23 January 2013 GST/HST Ruling 134086R - Application of GST/HST to salads

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

Dear [Client]:

We are writing […] concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to Caesar Salads (the Product) supplied by […].

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.  

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is not canned or vacuum sealed.

2. The Product is sold in a large plastic bowl with a re-sealable lid.

3. The Product net weight is […]kg. The Product contains chopped romaine lettuce, dressing in […] containers, […] bags of croutons, […] ounces of grated parmesan cheese placed on top of the lettuce, and […] lemon wedges placed on top of the lettuce.

4. The Product is labelled "Caesar Salad".

[…]

[…] RULING

Based on the facts set out above, we rule that the Product is a salad for GST/HST purposes. As a result, supplies of the Products are excluded from zerorating pursuant to paragraph 1(o.1) of Part III of Schedule VI to the ETA, and are taxable at 5% GST or, 12%, 13%, or 15% HST as applicable, pursuant to section 165.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI to the ETA.

Under Part III of Schedule VI to the ETA, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI to the ETA, zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section. Paragraph (o.1) excludes supplies of salads not canned or vacuum sealed from zerorating.

Paragraphs 104 to 109 of GST/HST Memorandum 4.3, Basic Groceries, outline how the GST/HST applies to supplies of salads. Paragraph 105 states:

Salads are considered to include ingredients such as chopped, shredded, diced, sliced, or pureed vegetables, meat, fish, egg, or other food supplied with a dressing and/or seasonings(s), whether or not the dressing is mixed with the other ingredients. A combination of one ingredient mixed with a dressing or seasoning(s) that is sold or represented as a salad is also considered to be a salad. Fruit salads and gelatine salads generally do not need a dressing to be considered a salad.

Paragraph 109 indicates that salad kits are basic groceries and their supply is zero-rated. It states:

A package that contains the ingredients for a salad where the ingredients are not mixed, such as a package containing lettuce, croutons and dressing (i.e., where the ingredients are in separate containers) and that require mixing by the consumer, is not considered to be a salad for purposes of the GST/HST.

Dressing and croutons are generally supplied in separate containers. Many ingredients of salads are packaged separately for addition at the time of consumption. This recognizes the nature of the ingredients. If such ingredients were not separately packaged, the croutons and other ingredients would become soggy and the shelf life of the product would be greatly reduced.

In the case of the Product, the lettuce, cheese and lemon wedges are packaged together in the container while only the dressing and croutons are packaged separately. Finally, the Product is represented and sold as a salad. Therefore, the conditions outlined in paragraph 109 have not been met as these ingredients are not separately packaged within the container.

As a result, the supply of the Product is excluded from zero-rating pursuant to paragraph 1(o.1) of Part III of Schedule VI to the ETA and is subject to the HST at 13% when purchased in Ontario.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4397. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Ken Syer
Manager
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Enc. GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service