Commodity Clips, July/August 2008

Disclaimer: The headings in the following Commodity Clips publication link to the relevant government home pages. This new format prevents linking to government bulletins that change locations on government web sites after legislative announcements.

A bi-monthly publication of the PricewaterhouseCoopers Indirect Tax Group.

• GST/HST
• British Columbia
• Saskatchewan
• Manitoba
• Ontario
• Prince Edward Island
• Nova Scotia
• Customs

Late-filed Subsection 225.2(4) Elections
GST/HST Policy Statement P-250 Late-filed subsection 225.2(4) elections was issued on May 22, 2008. The policy statement provides guidelines on the application of subparagraph 225.2(5)(c)(ii) of the Excise Tax Act, which states that selected listed financial institutions (SLFIs) may file a subsection 225.2(4) election on "any later day that the Minister will allow," being a day after the due date of the return for the reporting period of the SLFI in which the election is to become effective.

Filing an Election under Section 167.11 of the Excise Tax Act
GST/HST Notice 233 Filing an Election under Section 167.11 of the Excise Tax Act was issued in May 2008. The notice provides guidance regarding the circumstances under which both parties involved in foreign bank reorganizations may elect for GST/HST relief for initial asset transfers from a foreign bank's Canadian subsidiary to its newly established Canadian branch. Generally, section 167.11 permits, in certain circumstances, a GST/HST-free transfer of certain property and services supplied in the course of the foreign bank reorganization if both parties to the transaction so elect in accordance with the provision.

Nisga'a Citizens and GST/HST
GST/HST Notice 234 Nisga'a Citizens and GST/HST was issued in June 2008. The transitional GST/HST relief provided to qualifying Nisga'a citizens expired on May 31, 2008. This notice provides that as of June 1, 2008, GST/HST applies to all taxable supplies on Nisga'a lands that were formerly reserve lands, or on a reserve elsewhere.

Notice of Change to GST/HST Memorandum 13.4
GST/HST Notice 235 Notice of Change GST/HST Memorandum 13.4, Rebates for Printed Books, Audio Recordings of Printed Books, and Printed Versions of Religious Scriptures was issued in July 2008. The notice explains a change to GST/HST Memorandum 13.4 with respect to the term statement of activities regarding the criteria for prescribed organisations with respect to the federal book rebate.

First Nations Goods and Services Tax - Place of Supply
GST/HST Technical Information Bulletin B-102 First Nations Goods and Services Tax - Place of Supply, was issued in May 2008. The bulletin explains the place-of-supply rules that determine how the First Nations Goods and Services Tax (FNGST) applies to supplies when a First Nation has imposed this tax. Under certain situations, if an Indian or a Band acquires property or services, it will be necessary to know where the supply is considered to take place. GST or FNGST may apply, or the supply may be relieved of tax under section 87 of the Indian Act.

Foreign Convention and Tour Incentive Program - Hunting and Fishing Packages
GST/HST Info Sheet GI-046 Foreign Convention and Tour Incentive Program - Hunting and Fishing Packages, was issued in June 2008. This info sheet explains when hunting and fishing packages are eligible tour packages for purposes of claiming a GST/HST rebate under the Foreign Convention and Tour Incentive Program (FCTIP). It also explains how Canadian suppliers, such as outfitters, account for rebate amounts they pay or credit to non-residents.

Taxidermy - Animal, Bird and Fish Mounts
GST/HST Info Sheet GI-047 Taxidermy - Animal, Bird and Fish Mounts was issued in June 2008. This info sheet explains how the GST/HST applies to property and services provided by taxidermists. In particular, it discusses whether taxidermists are providing a service or selling property. This distinction is important in determining the tax status of supplies made to non-residents, which could be taxable or zero-rated depending on the characterisation of the supply.

Fertilizer and Pesticides
GST/HST Info Sheet GI-048 Fertilizer and Pesticides was issued in June 2008. This info sheet explains what products constitute fertilizers and what products constitute pesticides, how the GST/HST applies to supplies of these products and when these supplies are zero-rated.

Drop-Shipments
The final version of GST/HST Memorandum 3.3.1 Drop Shipments - Revised, previously issued in draft in September 2007, was issued in June 2008. This memorandum replaces GST/HST Memorandum 3.3.1, dated February 2001. It explains the term "drop-shipment" and the rules under the Excise Tax Act governing transactions involving the transfer of goods by a registrant in Canada to another person in Canada on behalf of an unregistered non-resident for purposes of the GST/HST. It also explains the mechanism of the flow-through of input tax credits and/or rebates for the tax paid by an unregistered non-resident on the importation of goods, and the non-resident rebate for installation services supplied in Canada to a non-resident.

Social Service Tax

Small Business Guide to Provincial Sales Tax (PST)
In May 2008, the British Columbia Ministry of Small Business and Revenue revised the Small Business Guide to Provincial Sales Tax (PST). The revised guide clarifies the registration process and reflects changes introduced in the 2008 provincial budget.

Bicycles and Tricycles
Bulletin SST 001 - Bicycles and Tricycles, originally issued in March 1981, was revised in July 2008. The revised bulletin provides that PST does not apply to sales or leases of cycles that include electric power assisted bicycles and tricycles purchased or leased between February 20, 2008 and March 31, 2011 (inclusive), that have a mechanism that either turns the motor on and off or prevents the motor from turning on before the cycle reaches 3 km per hour.

Caterers and Event Planners
Bulletin SST 041 - Caterers and Event Planners, originally issued in December 1983, was completely rewritten in June 2008, and replaces the previous version dated December 2005. This bulletin provides specific guidance to assist caterers and event planners understand how PST applies to their businesses and has been updated to include information for wedding planners.

Clubs, Thrift Stores, Societies and Charities
Bulletin SST 047 - Clubs, Thrift Stores, Societies and Charities, originally issued in November 1984, was revised in July 2008. The revised bulletin clarifies the registration process and provides a link to lists of taxable and non-taxable items commonly sold by thrift stores. It also provides guidance in relation to the refunds of PST paid that a Parent Advisory Council or school board may qualify for in respect of goods given to a school for use by the school or students.

Out-of-Province Sellers
Bulletin SST 074 - Out-of-Province Sellers, originally issued in June 2001, was completely rewritten in July 2008 and replaces the previous version dated March 2007. The bulletin provides specific guidance to assist businesses that regularly sell taxable goods to British Columbians understand how PST applies to their businesses. Among other things, the bulletin explains when to register, how to register, when to charge PST and when not to charge PST.

Notice on Heating Fuel to Collectors, Bulk Agents and the Oil and Gas Industry
In May 2008, the British Columbia Ministry of Small Business and Revenue issued Notice on Heating Fuel to Collectors, Bulk Agents and the Oil and Gas Industry. The notice outlines the authorized uses of coloured diesel and coloured heating fuel if sold for commercial, industrial or residential use for the purposes of the Motor Fuel Tax Act and Social Service Tax Act.

Sales on Nisga'a Lands
Effective June 1, 2008, Nisga'a citizens and sales on Nisga'a lands no longer qualify for exemption from Provincial Sales Tax (PST), Hotel Room Tax (HRT), Motor Fuel Tax (MFT) or tobacco tax. In June 2008, The Ministry of Small Business and Revenue revised the following bulletins to explain the application of the relevant tax to Nisga'a citizens and sales on Nisga'a lands:

• Bulletin SST 014 - Manufactured Homes for Residential Use
• Bulletin SST 015 - Environmental Levy on Batteries
• Bulletin SST 018 - Taxable Services
• Bulletin SST 034 - Procedures for Making Exempt Sales or Leases to Indians and Indian Bands
• Bulletin SST 046 - Exemption for Indians and Indian Bands
• Bulletin SST 094 - Liquor Sellers
• Bulletin SST 107 - Telecommunications Industry
• Bulletin SST 114 - Boats
• Bulletin MFT 002 - Fuel Retail Dealers Operating on Reserve Land
• Bulletin MFT 006 - Fuel Retail Dealers Located off Reserve: Tax-Exempt Sales of Fuel to Native Indians
• Bulletin HRT 004 - Hotel Room Tax Exemption for Indians and Indian Bands
• Bulletin HRT 006 - Accommodation - Registered Operators of Hotels, Motels or Other Lodgings

Motor Fuel Tax

Tax Rates on Motor Fuels
Bulletin MFT 005 - Tax Rates on Motor Fuels, originally issued in April 1999, was completely rewritten in June 2008, and replaces the previous version, dated February 2008. This bulletin outlines the various types of fuels used in internal combustion engines and the current tax rates that are in effect. The bulletin also explains how PST applies to fuels that are not used in internal combustion engines.

Hotel Room Tax

Municipal and Regional District Tax
Bulletin HRT 007 - Municipal and Regional District Tax, originally issued in October 1990, was revised in June 2008. The revised bulletin provides that a municipal and regional district tax of 2% must be charged on sales of taxable accommodation, in addition to the provincial Hotel Room Tax, by registered operators in the Districts of Tofino and Ucluelet as of June 1, 2007 and June 1, 2008, respectively.

Carbon Tax
Effective July 1, 2008, carbon tax applies to the retail purchase or use of fuels in British Columbia, such as gasoline, diesel, natural gas, heating fuel, propane and coal, and to peat and tires when used to produce energy or heat. In June 2008, the British Columbia Ministry of Small Business and Revenue issued the following publications in relation to Carbon Tax:

• Carbon Tax Update - provides an overview of how the carbon tax will apply to the purchase or use of fuels in British Columbia.
• Carbon Tax - Frequently Asked Questions - was updated on July 2, 2008, to include several new questions and answers.
• Carbon Tax Notice - Fuel Sellers - explains the responsibilities of fuel sellers for collecting, reporting and remitting carbon tax under the Carbon Tax Act.
• Carbon Tax - Notice to Marketable Natural Gas and Propane Sellers - explains the responsibilities of marketable natural gas and propane sellers for collecting, reporting and remitting carbon tax under the Carbon Tax Act.
• Carbon Tax - Registered Consumer - explains the requirements for becoming a registered consumer under the Carbon Tax Act. Only certain types of businesses can become registered consumers. A registered consumer is authorized to purchase a specific type of fuel without paying carbon tax at the time of purchase in British Columbia.
• Carbon Tax Rates by Fuel Type - setting out the rates of tax under the Carbon Tax Act, has been updated to list the tax rate for marketable natural gas in both gigajoules and cubic meters.
• Conversion Factors for Fuel - provides factors for converting various measurements of natural gas, petroleum coke and propane.
• Carbon Tax on Nisga'a Land - explains that the carbon tax applies to Nisga'a citizens and to transactions on Nisga'a land.
• Carbon Tax Notice - Deputy Collectors and Retail Dealers - Fuel Inventory - explains the responsibilities of deputy collectors and retail dealers for calculating and reporting their fuel inventory under the Carbon Tax Act.
• Carbon Tax Notice - Carbon Tax Refunds - Deputy Collectors and Retail Dealers - explains the requirements for claiming a refund of security paid under the Carbon Tax Act.
• Carbon Tax Notice - Carbon Tax Refunds - Purchasers - explains the requirements for claiming a refund of tax paid under the Carbon Tax Act by a person who buys or receives delivery of fuel for their own use.
• Carbon Tax Notice - Registered Air Service and Registered Marine Service - explains the requirements for becoming a registered air service or a registered marine service under the Carbon Tax Act and the associated responsibilities.
• Non-Registered Air or Marine Carbon Tax - explains the requirements for self-assessing carbon tax and for claiming a refund of carbon tax for owners and operators of commercial air services and commercial marine services.
• Carbon Tax Notice - Self-Assessing Carbon Tax - explains how businesses that use fuel in their operations, on which they have not paid carbon tax at the time of purchase, must self-assess and remit the carbon tax on that fuel.

Retail Sales Tax

Fire Trucks
The Government of Saskatchewan issued a news release on May 28, 2008, stating that fire trucks purchased by the Regina and Saskatoon Airport Authorities are now PST-exempt. This treatment is consistent with the GST treatment of airport authorities, which are treated like municipalities, such that purchases are effectively GST exempt.

Retail Sales Tax

Precious Metals, Coins, Tokens and Bank Notes
Information Bulletin No. 043 - Precious Metals, Coins, Tokens and Bank Notes was issued in June 2008. The bulletin contains information that will assist vendors of precious metals to apply PST to sales of gold, silver and platinum bullion. It provides that gold, silver and platinum bullion sold in bar, wafer and ingot form are not subject to PST when they are sold as investments. The bulletin also outlines the application of tax to coins, bank notes, commemorative coins, trade dollars and tokens.

Retail Sales Tax

Returnable Containers
RST Information Notice - Returnable Containers was issued in June 2008. This notice explains several measures included in Bill 44, the Budget Measures and Interim Appropriation Act, 2008. In particular, the definition of returnable container in the Retail Sales Tax Act has been re-enacted to include tangible personal property used in the packaging, storage or shipping of goods and that is intended to be returned, directly or indirectly, to a person for reuse in the packaging, storage or shipping of goods.

Business Numbers: simple, convenient
RST Information Bulletin Business Numbers: simple, convenient was issued recently by the Ministry of Revenue. The bulletin explains that Ontario is transitioning to one Business Number (BN) to make transactions easier for Ontario businesses. Ontario is joining the federal government and other provinces in using the federal BN to identify a business and its associated program accounts. Commencing mid-July, Ontario will phase in the BN for new and existing Retail Sales Tax clients.

Tax-Included Pricing
RST Guide 208 Tax-Included Pricing was revised in June 2008 to replace the previous version dated May 2001. The guide explains how tax-included pricing works and who can use it. Currently, vendors of commercial parking, prepared foods, vendor machines, alcoholic beverages and admission charges are authorized to use tax-included pricing. Manufacturing Contractors RST Guide 401 Manufacturing Contractors was revised in June 2008 to replace the previous version dated January 1997. The guide explains how PST applies to goods manufactured and installed by contractors.

Refunds, Rebates and Adjustments
RST Guide 700 Refunds, Rebates and Adjustments was revised in June 2008 to replace the previous version titled 'Refunds and Adjustments' dated January 1997. The guide explains the difference between refunds, rebates and adjustments and when each is available. For example:

• refunds are available for RST paid in error in certain situations, including goods shipped outside Ontario, real property contracts, used motor vehicles purchased privately, vehicles converted to farm use and non-taxable goods or services;
• rebates are available to persons who purchase goods in Ontario and then subsequently remove these goods from the province for permanent use outside of Ontario;
• rebates are also available for people who purchase of lease new or used vehicles licensed under the Highway Traffic Act if the vehicles operate on alternative fuels; and
• adjustments are available to a vendors RST liability account and RST returns for RST included in amounts written off as bad debts.

Revenue Tax

Tax Exemptions for Farmers
Revenue Tax Guide RTG: 109 - Tax Exemptions for Farmers, originally issued in May 1990, was revised in June 2008. The guide sets out a comprehensive list of goods that may be purchased by a farmer who is in possession of a valid Revenue Tax Exemption Permit, exempt of revenue tax (PST) when purchased for use in farming and for no other commercial purpose. Additions to the list of tax-exempt goods include anti-backflow devices, brush-cutters, GPS systems for farm machinery, gearbox pans, labour to repair any exempt machinery and equipment, packaging materials, safety switches, thermometers, time temperature recorders and vacuum columns. The revised guide also includes information of interest to new farmers.

Farming Income
Revenue Tax Guide RTG: 175 - Farming Income, originally issued in September 2007, was revised in June 2008. The revised guide amends the definition of a farmer to include an alternative threshold of income that must be earned from farming or from custom agricultural contracting. Additional guidance is also provided in the revised guide regarding the determination of gross annual income from farming.

Application of Revenue Tax to Refrigeration Equipment
Revenue Tax Guide RTG: 176 - Application of Revenue Tax to Refrigeration Equipment was issued in June 2008. The guide provides information on the application of PST to the sale, installation, repair and maintenance of various types of refrigeration equipment including walk-in coolers/freezers, free standing refrigerators/coolers/freezers, display cases, ice machines, compressors and condensers. Guidance is also provided regarding the application of PST to walk-in coolers and freezers forming part of real property.

Sales Tax

Commercial electricity customers applying for a rebate under "Your Energy Rebate Program"
Sales Tax Act Bulletin 5070 Commercial Electricity Customers Applying for a Rebate Under the "Your Energy Rebate Program" was issued on June 6, 2008. The bulletin explains that a rebate is available until the end of August 2008 for customers charged commercial service rates for their electricity. As of September 1, 2008, new thresholds will apply to commercial service rates as billed.

Purchase of Boats and Vessels from Persons Other than GST/HST Registrants
Sales Tax Guide 2007 Provincial Tax on Purchase of Boats and Vessels from Persons Other Than GST/HST Registrants - Section 31B of the Revenue Act was issued on June 24, 2008. The guide outlines the application of Nova Scotia Sales Tax on the private purchase of boats and vessels, including boats and vessels brought into Nova Scotia from within Canada and boats and vessels brought into Nova Scotia from outside Canada. It also provides certain exemptions and guidance with respect to trade-ins on purchases of boats and vessels and certain rebates that may be available.

Purchase of Aircraft from Persons Other Than GST/HST Registrants
Sales Tax Guide 2008 Provincial Tax on Purchase of Aircraft from Persons Other Than GST/HST Registrants - Section 31B of the Revenue Act was issued on June 24, 2008. The guide outlines the application of Nova Scotia Sales Tax to the private purchase of aircraft, including aircraft brought into Nova Scotia from within Canada and aircraft brought into Nova Scotia from outside Canada. It also provides certain exemptions and guidance with respect to trade-ins on purchases of aircraft and certain rebates that may be available.

Canada

Anti-dumping duties on Carbon Steel Pipe Nipples and Adaptor Fittings
The Canadian International Trade Tribunal issued an order on July 15, 2008 concerning carbon steel pipe nipples and adaptor fittings, in nominal diameters up to and including 6 inches or the metric equivalents, originating in or exported from the People's Republic of China. The tribunal has found that the dumping of carbon steel pipe nipples and adaptor fittings from China was likely to result in injury to Canadian industry. As a result, the Canada Border Services Agency (CBSA) will continue to impose anti-dumping duties on these products.

Advance Rulings under Free Trade Agreements
Memorandum D11-4-16, outlining the Canada Border Service Agency's (CBSA) program for issuing advance rulings under Free Trade Agreements has recently been amended as follows:

• Form B227, Request for a Free Trade Agreement Advance Ruling or for a Review of a Free Trade Agreement Advance Ruling, has been cancelled by the CBSA; and
• the memorandum has been revised to include updated contact information.

Canada-Peru Free Trade Agreement
On May 29, 2008, Canada signed a Free Trade Agreement (FTA) with Peru. Benefits of this Agreement include:

• Better market access through elimination of tariffs on goods: Immediately on implementation of the FTA, Peru will eliminate tariffs on 95% of current Canadian exports, with the remaining tariffs to be eliminated over a period of five to ten years.
• Better market access for service provider: The FTA will provide enhanced market access in service sectors that are of interest to Canada, including mining, energy and professional services.
• Promotion of two-way investment between Canada and Peru: The agreement includes existing provisions in the Canada-Peru Foreign Investment Promotion and Protection Agreement, and will lock in market access for Canadian investors.
• Better access to government procurement contracts: The FTA will give Canadian and Peruvian suppliers improved market access in the area of government procurement.
• Maximized opportunities through trade-related cooperation: The Canada-Peru FTA will contribute to Peru's economic development by creating new market opportunities for exports of Peruvian goods and services and by providing a positive environment for Canadian direct investment.
• Promotion of corporate social responsibility and anti-corruption measures: The FTA also encourages Canadian and Peruvian businesses operating within either country's borders to respect and follow internationally recognized corporate social-responsibility standards, practices and principles.

Helly Hansen Leisure Canada Inc. v. President of the Canada Border Services Agency (CBSA)
On July 14, 2008, the Canadian International Trade Tribunal (CITT) issued its decision in an appeal filed by Helly Hansen Leisure Canada Inc. The issue in this appeal was whether two styles of women's jackets imported by Helly Hansen were properly classified under tariff item 6210.30.00 of the Canadian Tariff as "other garments, made up of fabrics of heading 59.03 of the type described in subheading No's 6202.11 to 6202.19," as determined by the CBSA, or should be classified under tariff item no. 3926.20.95 as "other articles of apparel and clothing accessories, of plastics combined with knitted or woven fabrics, bolducs, nonwovens or felt," as claimed by Helly Hansen. The CITT has dismissed the appeal and ruled that the jackets are properly classified in subheading 6210.30 and under tariff item 6210.30.00.

Clothes Line Apparel, Division of 2810221 Canada Inc. v. President of the Canada Border Services Agency (CBSA)
This decision will interest any importer that is paying royalties or "buying commissions" in respect of imported goods. On July 14, 2008, the Canadian International Trade Tribunal (CITT) issued its decision in an appeal filed by the importer Clothes Line Apparel, Division of 2810221 Canada Inc. (CLA). The issue in this appeal was whether certain commissions and royalties paid by CLA to Diesel U.S.A. Inc. in connection with the importation of the goods at issue should be added to their pre-adjustment value and, therefore, included in their value for duty, under subsection 48(5) of the Act, as determined by the CBSA. The Tribunal dismissed the appeal, concluding that both the commissions and the royalties paid by the importer were dutiable. It stated that as Diesel U.S.A. took title to the goods and sold them to CLA, Diesel U.S.A., by definition, cannot be CLA's buying agent and the commissions cannot be... fees paid or payable by the purchaser to his agent for the service of representing the purchaser abroad in respect of the sale and as the royalty payments were a condition of the sales, pursuant to subparagraph 48(5)(a)(iv) of the Act, they shall be added to the price paid or payable for the goods..."