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: 139597
Business Number: [...]
December 20, 2011
Dear [Client]:
Subject:
GST/HST RULING
GST/HST status of supplies of tea [in different packaging formats]
Thank you for your letter of October 20, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supplies of loose leaf tea packed in a tin and a sampler box.
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
We understand the facts to be as follows:
[...] (the Company) is an importer, blender and packager of loose-leaf tea.
The tea is supplied in two different packaging formats; Product A: a single type of loose tea in a sealable metal tin and Product B which is a sampler collection of [#] smaller sealable metal tins each containing a different type of loose leaf tea all packaged together in a decorative gift box.
Ruling Requested
You would like to know if the supplies of Product A and Product B qualify for zero-rating pursuant to section 1 of Part III of Schedule VI to the ETA.
Ruling Given
Based on the facts set out above, we rule that the supply of Product A is zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA.
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.
Interpretation Given
Given that not all the costs for the elements comprising Product B were provided to us, we are unable to provide a ruling in the GST/HST status of Product B. Instead, we are providing information will help you make a determination of the GST/HST status of Product B once you acquire the necessary information.
Explanation
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 to be mixed with or used in the preparation of such food or beverages) unless one of the exclusions set out in paragraphs 1(a) through 1(r) applies.
Supplies of beverages that are characterized as tea, regardless of flavour or ingredients are zero-rated.
The next issue to be addressed is whether the tins are usual containers for GST/HST purposes.
Section 137 of the ETA provides that:
"Where a particular class of tangible personal property is supplied in a covering or container that is usual for that class of property, the covering or container forms part of the property so supplied."
It is customary for tea to be regularly supplied in metal tins. This type of sealable container helps the tea stay fresh by protecting it from sunlight and moisture, which can damage the flavour and quality of the tea. Metal tins are, therefore, usual coverings or containers for tea for human consumption. As a result, the tin is considered a usual container and is deemed to form part of the zero-rated supply of Product A.
The [#] smaller tins are also considered to be usual containers in the case of Product B.
INTERPRETATION
As noted above, Product B is a gift set composed of [#] small tins of tea within a gift box.
In order to accommodate gift baskets or gift sets comprised of taxable and zero-rated elements, CRA has a policy on the application of GST/HST to the supply of gift baskets. This policy applies in the case of Product B.
A gift basket is generally a single supply. Where gift baskets are comprises of zero-rated and taxable elements, the supply of a gift basket would normally be a taxable supply in the absence of the policy. The policy provides for some gift baskets comprised of taxable and zero-rated elements to be zero-rated where certain conditions are met. Under the policy when all or substantially all (e.g., 90% or more) of the value of the items which comprise a gift basket would be zero-rated supplies when supplied individually, the tax status of the supply of the gift basket is zero-rated. Conversely, when the value of the component parts, each of which is taxable, exceeds 10% of the total value of the supply, the supply is taxable.
In the case of Product B, while the tins of tea would be zero-rated supplies when supplied individually, the gift box is not a usual container for purposes of the GST/HST and when supplied separately it would be a taxable supply.
We were not provided with the value of the gift box and therefore we cannot determine the value of the box in relation to the other elements of the gift set. For this reason, we cannot provide you a ruling on the GST/HST status of the supply of Product B. If it is determined that the gift box is valued at equal to or less than 10% of the value of Product B, then the supply of Product B would be zero-rated. Where the value of the gift box is greater than 10%, then the supply of Product B is subject to the GST/HST.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. 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,
Angela Stachowski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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