24 April 2006 GST/HST Ruling 59859 - Tax Status of XXXXX Cochlear Implant System

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 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to bulk dried cranberries. We regret the delay in responding.

All legislative references are to the Excise Tax Act (the Act) and the regulations therein, unless otherwise specified.

Statement of Facts

We understand that XXXXX.

Ruling Requested

Based on this new fact you would like us to re-evaluate the ruling provided to you XXXXX.

Ruling Given

Based on the new fact set out above, we rule that the supply of bulk dried cranberries is taxable at 7 % (or 15% as applicable) pursuant to section 165 of the Act.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the Act, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Section 1 of Part III of Schedule VI to the Act, states that food or beverages (including ingredients) are zero-rated unless the product falls within one of the exceptions in paragraphs (a) to (r). Generally, a product that is represented (i.e., labelled and marketed) solely for use as an ingredient would not fall within the exceptions as the product would not fall within the meaning of certain words and phrases included in the exceptions. However, where a product can be purchased as both an ingredient and a snack food, that product may fall within the exceptions if other requirements included in the paragraph are met.

Paragraph 1(l) of Part III of Schedule VI to the Act excludes supplies of "fruit bars, rolls or drops or similar fruit-based snack foods" from zero-rating. It is the view of the Canada Revenue Agency (the CRA) that a good that consists of fruit or fruit-flavouring and at least one other ingredient, and that can be purchased as a snack, falls within paragraph 1(l) to the Act.

In this instance, the dried cranberries can be packaged directly by consumers in small, snack- sized portions. Although the dried cranberries can be used as an ingredient in other foods, they can also be eaten as a snack. As the dried cranberries are sweetened with sugar, they can be characterized as a fruit-based snack and are excluded from zero-rating pursuant to paragraph 1(l) of Part III of Schedule VI to the Act. Furthermore it is the CRA's opinion that if the sweetened dried fruit has additional ingredients such as sugar or flavour and can be sold for use as a snack and as an ingredient, the product is taxable by virtue of paragraph 1(l) of Part III of Schedule VI to the Act. The same is also true for a product that is sold in bulk for use as a snack and as an ingredient. That is, the product is taxable by virtue of paragraph 1(l) of Part III of Schedule VI to the Act.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9585.

Yours truly,

Gabrielle Nadeau
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/04/19 — RITS Ref 11601-3 — [Application of the GST/HST on a Convention Held by a Non-resident Association]