25 April 2007 GST/HST Interpretation 83134 - PROPOSED LAW/REGULATION Supplies of Approvals for Subdivision and Other Services

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 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:

1. The Product is packaged loosely in XXXXX-gram bags that are re-sealable.

2. The Product looks similar to XXXXX.

3. The Product labelling describes it as XXXXX.

4. The back of the package states, XXXXX.

5. There are XXXXX varieties of the Product available XXXXX.

6. XXXXX.

7. XXXXX.

8. XXXXX.

9. The Product packaging shows pictures of the Product XXXXX.

10. The Product is placed in the XXXXX section of grocery stores.

11. XXXXX.

Ruling Requested

You would like to know the GST/HST status of 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 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. Paragraph 1(f) excludes supplies of chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels (but not including any product that is sold primarily as a breakfast cereal) from zero-rating.

GST/HST Memoranda Series 4.3, Basic Groceries, outlines factors that are used to determine if a particular product is similar to a chip, crisp, puff, curl, or stick as described under paragraph 1(f) of Part III of Schedule VI. These factors include the properties of the product in question (ingredients, flavours, texture, cooking process and appearance), its labelling, its packaging, and its marketing.

The properties of the Product indicate that it fits within paragraph 1(f) of Part III of Schedule VI. These include the flavours available, the texture of the Product XXXXX, its appearance XXXXX, the Product labelling includes the word XXXXX (in its name), as well as the word XXXXX and the Product is packaged loosely in a bag.

Although the main ingredients of the Product do not include potatoes, corn, or corn meal, this does not preclude the Product from falling within paragraph 1(f) based on the application of the remaining factors. As well, although we consider product placement as a relevant consideration, it alone is not considered a determinative factor. Finally, fat content is not a factor in the determination of whether a particular product falls under paragraph 1(f).

The Product is considered to be "other similar snack foods" under paragraph 1(f). As a result, the Product falls under the exclusion pursuant to paragraph 1(f) of Part III of Schedule VI, and its supplies are taxable at 6% GST or 14% HST, as applicable.

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

2007/04/30 — RITS 83135 — Application of GST/HST to XXXXX