13 December 1999 GST/HST Interpretation 8306/HQR0001912 - Supplies of Fertilizer

Dear XXXXX

Thank you for your facsimile of July 26, 1999, addressed to the attention of Ms. Alyson Trattner, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of fertilizer.

Interpretation Requested

You purchase and re-supply Calcium Nitrate as fertilizer. Your current supplier of Calcium Nitrate has now changed the packaging size for Calcium Nitrate from 80 pound to 50 pound bags. Some of your clients to whom you supply the Calcium Nitrate in 500 kg lots comprised of these 50 pound bags are now refusing to pay the GST/HST on these supplies.

You are requesting a ruling on the GST/HST status of the supplies of Calcium Nitrate as a fertilizer by you to your clients in 500 kg lots in 50 pound bags. In accordance with GST/HST Memoranda Series Section 1.4, an application ruling can only be issued where reference can be made to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and where the taxpayer has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions, and relevant documentation such as invoices, contracts, prices, and other pertinent agreements. When all of the relevant facts and documentation are not provided, an interpretation may be issued. We are therefore pleased to issue to you an interpretation which will elaborate on how the GST/HST applies to the questions raised in your facsimile letter.

Interpretation Given

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% on the value of the consideration for the supply pursuant to subsection 165(1) of the Excise Tax Act ("ETA"). Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0% (subsection 165(3)).

Section 5 of Part IV of Schedule VI to the ETA provides that a supply of fertilizer (other than a good sold as soil or as a soil mixture, whether or not containing fertilizer) made at any time to a recipient when the fertilizer is supplied

(a) in bulk, or

(b) in a container that contains at least 25 kg of fertilizer where the total quantity of fertilizer supplied at that time to the recipient is at least 500 kg, is a zero-rated supply.

Consequently, supplies of fertilizer in bag or container sizes of less than 25 kg (55 pounds) are taxable at the GST rate of 7% regardless of the total quantity supplied.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. If you supply fertilizer that is delivered or made available in a participating province, to the extent that it is a taxable supply (which is not zero-rated), tax must be collected at the harmonized rate.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-2560.

Yours truly,

Richard Aronoff
Goods Unit
General [O]peration and [B]order [I]ssues Division
Excise and GST/HST Rulings Directorate