11 March 1998 GST/HST Interpretation HQR 0000308 - Winemaking Kits

                                                                        GST/HST Rulings and
                                                                                                Interpretations Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

                                                                        March 11, 1998

                                                                        VIA REGISTERED MAIL

Dear Sir/Madam:

This is further to the letter sent to your solicitors, XXXXX, by Mr. Adrien Venne on June 7, 1996 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the product described below.

Our understanding of the facts is as follows.

Statement of Facts

The XXXXX winemaking kit sold by XXXXX is purchased by consumers for the purpose of making wine at home. The kit consists of grape juice inoculated with yeast and packaged in a plastic bag that has been inserted into a plastic pail. On the plastic bag are two valves, which, when hooked up to holes in the pail, are opened to allow the entry of air, thus beginning the fermentation process. The upper valve is also used to provide for the escape of carbon dioxide and the lower valve is also used to drain wine from the container. The kit is advertised as containing everything required to make wine and requiring "no extra equipment". The cost of the pail accounts for approximately 17.5% of the cost of the entire kit.

PREVIOUS RULING

We understand that after you were assessed for uncollected GST on supplies of the abovenoted product, your solicitor requested a ruling from our office. The ruling stated that the product was zerorated. After reviewing the facts of this case, we have concluded that the ruling dated June 7, 1996 was incorrect.

Ruling Given

Based on the facts set out above, we rule that the kit is subject to GST/HST.

We would appreciate receiving from you any representations as to an effective date for the revocation of the ruling within thirty (30) days from the date you receive this letter. If we have not heard from you within that thirty day period, the revocation will be effective on that thirtieth day.

Explanation

Although the kit described contains zerorated basic groceries (juice and yeast), we note that the cost of the pail amounts to a substantial portion (approximately 18%) of the value of the kit. Therefore, the pail is not incidental to the supply of the groceries, and does not take on the tax status of the zerorated groceries pursuant to s. 138 of the ETA. The product is therefore taxable as a single supply of a wine kit.

We apologize for any inconvenience that the original ruling may have caused.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Susan Mailer, Manager of the Industries Unit, at 613 954-9579.

Yours truly,

Ivan Bastasic
A Director,
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate