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.
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December 5, 2002
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Dear XXXXX:
This is in response to your letter XXXXX regarding the application of excise tax to fuel products handled by your clients noted above.
I have reviewed the information provided in your letter as well as the input collected in your subsequent meeting with my officials and I offer the following comments.
Manufacturers and producers of excise taxable goods, including petroleum products, are required to be licensed under the Excise Tax Act (ETA) and to account for and remit excise tax, at time of sale, on their sales of goods made under taxable conditions. In the absence of Ministerial authorization, goods purchased for resale must be obtained on a tax paid basis with no further tax applicable at time of sale.
Under the ETA, excise tax is payable on petroleum products at the time of delivery by the licensed manufacturer thereof. This tax is remittable at the end of the month following that in which the sale is made. Large taxpayers, such as major petroleum producers, must also make an installment payment in the middle of each month, based on an estimate of that month's tax liability.
Manufacturers or producers in the petroleum industry include those who "splash blend", the process where different grades of gasoline, or fuel and additives, are individually placed in a tank truck and blended by the motion of the truck during the delivery process. Due to the existence of splash blending, many businesses that would not traditionally be considered to be manufacturers are licensed for that purpose. The fact that they are licensed as manufacturers entitles these firms to purchase raw material inputs to the goods of their manufacture or production on a tax-exempt basis. It also enables them to apply to the Minister to be considered the manufacturer of "similar goods" purchased for resale purposes only, under the provisions of section 48 of the ETA.
Sections 48 and 49 of the ETA provide the authority for any licensed manufacturer who acquires, for resale purposes only, goods that complement or are of the same class as goods of its manufacture, to apply to the Minister to be considered as the manufacturer of such similar goods and hence to account for tax on its sales of these "similar" goods in the same way as it does on sales of goods of its production. In order to obtain a section 48 authorizations, a licensee must meet certain criteria. The criteria have been consistent since the inception of the original undertakings and have been published in Departmental documents since at least 1985.
"The applicant's dollar sales volume of similar goods, during the twelve months immediately preceding the application, must be twenty-five per cent or less of its sales value of goods of its manufacture or production in Canada. These dollar volumes refer to goods subject to excise tax."
This rule is administrative in nature but the Canada Customs and Revenue Agency (CCRA) believes that it is prudent, reasonable and in keeping with the intent of the legislation to continue administering this part of the Act and the related administrative guidelines in the same manner as we have done since the introduction of this provision.
To this end, audits in the fuel sector include a verification that the above principles are adhered to and that remedial action will be taken where necessary to ensure that this is the case.
To permit an extension of, or relaxation in, these rules would distort the administration of the ETA away from its design as a manufacturers tax and more into a form of wholesale tax. This application is beyond the mandate of the CCRA as a tax administrator and is more a question of tax policy, which is the domain of the Minister of Finance. Accordingly, I must conclude that our policy is reasonable and I cannot accede to your request for a relaxation in the current policy.
I regret that I cannot give you a more favourable decision.
Bill McCloskey
Assistant Commissioner
Policy & Legislation
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