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.
Excise Tax and Fuel Charge Division
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa, ON K1A 0L5
[Addressee]
Case Number: XXXXXXX
November 23, 2023
Dear [Client]:
Subject: Application of the federal excise tax on diesel fuel
Thank you for your letter of July 25, 2023, concerning the application of the Excise Tax Act (the Act) to diesel fuel.
All legislative references are to the Act.
STATEMENT OF FACTS
Based on the information that we received in your incoming fax and the previous interpretation provided to (the Corporation) and case number xxxxxx, we understand the following:
1. The Corporation purchased furnace fuel dyed. The furnace fuel dyed was used to heat tanks[…information about the Corporation].
2. On the purchase invoice for the furnace fuel dyed, the product is labelled as “not suitable for use in on-road vehicles, off-road engines, locomotive engines or vessel engines.”
INTERPRETATION REQUESTED
You would like to know if the product, furnace fuel dyed, is considered a diesel fuel and if an amount equal to the federal excise tax (excise tax) should be applied to the purchase. You would also like the Canada Revenue Agency (CRA) to amend our previous interpretation of case number [#].
INTERPRETATION GIVEN
Based on the facts set out above, the product, furnace fuel dyed, is considered a diesel fuel and an amount equal to the excise tax should be applied to the purchase. As the product is considered a diesel fuel, the CRA remains it’s stance on it’s previous interpretation of case number [#].
Legislation
Subsection 2(1) of the Act provides for the following definitions:
Diesel fuel includes “any fuel oil that is suitable for use in internal combustion engines of the compression-ignition type, other than any such fuel oil that is intended for use and is actually used as heating oil.”
Heating oil means “any fuel oil that is consumed exclusively for providing heat to a home, building or similar structure and that is not consumed for generating heat in an industrial process, including any commercial process that involves removing moisture from a good.”
Subsection 23(1) of the Act states: “subject to subsections (6) to (8), whenever goods mentioned in Schedule I are imported or are manufactured or produced in Canada and delivered to a purchaser of those goods, there shall be imposed, levied and collected, in addition to any other duty or tax that may be payable under this or any other law, an excise tax in respect of the goods at the applicable rate set out in the applicable section of that Schedule, computed, if that rate is specified as a percentage, on the duty paid value or the sale price, as the case may be.”
Subsection 23(2) of the Act states: “where goods are imported, the excise tax imposed by subsection (1) shall be paid in accordance with the provisions of the Customs Act by the importer, owner or other person liable to pay duties under that Act, and where goods are manufactured or produced and sold in Canada, the excise tax shall be payable by the manufacturer or producer at the time of delivery of the goods to the purchaser thereof.”
EXPLANATION
Diesel fuel is not subject to excise tax if it is intended for use and actually used as heating oil, where is it being used to heat a home, building or similar structure. A similar structure is similar in structure to a home or a building. […information about the Corporation].
In the case at hand, the label on the invoice indicates that the product, furnace fuel dyed, is “not suitable for use in on-road vehicles, off-road engines, locomotive engines or vessel engines.” This label and how the fuel is marketed, has no bearing on the definitions provided under subsection 2(1) of the Act in determining if excise tax is applicable.
Regarding diesel fuel and heating oil, the usage of the fuel is what determines whether the product is subject to excise tax. The furnace fuel dyed is being used to […information about the Corporation].. This is considered part of an industrial process. As this usage does not meet the definition of heating oil, it is considered a diesel fuel and the purchase of furnace fuel dyed is subject to excise tax.
Should you have any questions or require clarification, please call Martha Persaud at 343-572-8331.
Sincerely,
Martha Persaud
Martha Persaud, CPA, CMA
Senior Rulings Officer
Excise Taxes and Other Levies Unit
Excise Tax and Fuel Charge Division
Legislative Policy and Regulatory Affairs Branch
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