GST/HST Notice 89
August 1998

The following notice is being sent out in the same envelope with the GST/HST News and tax returns to all GST/HST registrants across Canada (except those in Quebec) during September 1998.

In the 1997 budget, the federal government expressed its willingness to enter into taxation arrangements with interested First Nations. While they are not self-government agreements, these arrangements are consistent with the federal government's acknowledgement of the inherent right of Aboriginal self-government, and the shared goal of Aboriginal self-sufficiency. One such arrangement has led to the introduction of a First Nation Tax (FNT). This initiative demonstrates the federal government's commitment to put into effect taxation arrangements with First Nations interested in exercising taxation powers.

The FNT is a tax imposed on the sale of certain products, namely alcoholic beverages, fuel, or tobacco products, on some First Nation reserves. The tax is administered by Revenue Canada. Following recent legislation, some band councils have passed by-laws that impose the FNT on those products that are specifically included in the band by-law. These products are described under the heading "Listed Products," on the second page of this Notice.

Kamloops First Nation Tax (British Columbia)

The Kamloops Indian Band Council has passed a by-law which will impose the Kamloops FNT, effective September 1, 1998, on the sale of listed products on the Kamloops reserve. The tax rate for the Kamloops FNT will be 7%.

As of September 1, 1998, everyone who buys a listed product on the Kamloops reserve will have to pay the Kamloops FNT. If the FNT applies to a product, the Goods and Services Tax (GST) does not apply. Supplies of other goods and services on the Kamloops reserve will continue to be subject to the GST/HST.

Every person who sells a listed product on the Kamloops reserve, regardless of who the purchaser is, will have to collect the Kamloops FNT. In addition, if you sell listed products off reserve and you or your agent deliver these products to the Kamloops reserve, the Kamloops FNT will apply to these sales.

If you are already a GST/HST registrant, you do not have to register for the FNT. You will report the FNT collected on your GST/HST return. The GST/HST return will include the combined amounts for both taxes (GST/HST and FNT). However, if you sell listed products from a location on the Kamloops reserve, you will also have to complete a new form GST499, First Nation Tax (FNT) Schedule, for each GST/HST reporting period.

If you are not registered for GST/HST because you do not exceed the small supplier threshold, but you sell listed products on the Kamloops reserve, you must register for the FNT. If you are registered for the FNT only, you will not collect GST/HST but will collect the Kamloops FNT when you sell listed products on the Kamloops reserve.

A person who makes a taxable supply that is subject to the FNT must disclose that information in the same manner as the GST/HST. In addition, a person who makes a taxable supply must provide, upon request and in writing, sufficient information to substantiate an input tax credit or rebate claim.

Westbank First Nation Tax (British Columbia)

Effective February 1, 1998, the Westbank First Nation also imposed the 7% Westbank FNT on its reserves. The Westbank FNT currently applies only to tobacco products as described below.

The publication entitled First Nation Tax (FNT) provides more details about the FNT, and includes form GST499. This publication will be available shortly from any Revenue Canada tax services office, or on the departmental Internet site at http://www.rc.gc.ca.

If you need more information about the FNT, contact your local tax services office. Tax services offices are listed under "Revenue Canada" in the Government of Canada section of the telephone directory.

LISTED PRODUCTS

Tobacco products means:

• every article made by a tobacco manufacturer from leaf tobacco, by any process whatever, and includes cigarettes, tobacco sticks, and snuff;
• the leaves and stems of the tobacco plant if they have been processed further than drying and sorting; and
• cigars.

Alcoholic beverage means:

• beer, ale, stout, porter or malt liquor containing more than 0.05% alcohol by volume;
• wine containing more than 1% alcohol by volume;
• any beverage containing more than 1% alcohol by volume that is obtained from the distillation of grains, fruit, or other agricultural products or from the distillation of beer or wine; and
• any beverage that is a combination of the above beverages that is suitable for human consumption containing more than 1% alcohol by volume.

Fuel means:

• diesel fuel, including any fuel oil that is suitable for use in internal combustion engines of the compression-ignition type, other than fuel oil that is intended for and is actually used as heating oil;
• gasoline type fuels for use in internal combustion engines; and
• propane gas.