Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 136624[r]
November 16, 2012
Dear [Client]:
Subject: GST/HST INTERPRETATION
Ontario Point-of-Sale Rebate for Qualifying Food and Beverages
Please accept this letter as further explanation of the Ontario point-of-sale rebate for qualifying food and beverages. It has come to our attention that our previous correspondence […], did not address all of the conditions for the point-of-sale rebate in respect of the food and beverage combinations put forth by […]. […].
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories. Since this issue concerns the application of the HST in Ontario, all references to the HST will be to the 13% rate.
The responses that follow replace the responses […] contained in our previous correspondence.
INTERPRETATION REQUESTED
[…] to confirm the tax rate(s) applicable to the following purchases of food and beverages:
1. Cup of coffee and a granola bar;
2. Single serving bottle of water and a granola bar;
3. Single serving bottle of water, cup of coffee and a granola bar;
4. Single serving of unflavoured milk and a prepackaged muffin;
5. Single serving of unflavoured milk and a non-prepackaged muffin;
6. Single serving of unflavoured milk, a sandwich and a prepackaged muffin; and
7. Cup of coffee and a prepackaged muffin.
INTERPRETATION GIVEN
The Government of Ontario provides a point-of-sale rebate of the provincial portion of the HST payable on taxable supplies of qualifying food and beverages. The rebate is administered by the Canada Revenue Agency (CRA) under an agreement between the Government of Canada and the Government of Ontario but is legislatively provided for by the combined effect of section 51 of the Ontario Retail Sales Tax Act and the Ontario regulations 262/10 Point of Sale Rebates (the Ontario regulations). Section 6 of the Ontario regulations states that prepared food and beverages are qualifying property for purposes of the rebate if the prepared food and beverages are qualifying food and beverages as defined in the federal Deduction for Provincial Rebate (GST/HST) Regulations (the federal regulations) made pursuant to the Excise Tax Act (ETA), and if the circumstances described in section 11 of Schedule 1 to the federal regulations exist.
Subsection 234(3) of the ETA, together with the federal regulations, allow a supplier who is a GST/HST registrant to make a deduction in its net tax calculation where the supplier has paid or credited a purchaser the point-of-sale rebate for qualifying food and beverages. However, the rebate and deduction are only available if the total of all consideration for all qualifying food and beverages sold to the purchaser at a particular time is four dollars or less. Under paragraph 154(2)(a) of the ETA, consideration for a supply does not include the GST/HST payable by the recipient in respect of the supply; therefore, the four dollar threshold is calculated without reference to the GST/HST. The deduction under subsection 234(3) must be taken in the reporting period of the supplier in which the amount of the rebate was paid or credited to the purchaser.
The federal regulations define “qualifying food and beverages” to mean, food or beverages (other than wine, spirits, beer, malt liquor or other alcoholic beverages) for human consumption that are, having regard to the nature of the product, the quantity sold or its packaging, sold in a form suitable for immediate consumption and that are
(a) food or beverages heated for consumption;
(b) salads not canned or vacuum sealed;
(c) sandwiches and similar products other than when frozen;
(d) platters of cheese, cold cuts, fruit or vegetables and other arrangements of prepared food;
(e) cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products if they are not prepackaged for sale to consumers, and are sold as single servings in quantities of less than six;
(f) ice cream, ice milk, sherbet, frozen yogurt, frozen pudding or non-dairy substitutes for any of the foregoing, or any product that contains any of the foregoing, sold in single servings and not prepackaged;
(g) food, the supply of which is a taxable supply (other than a zero-rated supply) that would be a zero-rated supply included in section 1 of Part III of Schedule VI to the ETA if that section were read without reference to paragraph (q);
(h) non-carbonated beverages dispensed at the place where they are sold;
(i) any of the following beverages, the supply of which is not a zero-rated supply:
(i) milk (flavoured or unflavoured),
(ii) soy, rice or almond-based beverages or other similar non-dairy substitutes for milk, or
(iii) non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk-based beverages, that contain 25% or more by volume of a natural fruit juice or combination of natural fruit juices or of a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state;
(j) any of the following beverages sold to a person at the same time as food or beverages that are described in any of paragraphs (a) to (i) and the supply of which is not a zero-rated supply:
(i) carbonated beverages dispensed at the place where they are sold, or
(ii) beverages (other than those described in any of the paragraphs (a), (h) and (i)), provided that all of the following circumstances are satisfied:
(A) the cans, bottles or other primary containers in which they are sold contain a quantity not exceeding a single serving, and
(B) the beverages are not sold in multiples, prepackaged by the manufacturer or producer, of single servings; or
(k) any of the following food, sold to a person together with food or beverages that are described in any of paragraphs (a) to (i) for a single consideration:
(i) cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products if they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving,
(ii) ice cream, ice milk, sherbet, frozen yoghurt or frozen pudding, non-dairy substitutes for any of the foregoing, or any product that contains any of the foregoing, prepackaged and sold in single servings, or
(iii) food described in any of paragraphs 1(e) to (j) and (l) of Part III of Schedule VI to the ETA.
A cup of coffee suitable for immediate consumption is a qualifying beverage for purposes of the point-of-sale rebate. A cup of coffee satisfies the requirements of both paragraph (a) and paragraph (h) of the definition of “qualifying food and beverages” in the federal regulations. The coffee is a heated beverage and it is dispensed by the supplier at the place it is sold.
On its own, a granola bar is not a qualifying food for purposes of the point-of-sale rebate. Granola bars are excluded from being zero-rated under paragraph 1(h) of Part III of Schedule VI to the ETA. Only through paragraph (k) of the definition of “qualifying food and beverages” in the federal regulations are granola bars brought into the gamut of qualifying food. Unique to paragraph (k) is the requirement that food included in paragraphs 1(e) to (j) and paragraph (l) of Part III of Schedule VI to the ETA, which includes granola bars, must be sold together with qualifying food or beverages for a single consideration. As such, a granola bar suitable for immediate consumption is a qualifying food for purposes of the point-of-sale rebate only when it is sold together with a qualifying food or beverage, such as a cup of coffee, for a single consideration.
On its own, a single serving of bottled water is not a qualifying beverage for purposes of the point-of-sale rebate. However, when sold at the same time as qualifying food or beverages, the single serving of bottled water suitable for immediate consumption becomes a qualifying beverage under subparagraph (j)(ii) of the definition of “qualifying food and beverages” in the federal regulations. There is no requirement that the single serving of bottled water be sold together with a qualifying food or beverage for a single consideration.
Muffins suitable for immediate consumption that are not prepackaged for sale to consumers are qualifying food for purposes of the point-of–sale rebate under paragraph (e) of the definition of “qualifying food and beverages” in the federal regulations, provided the muffins are sold in single servings in quantities of less than six.
On its own, a prepackaged muffin is not a qualifying food for purposes of the point-of–sale rebate. Under subparagraph (k)(i) of the definition of “qualifying food and beverages” in the federal regulations, prepackaged muffins suitable for immediate consumption only become qualifying food when sold together with qualifying food or beverages for a single consideration and when sold in single serving sizes in quantities of less than six.
A single serving of flavoured or unflavoured milk suitable for immediate consumption, that is not zero-rated under Part III of Schedule VI to the ETA, is a qualifying beverage under paragraph (i) of the definition of “qualifying food and beverages” in the federal regulations. For example, a single serving of unflavoured (white) milk dispensed at the place where it is sold is subject to the HST at 13% as it is not zero-rated pursuant to paragraph 1(o.4) of Part III of Schedule VI to the ETA. In this case, the unflavoured milk is a qualifying beverage for purposes of the point-of-sale rebate.
Unfrozen sandwiches sold in a form suitable for immediate consumption are qualifying food for purposes of the point-of-sale rebate under paragraph (c) of the definition of “qualifying food and beverages” in the federal regulations.
[…]
Note: For illustration, the represented combinations of food and beverages suitable for immediate consumption sell for a total consideration of four dollars or less. Furthermore, the muffins represented are sold in single serving sizes.
1. Cup of coffee and a granola bar
As separate items, the cup of coffee is a qualifying beverage whereas the granola bar is not a qualifying food for purposes of the point-of-sale rebate. However, when both items are sold together for a single consideration, the granola bar becomes a qualifying food for purposes of the rebate. In this case, the supplier collects the 5% federal portion of the HST on the consideration payable for the sale of the qualifying food and beverage (i.e., the granola bar and the cup of coffee sold together for a single consideration) and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser.
Where these items are sold at the same time, but for separate consideration, only the cup of coffee is a qualifying beverage for purposes of the point-of-sale rebate. In this case, the supplier collects the 5% federal portion of the HST on the consideration payable for the sale of the qualifying beverage (i.e., the cup of coffee) and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser. The supplier collects the 13% HST on the consideration payable for the sale of the granola bar.
2. Single serving bottle of water and a granola bar
Bottled water, on its own, is not a qualifying beverage for the purposes of the point-of-sale rebate. However, single serving sizes (i.e., less than 600 ml in volume) of certain beverages (such as bottled water) qualify for the rebate when sold at the same time as a qualifying food or beverage.
As noted in the response to example 1, a granola bar is not a qualifying food on its own. A granola bar must be sold together with a qualifying food or beverage for a single consideration to be eligible for the point-of-sale rebate.
Where a single serving bottle of water (less than 600 ml in volume) is sold at the same time as a granola bar, or together with a granola bar for a single consideration, the bottle of water and the granola bar are not qualifying food or beverages for purposes of the point-of-sale rebate, and the supplier must collect the 13% HST on the consideration payable for the sale of both items.
3. Single serving bottle of water, cup of coffee, and a granola bar
Of the three items in this transaction, only the cup of coffee is a qualifying beverage for purposes of the point-of-sale rebate. However, where the single serving bottle of water is sold at the same time as the cup of coffee, it becomes a qualifying beverage under subparagraph (j)(ii) of the definition of “qualifying food and beverages” in the federal regulations. Although the granola bar is sold at the same time as the cup of coffee, it only becomes a qualifying food if it is sold together with the cup of coffee, or with the cup of coffee and the bottle of water, for a single consideration.
If the cup of coffee is sold with the granola bar for a single consideration and at the same time as the single serving bottle of water (separate consideration), the recipient will be eligible for the point-of-sale rebate on all three items. If the cup of coffee, granola bar, and the single serving bottle of water are all sold together for a single consideration, the recipient will be eligible for the rebate on all three items. In these cases, the supplier collects the 5% federal portion of the HST on the consideration payable for the sale of the qualifying food and beverages (i.e., the three items) and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser.
If the granola bar is sold for consideration separate from the consideration for the cup of coffee, only the qualifying beverages (water and coffee) qualify for the rebate. In this case, the granola bar is not a qualifying food and the supplier collects the 13% HST on the consideration payable for the sale of the granola bar. In addition, the supplier collects the 5% federal portion of the HST on the consideration payable for the sale of the cup of coffee and the single serving bottle of water, and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser.
4. Single serving of unflavoured milk and a prepackaged muffin
Of the two items, only the unflavoured milk is a qualifying beverage for purposes of the point-of-sale rebate if the milk is subject to the HST at 13%. The prepackaged muffin is not a qualifying food for purposes of the rebate. However, if sold together with the unflavoured milk for a single consideration, the prepackaged muffin becomes a qualifying food for purposes of the rebate. In this case, the supplier collects the 5% federal portion of the HST on the consideration payable for the sale of the qualifying food and beverage (i.e., the muffin and the milk) and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser.
If the two items are sold for separate consideration, only the unflavoured milk will qualify for the point-of-sale rebate if it is subject to the HST and not zero-rated. The prepackaged muffin is not a qualifying food for purposes of the rebate. In this case, the supplier collects the 5% federal portion of the HST on the consideration payable for the qualifying beverage (i.e., the milk) and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser. The supplier collects the 13% HST on the consideration payable for the sale of the prepackaged muffin.
5. Single serving of unflavoured milk and a non-prepackaged muffin
Under paragraph (e) of the definition of “qualifying food and beverages” in the federal regulations, cakes, muffins, pies, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six, are qualifying food for purposes of the point-of-sale rebate. Therefore, the purchase of one muffin that is not prepackaged will be the purchase of a qualifying food for purposes of the rebate.
As noted in the response to example 4, a single serving size of milk (i.e., less than 600ml in volume) will qualify for the point-of-sale rebate when sold in circumstances where the sale of the milk is not zero-rated. Where the sale of the milk is not zero-rated, the supplier collects the 5% federal portion of the HST on the total consideration payable for the sale of the non-prepackaged muffin and the milk, whether or not they are sold for a single consideration. The supplier pays or credits the rebate of the 8% provincial portion of the HST to the purchaser.
6. Single serving of unflavoured milk, a sandwich (unfrozen) and a prepackaged muffin
The single serving size of unflavoured milk is a qualifying beverage if the milk is not zero-rated and the sandwich is a qualifying food eligible for the point-of-sale rebate. The prepackaged muffin, if sold together for a single consideration with the unflavoured milk, with the sandwich, or with both, would become a qualifying food for purposes of the rebate. In this case, the supplier collects the 5% federal portion of the HST on the total consideration payable for the sale of the qualifying food and beverages (i.e., the three items) and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser.
If the prepackaged muffin is sold for separate consideration from both the milk and the sandwich, the muffin is not a qualifying food for purposes of the point-of-sale rebate. In this case, the supplier collects the 13% HST on the consideration payable for the sale of the muffin. The supplier collects the 5% federal portion of the HST on the total consideration payable for the sale of the milk and the sandwich, whether or not they are sold for a single consideration. The supplier pays or credits the rebate of the 8% provincial portion of the HST to the purchaser.
7. Cup of coffee and a prepackaged muffin
As identified in the earlier examples, by themselves, the cup of coffee is a qualifying beverage for purposes of the point-of-sale rebate, whereas the prepackaged muffin is not a qualifying food. If each item is sold for separate consideration, the point-of-sale rebate only applies in respect of the cup of coffee. In this case, the supplier collects the 5% federal portion of the HST on the consideration payable for the sale of the qualifying beverage (i.e., the cup of coffee) and pays or credits the rebate of the 8% provincial portion of the HST to the purchaser. The supplier collects the 13% HST on the consideration payable for the sale of the prepackaged muffin.
However, if the prepackaged muffin is sold together with the cup of coffee for a single consideration, the cup of coffee is a qualifying beverage and the prepackaged muffin is a qualifying food for purposes of the point-of-sale rebate. In this case, the supplier collects the 5% federal portion of the HST on the consideration payable for the sale of the qualifying food and beverage (i.e., the muffin and the coffee) and pays or credits the 8% provincial portion of the HST to the purchaser.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, the Ontario Retail Sales Tax Act, their regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues explained in this letter, please call Patricia Taylor, Manager, Basic Groceries and Point-of-Sale Rebates Unit, at (905) 721-4106. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Respectfully,
Marcel R. Boivin
Director
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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