7 August 2003 GST/HST Ruling 46679 - GST/HST Status of Container Recycling Fees

Dear XXXXX:

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to container recycling fees charged on your sales of beverages in returnable containers.

Statement of Facts

Our understanding of the facts and the transactions is as follows:

1. XXXXX

2. XXXXX

3. The Company sells fruit juices and fruit beverages that are zero-rated under section 1 of Part III of Schedule VI to the Excise Tax Act (ETA).

4. Non-refundable container recycling fees are charged on most beverage containers sold XXXXX in addition to any refundable deposits.

5. The Company charges GST on the container recycling fees, but not on the refundable deposits.

Ruling Requested

What is the GST status of the container recycling fees?

Ruling Given

Based on the facts set out above, we rule that the container recycling fees are zero-rated.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Section 137 of the ETA deems that where tangible personal property of a particular class is supplied in a covering or container that is usual for that class of property, the covering or container shall be deemed to form part of the property so supplied.

When the Company makes a supply of a beverage product, the container is deemed to form part of the beverage, and the container recycling fee and any refundable deposit charged in respect of the container are part of the consideration for the beverage. As the supply of the beverage is zero-rated, the container recycling fee and the refundable deposit will be also be zero-rated.

Therefore, the Company should not be charging GST on the container recycling fees or the refundable deposits.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8253.

Yours truly,

Jacqueline Russell
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate