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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 113630
Attention: XXXXX
May 7, 2009
Subject:
_Excise Interpretation
XXXXX
Dear XXXXX:
Thank you for your letter of XXXXX concerning the application of the federal excise tax (FET) to the operations of you client, XXXXX. In your letter, you have asked the Canada Revenue Agency (CRA) to confirm how XXXXX should account for FET on tax-paid purchases of aviation fuel.
Statement of Facts
Based on your letter and subsequent telephone conversations, the following is my understanding of the issue:
1. XXXXX is a licensed fuel manufacturer for purposes of the FET.
2. Occasionally, XXXXX will purchase aviation fuel from XXXXX. Since XXXXX does not hold an excise tax licence, any aviation fuel sold to XXXXX is done on an FET tax-paid basis.
3. From an operational perspective, it is not feasible for XXXXX to maintain separate inventory storage tanks for tax-paid and tax-exempt fuel. For this reason, all FET tax-paid aviation fuel purchased from XXXXX is stored with tax-exempt inventory.
4. Currently on their monthly FET tax return, XXXXX accounts for aviation fuel in the following manner. First, it determines the amount of FET owing based on their taxable sales. It then subtracts from that amount any FET on aviation fuel it has taken back into inventory. The net result is reported on the aviation fuel line of the FET return.
Issue
What procedure should XXXXX take in order to properly account for purchases of tax-paid aviation fuel?
Decision
Paragraph 23(7)(a) of the Excise Tax Act (ETA) allows a licensed manufacturer to purchase goods exempt of excise tax that will be further manufactured into a product subject to excise tax. Since the aviation fuel purchased from XXXXX is for resale and not for further manufacturing, it must be obtain on a FET tax-paid basis.
Subsection 23(1) of the ETA, subject to subsections (6) to (8), imposes excise tax on items listed in Schedule I to the ETA, at the rate specified in the Schedule. Section 9.1 of Schedule I to the ETA specifies a tax rate of $0.04 per litre on aviation fuel. Due to the fact that XXXXX is unable to distinguish between FET tax-paid and exempt inventory, it will need to account for excise tax on any taxable sales of aviation fuel sold from inventory on their monthly FET return.
In order to offset any double taxation, XXXXX would be eligible to file for a refund, under subsection 68(1), for tax paid in error on any tax-paid aviation fuel accounted for on their monthly return. Subsection 73(1) of the ETA allows for a licensed manufacturer, upon authorization from the CRA, in lieu of applying for a refund under subsection 68(1) of the ETA, to take a deduction on their FET return for an amount equal to the refund application. In other words, XXXXXX when submitting their monthly FET return would account for excise tax on sales of tax-paid aviation fuel and take a corresponding offsetting deduction.
XXXXX can apply for authorization to take internal deductions by submitting a written request to the Assistant Director of Audit - XXXXX at the following address:
XXXXX
For your information, a copy of this letter has been forwarded to the XXXXX for their records.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-5899.
Yours truly,
Darren Weiner
Senior Rulings Officer
Excise and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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