13 December 2004 GST/HST Ruling 51623R - Supply of parking in the City XXXXX

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.

Dear XXXXX:

Thank you for your letter XXXXX in which you asked us to review our decision XXXXX. We would like to confirm that our ruling on XXXXX (Product A), XXXXX (Product B), XXXXX (Product C), XXXXX (Product D), and XXXXX (Product E) as stated in that case, stands. We are, however, submitting a revised explanation with respect to Product E.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (the company) is launching XXXXX new products.

2. The company's brochure makes the following statement: XXXXX.

3. Product A ingredients are: XXXXX.

4. Product A is supplied in powder format in a XXXXX g container.

5. Product A label states: XXXXX.

6. Product A label states: XXXXX.

7. Product B ingredients are: XXXXX.

8. Product B is in powder format and is supplied in a XXXXX g container.

9. Product B label states: XXXXX.

10. Product B label states that it is: XXXXX.

11. Product C ingredients are: XXXXX.

12. Product C is supplied in a XXXXX g container.

13. Product C label states: XXXXX.

14. Product C label states: XXXXX.

15. Product D ingredients are: XXXXX.

16. Product D is supplied in a XXXXX ml bottle.

17. Product D label states: XXXXX.

18. Product D label states: XXXXX.

19. Product E ingredients are: XXXXX.

20. Product E is labelled as XXXXX bar weighing XXXXX g and is available in XXXXX flavour.

21. Product E label states: XXXXX.

Ruling Requested

What is the GST/HST status of the products?

Ruling Given

Based on the facts set out above, we rule that the supply of Products A, B and E are taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the Excise Tax Act (ETA). We rule that the supply of Products C and D are zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act (ETA), or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% GST or 15% HST, as applicable. However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the ETA.

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.

The terms "food" and "beverage" are not defined in the ETA. However, the position of the Canada Revenue Agency (CRA) is that these terms are to be construed according to their ordinary meaning. That is, a food or a beverage is a good that an average consumer would recognize and purchase as such in the ordinary course of buying basic groceries. Products that meet special dietary needs of certain segments of the population such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed as a food or a beverage.

Consumers usually consume beverages for enjoyment or to quench thirst. Therefore, the CRA generally considers 'beverages' as goods consumed to sustain or maintain life, to allay thirst, or for enjoyment rather than for therapeutic or preventative effects or to achieve specific beneficial effects related to performance or physique.

Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if the product added to flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, must be considered to be a food or beverage by the average consumer.

Additionally, a product that is marketed for its beneficial effects, and that is added to a food or beverage simply as a means of consuming it, would not be considered as an ingredient to a food or beverage simply because it is ingested in this manner.

Among other factors, the CRA will consider labelling, packaging and marketing to determine whether a product would be considered a "food", "beverage", or "ingredient".

The main ingredient of Product B is XXXXX and Product A is a XXXXX. Products that are labeled or marketed as products to be consumed to facilitate the intake of certain ingredients (nutritive or otherwise) or which place an emphasis on claims relating to the benefits of the product such as therapeutic or preventative effects, or claim to enhance performance or physique are not considered to be a food or beverage.

The CRA considers that Products A and B are not food, beverages or ingredients and are therefore not within the preamble of Section 1 of Part III of Schedule VI to the ETA. Supplies of Products A and B are taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the ETA.

The CRA considers Products C and D to be ingredients. As such, they are within the preamble to Section 1 of Part III of Schedule VI to the ETA and are zero-rated.

Product E is considered to be food. As previously mentioned, supplies of food are zero-rated unless one of the exclusions in paragraphs 1(a) through 1(r) of Part III of Schedule VI to the ETA applies.

In accordance with paragraph 1(l) of Part III of Schedule VI to the ETA, the following products are excluded from zero-rating:

"fruit bars, rolls or drops or similar fruit-based snack foods"

We consider Product E to be a fruit bar that falls under this exclusion and therefore it is taxable at 7% GST, or 15% HST, as applicable.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Donna Harding
Manager, Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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