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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 126711
Business Number: [...]
July 5, 2011
Dear [Client]:
Subject:
GST/HST RULING
Application of HST to products for sale in high school cafeteria
Thank you for your fax of July 27, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to products sold by your catering business in a high school cafeteria. We apologize for the delay in responding to your enquiry.
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
Based on your fax sent July 27, 2010, and our telephone conversation of November 3, 2010, we understand that:
1. You are the owner of [...], a sole proprietorship that has operated a high school cafeteria on a contract basis in [...] [City 1], Ontario, since [mm/dd/yyyy].
2. You are registered for GST/HST purposes, with GST/HST account number [...].
3. You make supplies of food and beverages in the school cafeteria directly to the students. Your supplies are made primarily (i.e. more than 50%) to students of the school.
4. The food and beverage items sold in the school cafeteria include sandwiches, wraps, salads, soups, fries and perogies. You also sell snack foods, candy, beef jerky, baked goods, and beverages such as juice, milk, pop, and regular or flavoured waters. You only sell juices that are contained in cans or bottles, with the exception of "slush puppies", which are dispensed in cups.
5. You offer a daily lunch special for $[...], which does not include a drink or a dessert. For example, the lunch special on [mm/dd/yyyy], was [...]. Our understanding is that the term "lunch special" refers to the prepared food item featured that day.
6. You do not provide any food or beverages through vending machines.
7. You occasionally provide catering services for meetings and functions, such as teachers' meetings. You collect HST on these supplies.
Ruling Requested
You would like to know which foods and beverages sold in the school cafeteria are subject to HST. By way of example, you have asked whether the HST applies to a cookie sold for $0.50 or a lunch special sold for $5.00. You have also asked for a complete list of foods and beverages that are subject to HST when sold in a school cafeteria.
Accordingly, we will provide rulings on the tax status of your supplies of the following categories of foods and beverages sold in the school cafeteria:
1. sandwiches, wraps, salads, soups, fries, burgers, perogies, and other prepared foods;
2. beef jerky;
3. crackers;
4. baked goods, such as individual cookies;
5. pudding and flavoured gelatine;
6. candy, chewing gum, chocolate, etc., when pre-packaged for sale to consumers;
7. chips, crisps, puffs, etc., popcorn and brittle pretzels, when pre-packaged for sale to consumers;
8. salted nuts and salted seeds, when pre-packaged for sale to consumers;
9. granola products, when pre-packaged for sale to consumers;
10. snack mixtures, when pre-packaged for sale to consumers;
11. ice lollies, juice bars, flavoured ice waters, etc., when pre-packaged for sale to consumers;
12. ice cream, sherbet, frozen yogurt, etc., when pre-packaged for sale to consumers,
13. fruit snacks, when pre-packaged for sale to consumers;
14. carbonated beverages;
15. fruit juice and fruit flavoured beverages sold in cans, cartons or bottles;
16. milk;
17. bottled water;
18. flavoured water;
19. slush puppies.
Rulings Given
Based on the facts set out above, we rule that:
1. Supplies of sandwiches, wraps, salads, soups and other prepared foods sold in the school cafeteria, such as fries, burgers and perogies, are exempt from HST when sold in the school cafeteria. Your daily "lunch special" prepared food items, such as [...], are exempt from HST when sold in the school cafeteria.
2. Supplies of beef jerky are exempt from HST when sold in the school cafeteria.
3. Supplies of crackers are exempt from HST when sold in the school cafeteria.
4. Supplies of baked goods are exempt when sold in the school cafeteria. Therefore, a cookie sold for $0.50 is not subject to HST. Other baked goods, such as cakes, muffins, pastries, tarts, doughnuts, and brownies are also exempt.
5. Supplies of pudding, flavoured gelatine, mousse, flavoured whipped dessert product, and any other products similar to pudding, are exempt from HST when sold in the school cafeteria.
6. Supplies of candy that are pre-packaged for sale to consumers are subject to HST and taxable at 13% when sold in a school cafeteria in Ontario. Other goods sold as candy that are pre-packaged for sale to consumers, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, and fruits, seeds, nuts and popcorn coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners are also subject to HST and taxable at 13% when sold in a school cafeteria in Ontario.
7. Supplies of chips, crisps, puffs, curls or sticks, and other similar snack foods, popcorn and brittle pretzels that are pre-packaged for sale to consumers are subject to HST and taxable at 13% when sold in a school cafeteria in Ontario. However, supplies of any product that is sold primarily as a breakfast cereal is exempt when sold in the school cafeteria.
8. Supplies of salted nuts and salted seeds that are pre-packaged for sale to consumers are subject to HST and taxable at 13% when sold in a school cafeteria in Ontario.
9. Supplies of granola products that are pre-packaged for sale to consumers are subject to HST and taxable at 13% when sold in a school cafeteria in Ontario. However, supplies of any product that is sold primarily as a breakfast cereal is exempt when sold in the school cafeteria.
10. Supplies of snack mixtures that are pre-packaged for sale to consumers, which contain cereals, nuts, seeds, dried fruit or any other edible product, are subject to HST and taxable at 13% when sold in a school cafeteria in Ontario. However, supplies of any mixture that is sold primarily as a breakfast cereal is exempt when sold in a school cafeteria.
11. Supplies of ice lollies, juice bars, flavoured, coloured or sweetened ice waters, or similar products, whether frozen or not, which are pre-packaged for sale to consumers, are subject to HST and taxable at 13% when sold in a school cafeteria in Ontario.
12. Supplies of ice cream, ice milk, sherbet, frozen yoghurt or frozen pudding, non-dairy substitutes for any of the foregoing, or any product that contains any of the foregoing, when pre-packaged for sale to consumers in single servings, is subject to HST. However, supplies of such products are exempt from HST when sold in a school cafeteria if they are not pre-packaged (e.g. a scoop of ice cream).
13. Supplies of fruit bars, rolls, drops, and similar fruit-based snack foods that are pre-packaged for sale to consumers are subject to HST and taxable at 13% when sold in a school cafeteria in Ontario.
14. Supplies of carbonated beverages sold in the school cafeteria are subject to HST and taxable at 13% in Ontario.
15. Supplies of non-carbonated fruit juice beverages and fruit flavoured beverages, other than milk-based beverages, that contain less than 25% natural fruit juice sold in the school cafeteria are subject to HST at 13% in Ontario when sold in cans, cartons or bottles.
Supplies of non-carbonated fruit juice beverages that contain 25% or more natural fruit juice are exempt from HST when sold in a school cafeteria.
Supplies of non-carbonate fruit juice beverages and fruit flavoured beverages that are dispensed in a school cafeteria are exempt.
16. Supplies of milk (flavoured and unflavoured) are exempt from HST when sold in the school cafeteria.
17. Supplies of unflavoured bottled water are exempt from HST when sold in the school cafeteria.
18. Supplies of non-carbonated fruit-flavoured water are subject to HST and taxable at 13% when sold in cans, cartons or bottles in a school cafeteria in Ontario. Fruit-flavoured water falls within the same category as other fruit-flavoured beverages discussed above.
19. Supplies of slush-puppies dispensed from a machine in the school cafeteria are subject to HST and taxable at 13%. Slush-puppies fall within the same category as ice lollies, etc.
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
Exempt supplies of food and beverages made in a school cafeteria
Most food or beverages sold in an elementary or secondary school cafeteria primarily (more than 50%) to students of the school are exempt from HST pursuant to section 12 of Part III of Schedule V to the ETA. You received an interpretation to this effect from the GST/HST Rulings Centre on [mm/dd/yyyy].
This exemption does not extend to sales of food or beverages supplied through vending machines. It is our understanding that you do not currently supply any food or beverages through vending machines. In addition, the exemption does not include private catering services provided through a school cafeteria for a private party, reception, meetings or similar private event. You have indicated that you do occasionally provide catering services for meetings and functions, and you collect HST on these supplies.
Supplies of certain food and beverages, known as prescribed food and beverages, are also excluded from the exemption. The School Cafeteria Food and Beverages (GST/HST) Regulations set out the food and beverages prescribed for the purposes of section 12 of Part III of Schedule V. Accordingly, supplies of the following food and beverages are taxable at 13% when sold by a GST/HST registrant in an elementary or secondary school cafeteria in Ontario:
• carbonated beverages;
• non-carbonated fruit juice beverages that contain less than 25% natural fruit juice, when sold in cans, cartons or bottles;
• the following snack foods when pre-packaged for sale to consumers:
- candy, chewing gum, chocolate, etc.;
- chips, crisps, puffs, etc., but not including any product sold primarily as a breakfast cereal;
- salted nuts or salted seeds;
- granola products, but not including any product sold primarily as a breakfast cereal;
- snack mixtures, but not including any mixture sold primarily as a breakfast cereal;
- ice lollies, juice bars, flavoured ice waters, etc.;
- single servings of ice cream, sherbet, frozen yogurt, etc.; and
- fruit bars, rolls, or drops, etc.
Therefore, supplies of all food and beverages sold in the school cafeteria will be exempt, unless specifically prescribed by the School Cafeteria Food and Beverages (GST/HST) Regulations. For example, you asked whether a cookie sold for $0.50 is subject to HST. Since cookies are not prescribed, they are exempt when sold in a school cafeteria.
For your information, a combination of prescribed and exempt items sold for a single consideration (a "combo meal") is exempt from HST when sold in a school cafeteria. A combo meal may consist of multiple products that would have different tax statuses if sold separately. For instance, a sandwich and a carbonated beverage may be sold together as a combo meal for a single consideration. If they were sold separately, the supply of the sandwich would be exempt and the supply of the carbonated beverage would be taxable. However, when the items are sold together for a single consideration, the supply of the entire combo meal is exempt.
The following examples illustrate when a lunch combo is sold for a single consideration:
Example #1
A school cafeteria in Ontario sells a sandwich and a single serving of a carbonated beverage as a combo meal for a single price of $4.00. The supply of the combo meal is exempt pursuant to section 12 of Part III of Schedule V. Therefore, the school cafeteria does not charge any HST on the sale.
Example #2
A school cafeteria in Ontario sells a sandwich for $3.00 at the same time as a single serving of a carbonated beverage for $1.00. The supply of the sandwich is exempt and the supply of the can of pop is taxable at 13%, because the items are not sold for a single consideration. Therefore, the school cafeteria does not charge HST on the $3.00 for the sandwich, but it must charge HST on the $1.00 for the can of pop.
Point-of-sale rebate on prepared food and beverages
The Government of Ontario provides a point-of-sale rebate of the provincial part of the HST payable on qualifying prepared food and beverages sold in Ontario that are ready for immediate consumption. The total price, excluding HST, must not be more than $4.00 for all qualifying prepared food and beverages sold to a person at a particular time. Goods that are not qualifying prepared food and beverages sold in a single transaction together with qualifying prepared food and beverages are ignored for purposes of calculating the $4.00 limit.
The following goods are qualifying prepared food and beverages for the purposes of the point-of-sale rebate:
• food or beverages heated for consumption;
• salads not canned or vacuum sealed;
• sandwiches and similar products other than when frozen;
• platters of cheese, cold cuts, fruit or vegetables and other arrangements of prepared food;
• cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where they are not pre-packaged for sale to consumers and are sold as single servings in quantities of less than six;
• ice cream, ice milk, sherbet, frozen yoghurt, frozen pudding or non-dairy substitutes for any of the foregoing, or any product that contains any of the foregoing, sold in single servings and not pre-packaged;
• other food items excluded from zero-rated GST/HST treatment as basic groceries solely by virtue of the type of sales made at the establishment where they are sold (e.g. a sale of a bagel or a plain croissant in a restaurant);
• non-carbonated beverages when dispensed at the place where they are sold; or
• any of the following beverages, the supply of which is not a zero-rated supply:
- milk (flavoured or unflavoured),
- soy, rice or almond-based beverages or other similar non-dairy substitutes for milk, or
- non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk-based beverages, that contain 25% or more by volume of a natural fruit juice or combination of natural fruit juices or of a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state;
• the following when sold with a qualifying food or beverage item above:
- carbonated beverages dispensed at the place where they are sold, or
- other beverages (including carbonated beverages not dispensed) except if the cans, bottles or other primary containers in which they are sold contain a quantity exceeding a single serving or they are packaged in multiples of single servings;
• the following when sold with a qualifying food or beverage item above for a single consideration:
- cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where they are pre-packaged for sale to consumers in quantities of less than six items each of which is a single serving,
- ice cream, ice milk, sherbet, frozen yoghurt or frozen pudding, non-dairy substitutes for any of the foregoing, or any product that contains any of the foregoing, when packaged and sold in single servings, or
- other snack foods such as chips, salted nuts, popcorn, candies, fruit bars, and granola bars
The point-of-sale rebate amount is equal to the amount of the provincial part of the HST payable by the recipient on the purchase of the qualifying prepared food and beverages. Generally, recipients of qualifying prepared food and beverages will receive the point-of-sale rebate by being paid or credited the rebate amount by the registrant supplier at the point of sale. When the recipient receives the rebate at the point-of-sale, the registrant supplier pays or credits the rebate amount and collects only the 5% federal part of the HST payable on the sale of the qualifying prepared food and beverages. If the registrant supplier does not pay or credit the rebate amount at the point of sale, the recipient of the qualifying prepared food and beverages sold in Ontario can file a rebate claim with the CRA using Form GST189, General Application for Rebate of GST/HST.
The point-of-sale rebate is available in a school cafeteria in Ontario in a limited number of circumstances. The point-of-sale rebate applies only to supplies of qualifying prepared food and beverages that are not exempt from HST under section 12 of Part III of Schedule V. Most qualifying prepared food and beverages are exempt from HST when sold in a school cafeteria and as no tax is payable on exempt supplies, the point-of-sale rebate is not available. However, the point-of-sale rebate would be available in your school cafeteria in the following situations:
1. A point-of-sale rebate would be available on the sale of the following types of carbonated beverages when sold in the school cafeteria at the same time as a qualifying prepared food or beverage item and the total price of all qualifying food or beverages sold to the person at the time is not more than $4.00:
• Carbonated beverages dispensed at the place they are sold; and
• Carbonated beverages not dispensed, except if the cans, bottles or other primary containers in which they are sold contain a quantity exceeding a single serving or they are packaged in multiples of single servings;
Therefore, in example 2 on page 7, a point-of-sale rebate is available on the purchase of the carbonated beverage.
2. A point-of-sale rebate would be available on the sale of non-carbonated fruit juice beverages or fruit flavoured beverages that contain less than 25% natural fruit juice sold in cans, cartons or bottles when sold in the school cafeteria at the same time as a qualifying prepared food or beverage item, except if the cans, bottles or other primary containers in which they are sold contain a quantity exceeding a single serving or they are packaged in multiples of single servings. The rebate is available if the total price of all qualifying prepared food or beverages sold to the person at the time is not more than $4.00.
The qualifying prepared food or beverage item sold in the school cafeteria at the same time as the above mentioned beverages would be exempt from HST, as previously indicated.
For your convenience, please find enclosed a copy of GST/HST Info Sheet GI-064, Harmonized Sales Tax for Ontario - Point-of-Sale Rebate on Prepared Food and Beverages, which provides detailed information about the point-of-sale rebate on qualifying prepared food and beverages.
The government of Ontario also provides point-of-sale relief to eligible Ontario First Nations purchasers. For further information, please contact the Ministry of Revenue of Ontario at 1-866-668-8297.
A GST/HST registrant can claim input tax credits on its purchases and expenses only to the extent that they are for consumption, use, or supply in its commercial activities. "Commercial activity" is defined in subsection 123(1) of the ETA and includes "a business carried on by the person...except to the extent to which the business involves the making of exempt supplies." Please see the comments with respect to input tax credits in our previous interpretation dated [mm/dd/yyyy]. If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-3158. 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,
Heather Reardon
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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