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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th Foor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 193533
Attention: […]
Dear […]:
Subject: GST/HST INTERPRETATION
Supply of jet fuel to non-resident airline
Thank you for your letter concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of jet fuel to a non-resident airline.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15%
in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The
GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Based on the information provided in your letter, the sample […] Agreement (the “Agreement”), the sample invoices, the sample daily transaction vouchers and our subsequent telephone discussions, we understand the following:
1. […](“FuelCo”), registered for the GST/HST, […][is an intermediary supplier of jet fuel].
2. FuelCo purchases jet fuel from […] and […][X] and [stores the jet fuel in a shared fuel storage facility “the fuel farm”] […]. Your submission refers to the specific cases where FuelCo resells the fuel to non-resident international air carriers (“NonResAir”).
3. NonResAir refers to a non-resident international commercial air carrier in the business of transporting passengers and property by air to and from Canada or between places outside Canada. NonResAir does not offer any local air transportation services exclusively within Canada and undertakes only international flights to and from Canada. […].
4. Some of the NonResAir airlines are registered for the GST/HST, while others are not.
5. […]. […] (“Operator”), currently operates and manages the Airport fuel farm.
6. The fuel farm is used by […] and […][X], 2nd tier intermediaries such as FuelCo, and individual airline companies.
7. Each airline is responsible for purchasing its own jet fuel. Typically, an airline will purchase more fuel than it needs and store the excess fuel in inventory at the fuel farm for future use. NonResAir has entered into an Agreement with FuelCo for the procurement of jet fuel, on demand, for the duration of the Agreement.
8. […][The fuel farm users such as NonResAir] do not each have their own separate storage tanks at the fuel farm. Rather, the fuel purchased by the […][users] is comingled in the shared fuel storage tanks.
9. The fuel farm is a series of above and below ground fuel storage tanks and associated infrastructure that moves jet fuel from the storage tanks, and pushes it through a grid of underground pipelines and valves to underneath the Airport’s aprons where it is drawn by pump trucks from hydrants in the ground. On request by the airlines, the loaded pump trucks will then transfer the jet fuel into individual aircrafts for refueling.
10. […].
11. […][X] stores an inventory of fuel in the fuel farm, which is available for resale to intermediaries such as FuelCo. Once FuelCo receives a purchase request from one of its clients (airlines), it purchases the required fuel from [X] and resells it to its clients, such as NonResAir. At the time of purchase, the fuel is already stored in the fuel farm storage tanks, since [X] maintains its inventory of fuel on-site. As a result, FuelCo does not ever physically take possession of the fuel at any time.
12. The successive sales of fuel are recorded by the Operator and an entry is added to the airline’s account of fuel inventory in storage. No fuel is ever physically displaced during these events, since the series of transactions all take place “on the books” and the fuel remains at all times in the fuel farm storage tanks. However, delivery is considered to have occurred once the Operator recognizes the transfer.
13. The Operator logs and maintains an inventory record of how much of the fuel in the storage tanks belongs to each of the […][users of the fuel farm]. These inventory record logs are updated each time fuel is [purchased by a user and] added to (transferred within) the tanks […] or removed (transferred out) when fuel is sold or loaded into airplanes. The Operator then issues daily transaction vouchers to the […][users] which detail the fuel which they have purchased (received-in to storage) and the fuel which they have either consumed or sold (transferred-out of storage) and to whom it has been transferred.
14. You have provided an example of a daily transaction voucher dated [mm/dd/yyyy] wherein FuelCo has purchased 300 000 litres of jet fuel from the [X] (receipt-in) and sold (transferred-out) 22 660 litres to a domestic airline company, 200 000 litres to NonResAir and 17 770 litres to yet another domestic airline company. This still leaves FuelCo with a residual inventory of 59 570 litres of fuel left in storage.
15. When NonResAir purchases jet fuel from FuelCo, delivery of the fuel is not made directly into the aircraft, but rather the jet fuel is added to the airline’s existing account of fuel inventory at the fuel farm.
16. The parties to the transaction consider the fuel to have been delivered [for GST/HST purposes] once the Operator issues a daily transaction voucher to NonResAir indicating that the fuel is transferred-out of storage for FuelCo and received-in to storage by […][NonResAir].
INTERPRETATION REQUESTED
You would like to know whether the supply of jet fuel by FuelCo to NonResAir is zero-rated.
INTERPRETATION GIVEN
A supply by way of sale of tangible personal property that is delivered or made available in Canada to the recipient is deemed to be a supply made in Canada. Since the fuel sold by FuelCo to NonResAir is considered to be delivered or made available at the Airport fuel farm, the supply is deemed to be made in Canada.
Section 2.1 of Part V of Schedule VI to the ETA zero-rates a supply of fuel to a person who is registered under the ETA at the time the supply is made while section 2 zero-rates a supply of property to a non-resident person who is not registered at the time the supply is made. In both cases, the following conditions must be met for the supply of fuel to be zero-rated:
(a) the person carries on a business of transporting passengers or property to or from Canada or between places outside Canada by aircraft; and
(b) the property (fuel) is acquired by the person for use in the course of so transporting passengers or property.
At the time of the supply, NonResAir appears to meet the condition in paragraph (a); however, because of the manner in which the fuel is delivered and stored at the Airport fuel farm, the condition in paragraph (b) is not met and therefore the supply of fuel to NonResAir is not zero-rated. These zero-rating provisions do not allow for any situation other than the complete use of the fuel supplied for transporting passengers or property either to or from Canada or between places outside Canada.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-9892. 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.
Yours truly,
Anna Messore
Border Issues Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate
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