12 May 2003 Excise Interpretation 45744 - Proposed Bio-diesel Fuel Tax Exemption

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the proposed bio-diesel fuel tax exemption announced in the February 18, 2003 Federal Budget. Your letter has been referred to the Excise Tax and Special Levies Unit in Headquarters for reply.

You would like a ruling to confirm whether XXXXX production of diesel fuel from waste oil feedstock would qualify for the proposed bio-diesel fuel tax exemption. As per GST Memorandum 1.4, the Canada Customs and Revenue Agency (CCRA) will not issue a ruling based on proposed legislation. Therefore, we are please to offer the following interpretation, which represents our view on how the proposed legislation would apply to your situation.

Statement of Facts

•   XXXXX has a re-refinery in XXXXX that produces diesel fuel from waste oil feedstock.

•   The waste oil feedstock is obtained by collecting automotive and industrial wastes and waste lubricating oils throughout XXXXX Canada.

•   The waste oil feedstock does not come from any industry production process but rather as a result of the consumption and collection of finished products whose life cycle is spent.

Interpretation Requested

You would like clarification as to whether XXXXX production of diesel fuel would qualify for the proposed tax exemption on bio-diesel fuel.

Interpretation Given

Subsection 23(1) of the Excise Tax Act (Act) imposes excise tax on items listed in Schedules I and II to the Act, at the rate specified in the Schedules. Section 9.1 of Schedule I to the Act specifies a tax rate of $0.04 per litre on diesel fuel. Under proposed legislation announced in the February 18, 2003 Federal Budget, a new section 23.5 will be added to the Act that allows for an exemption of tax imposed under section 23 of the Act on bio-diesel fuel.

Under proposed subsection 23.5(1), bio-diesel fuel is defined as follows:

"bio-diesel fuel" means a diesel fuel that is produced from waste materials, or feedstock, of biological origin and not from petroleum, natural gas or coal."

In our opinion, the diesel fuel produced by XXXXX would not qualify for the proposed bio-diesel tax exemption since the diesel fuel is produced from recycled petroleum products, which is not of biological origin. The proposed legislation does not make any differentiation between bio-diesel fuel produced directly or, in XXXXX case, indirectly from petroleum.

The foregoing comments represent our general views with respect to the subject matter of your letter. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above or any other Excise tax matter, please do not hesitate to contact me at (613) 954-6718.

Yours truly,

Darren Weiner
Senior Programs Officer
Excise Taxes and Special Levies
Policy and Legislation Branch