8 January 2003 GST/HST Ruling 43726 - Whether Food or Beverage

Dear XXXXX:

This letter is further to our letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the Product).

Statement of Facts

Our understanding of the facts is as follows:

1. Marketing material for the Product states: "(the Product) is an exclusively formulated supplement XXXXX".

2. The Product is described as a XXXXX[.]

3. The Product contains XXXXX important minerals including XXXXX.

4. The recommended usage states: XXXXX[.]

5. The Product is packaged in XXXXX.

Ruling Requested

You requested a ruling on the tax status of the Product pursuant to the Excise Tax Act (ETA).

Previous Ruling Given

Based on the facts set out above, we ruled that the Product was zero-rated pursuant to paragraph 1(n) of Part III of Schedule VI to the ETA as a beverage sold in multiples of single servings.

Having reviewed the facts of this case, we are providing you with the following revised ruling.

Revised Ruling Given

Based on the facts set out above, we rule that the Product is taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the ETA.

This ruling supersedes our previous ruling XXXXX and is effective 30 days from the date of this letter.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Revised Explanation

The terms "food" and "beverage" are not defined in the ETA. However, the Canada Customs and Revenue Agency (CCRA) position is that these terms are to be construed according to their ordinary meaning. That is, a food or a beverage is a good that an average consumer would recognize and purchase as such in the ordinary course of buying basic groceries. Additionally, a product that is marketed for its beneficial effects, and that is added to a food or beverage simply as a means of consuming it, would not be considered as an ingredient to a food or beverage simply because it is ingested in this manner.

If a product identifies itself as a 'supplement', 'dietary supplement', 'food supplement' or other type of similar supplement, this is an indication that the product is consumed for the purpose of enhancing or improving a person's state of health and not as a food, beverage or ingredient. The Product is marketed as a supplement for use XXXXX Directions for use for the Product are to "XXXXX". These types of directions or restrictions relating to the amount to be consumed generally indicate that the product is being consumed for a purpose other than as a food, beverage or ingredient.

Among other factors, the CCRA considers such things as labelling, packaging and marketing to determine whether a product would be considered a "food", "beverage", or "ingredient". For more details, please refer to the enclosed GST/HST Policy Statement P-240, Application of GST/HST to Products Commonly described as "Dietary Supplements".

The Product is labelled and marketed as XXXXX Products that place an emphasis on claims relating to the benefits of the product such as therapeutic or preventative effects, or claim to enhance performance or physique are not considered to be a food or beverage.

The Product is packaged in a XXXXX and must be mixed with a specified quantity of fluid in order to be consumed. This would indicate that the Product is not a food or beverage.

As a result of the above, the CCRA does not consider the Product to be a food, beverage or ingredient, and it is therefore taxable at 7% or 15%, as applicable, pursuant to section 165 of the ETA.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9218.

Yours truly,

Nicole Thomas
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate