12 June 2007 GST/HST Interpretation 85568 - Municipal Designation

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 fax XXXXX requesting a review of our ruling XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the Product).

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

Statement of Facts

Our understanding of the facts is as follows:

•   The Product comes in XXXXX-gram re-sealable pouches.

•   The Product is available in XXXXX varieties: XXXXX.

XXXXX.

•   The Product packaging indicates an expiry date and that XXXXX.

•   There is no XXXXX added to the Product.

•   The Product label states: XXXXX.

•   The Product is placed near XXXXX in grocery stores.

•   Each variety has XXXXX listed on its' packaging.

(a) XXXXX.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 6% GST or 14% HST as applicable pursuant to section 165.

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

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 6% on the value of the consideration for the supply (14% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated, pursuant to subsection 165(3). The tax rate in respect of a zero-rated supply is 0%, where a zero-rated supply is a supply that is included in Schedule VI.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.

Under paragraph 1(i) of Part III of Schedule VI, the following products are excluded from zero-rating:

Supplies of snack mixtures that contain cereals, nuts, seeds, dried fruit or any other edible product, but not including any mixture that is sold primarily as a breakfast cereal.

Mixtures of two or more varieties of the same kind of ingredient, such as two or more varieties of dried fruit, or two or more varieties of nuts are also considered to be snack mixtures and as such are taxable.

A mixture of two or more types of nuts is considered to be a snack mixture even if the nuts are not salted. However, mixtures of nuts in their natural state that are not further processed other than washed and/or cleaned are not considered to be snack mixtures and therefore are zero-rated. Nuts that have been roasted, shelled or seasoned are not considered to be in their natural state.

Snack mixtures usually have the following characteristics:

•   Consumers commonly view them as snacks.

•   Their ingredients are ready to eat; no further processing is required.

•   The ingredients have been combined before the product is sold.

•   The main ingredients remain separate and distinct from each other and are not bound into one whole.

•   The main ingredients are often coated with a savoury seasoning such as salt or barbecue flavouring.

•   They are eaten by the handful or as individual bite-sized pieces without utensils.

•   They are usually sold in pouch packs or bags, from bulk bins or in clear plastic containers.

Supplies of products known as "trail mixes" that contain various combinations of the above noted ingredients are excluded from zero-rating as they are considered to be snack mixtures under paragraph 1(i) of Part III of Schedule VI. The Product is very similar to trail mix products. In comparison with the characteristics of snack mixtures as noted above, including labelling and marketing, we consider the Product to be a snack mixture for purposes of paragraph 1(i) of Part III of Schedule VI. It should be noted that while labelling and marketing are important characteristics, they are two of several that are taken into account when determining a product's GST/HST tax status.

As the Product is considered to be a "snack mixture" under paragraph 1(i) that contains cereals, nuts, seeds, dried fruit or any other edible product and is not sold primarily as a breakfast cereal, it falls under the exclusion pursuant to subparagraph 1(i) of Part III of Schedule VI, and supplies of the Product are taxable at 6% GST or 14% HST, as applicable.

This letter confirms the ruling XXXXX in which we determined that supplies of the Product are taxable at 6% GST or 14% HST.

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,

Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/06/20 — RITS 86862 — Tax Refund or Credit from Direct Seller