Commodity Clips, May/June 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
• Manitoba
• Ontario
• Québec
• Nova Scotia
• Newfoundland and Labrador
• Customs

Returnable Containers Other Than Beverage Containers
GST/HST Technical Information Bulletin B-038 — Returnable Containers Other than Beverage Containers, originally issued January 1991, was revised in March 2008, to clarify the GST/HST treatment of separate charges for returnable containers. These include wooden pallets used to transport goods, oil drums, and helium and oxygen cylinders. Information was included in the Bulletin regarding refunds, adjustments and credits under section 232 of the Excise Tax Act.

Trusts
GST/HST Technical Information Bulletin B-101 — Trusts was issued in April, 2008. The Bulletin explains the GST/HST treatment of Trusts under the Excise Tax Act. It provides guidance in relation to the types of trusts, general requirements and entitlements of trusts, operation of a trust, settlement of an inter vivos trust and distributions by a trust. It does not apply to trustees in bankruptcy or receivers, both of which are subject to the rules in sections 265 and 266 of the Act.

Agriculture and Fishing
GST/HST Memorandum 4.4 — Agriculture and Fishing, Technical Information originally issued July 2007, was revised on May 12, 2008, to change the meaning of "large seeds." The Memorandum clarifies that the reference to large seeds refers to peas, corn and beans only. Any other type of seed is considered a small seed. The reference to the Seeds Act has been changed to the Seeds Regulations. Notice 232 was issued to highlight these changes to the Memorandum.

Input Tax Credit — Restrictions and Limitations
GST/HST Memorandum 8.2 — General Restrictions and Limitations, was issued in March 2008. This memorandum replaces GST Memorandum 400-2 Restrictions — General and parts of GST Memorandum 400-3-5 Property and Services for Non-Financial Institutions. The new Memorandum provides information regarding the restrictions and limitations to input tax credit eligibility in the context of:

• club memberships
• home office expenses
• supply for exclusive personal consumption, use or enjoyment
• supply primarily for personal consumption, use or enjoyment
• reasonable amounts
• acquisition of a passenger vehicle or aircraft
• leased passenger vehicles
• food, beverages and entertainment expenses

Refund, Adjustment or Credit of the GST/HST
GST/HST Memorandum 12.2 — Refund, Adjustment or Credit of the GST/HST under Section 232 of the Excise Tax Act, issued April 2008, updates and replaces GST/HST Technical Information Bulletin B-042, Refunds, Adjustment or Credit of the GST, and incorporates Policy Statement P-030R, "Credit/Debit Notes and Net Tax Adjustments." It includes additional guidance, in paragraphs 23 to 35, regarding:

• adjustments that may be made to net tax by the supplier when an amount of tax is refunded, adjusted or credited and a credit note has been issued or a debit note received; and
• rebates of tax that may be claimed by a recipient when a supplier chooses not to refund, adjust or credit amounts of tax collected in error or in respect of consideration subsequently reduced.

Non-Residents Purchasing Tour Packages: Rebates for Eligible Tour Packages — Correction
GST/HST Info Sheet GI-032 — Foreign Convention and Tour Incentive Program — Non-Residents Purchasing Tour Packages: Rebates for Eligible Tour Packages, originally issued February 2008, was revised in April 2008 to amend the example form that can be used to help determine if a non-resident qualifies for a rebate for an eligible tour package (Appendix B). The second condition (towards the bottom), which previously read "for resale otherwise than," is replaced with "otherwise than for resale."

Excise Duty

Tobacco Compliance and Changes to Duty and Special Duty on Certain Tobacco Products
Excise Duty Notice 21 — Enhancements to Tobacco Compliance and Changes to Duty and Special Duty on Certain Tobacco Products was issued in April 2008. This Notice explains the measures that were proposed in the federal budget tabled by the Minster of Finance on February 26, 2008, with respect to tobacco compliance and duty and special duty on tobacco products. The measures include controls on tobacco manufacturing equipment, record keeping, licensing authority and proposed new duty rates.

Labelling of Spirit Containers
Excise Duty Memorandum 3.2.3 — Labelling of Containers of Spirits was issued in May 2008. The Memorandum explains the requirements relating to information that must be displayed on containers of spirits and on any packaging encasing those containers that are packaged by a spirits licensee in accordance with the Excise Act, 2001.

Labelling of Wine Containers
Excise Duty Memorandum 4.2.3 — Labelling of Wine Containers, originally issued January 2005, was revised on May 12, 2008, to include an additional instance in which wine licensees who package wine are required to ensure that specific information is displayed on the wine container. The revised Memorandum now requires that, in the case of wine that qualifies for relief of excise duty under the Excise Act, 2001, specific information must be displayed on the wine container before that wine is removed from the wine licensee's premises, consumed or made available for sale on the premises.

Social Service Tax

Purchases by Non-Residents of British Columbia
Bulletin SST 030 — Purchases by Non-Residents of British Columbia, originally issued in October 1982, was revised in April 2008. The revised Bulletin highlights the exemption that applies to transactions when a non-resident purchaser takes delivery of a vehicle or an aircraft in the province. It also specifies that the Certificate of Exemption form may be used only by persons who do not regularly make retail sales in the province and that persons who do make regular sales in the province are required to be registered as vendors.

Registering to Collect Provincial Sales Tax (PST)
Bulletin SST 044 — Registering to Collect Provincial Sales Tax (PST), originally issued in August 1984, was revised in May 2008 to include further examples of when registration is not required. The additional examples indicate that registration is not required when an entity sells only non-taxable goods or provides non-taxable services, or is a wholesaler and does not make retail sales.

Clubs, Thrift Stores, Societies and Charities
Bulletin SST 047 — Clubs, Thrift Stores, Societies and Charities, originally issued in November 1984, was revised in March 2008. The revised Bulletin includes bicycles and adult-sized tricycles as additional examples of items sold by thrift stores that are exempt. It also sets out the PST treatment of refunds and gifts given by charities in exchange for a donation.

Legal Services
Bulletin SST 061 — Legal Services, originally issued in March 1992, was completely rewritten in April 2008 and replaces the previous version dated March 1993. The Bulletin provides information to help lawyers and notaries understand how the PST applies to legal services, and includes guidance regarding taxable legal services, non-taxable legal services, residency, exemption and purchases.

Design Consultants
Bulletin SST 090 — Design Consultants, originally issued in January 1988, was revised in May 2008 to clarify the circumstances in which design consultants are required to charge PST. The Bulletin specifies that only the original copy, or the first final version, of a design provided to a client on tangible medium qualifies as incidental to the design services and that PST must be charged on any subsequent copies. Furthermore, the Bulletin now provides that PST must be charged on the entire contract if the purpose of the contract is to produce a tangible product. Additional details are also provided regarding the PST implications of improvements to real property and the change to that treatment for contracts entered into on October 1, 2008, or later.

Exemption for Members of Diplomatic and Consular Corps
Bulletin GEN 007 — Exemption for Members of Diplomatic and Consular Corps, originally issued in March 1986, was revised in April 2008 to add a requirement to include a copy of the diplomatic or consular identity card when requesting exemption from PST on telephone, hydro or pay television services.

Provincial Taxes on Nisga'a Lands
Bulletin GEN 013 — Provincial Taxes on Nisga'a Lands was issued in April 2008. This new Bulletin explains how provincial consumption taxes apply to Nisga'a citizens and to transactions on Nisga'a lands, effective June 1, 2008.

Motor Fuel Tax

Fuel Tax Refund Program for Persons with Disabilities
Bulletin MFT 004 — Fuel Tax Refund Program for Persons with Disabilities, originally issued in June 1989, was revised in April 2008 to clarify that the fuel tax refund program was expanded to include individuals with a mental disability. The date from which qualifying individuals with a permanent mental disability may claim a refund of motor fuel tax refund is February 20, 2008.

Notice to Clear and Coloured Fuel Sellers
Notice to Clear and Coloured Fuel Sellers was issued in April 2008. It provides information important to sellers of clear and coloured fuel, including information relating to coloured fuel used in farm vehicles, tax rates for coloured biodiesel and ethanol and tax rate increases on clear gasoline and clear diesel.

Hotel Room Tax

Municipal and Regional District Tax
Bulletin HRT 007 — Municipal and Regional District Tax, originally issued in October 1990, was completely rewritten in March 2008 and replaces the previous version dated October 2007. The Bulletin provides information to help registered operators of hotels, motels and other lodgings understand how the municipal and regional district tax applies to their business. In addition, the updated Bulletin adds the city of Revelstoke to the areas collecting additional tax on accommodation sales.

Carbon Tax

Carbon Tax Update
In April 2008, the British Columbia Ministry of Small Business and Revenue issued an update in relation to Carbon Tax. The update provides further information following the February 19, 2008 budget announcement and subsequent introduction of legislation regarding the proposed British Columbia Carbon Tax. If enacted, the legislation will tax the retail purchase or use in British Columbia of fuels, such as gasoline, diesel, natural gas, heating fuel, propane and coal, and on tires when used to produce energy or heat, effective July 1, 2008. The Carbon Tax Update provides details, including who will pay the carbon tax, how the carbon tax will be collected, the rates of carbon tax, remitting the carbon tax and self-assessment of carbon tax.

Draft Carbon Tax Notices
In April 2008, the British Columbia Ministry of Small Business and Revenue issued the following three draft Carbon Tax notices, final versions of which are planned to be issued when the legislation is enacted:

• Notice to Fuel Sellers — Carbon Tax, which explains the responsibilities of fuel sellers for collecting, reporting and remitting carbon tax under the proposed Carbon Tax Act.
• Notice to Propane and Natural Gas Sellers — Carbon Tax, which explains the responsibilities of propane and marketable natural gas sellers for collecting, reporting and remitting carbon tax under the proposed Carbon Tax Act.
• Registered Consumer — Carbon Tax, which explains the requirement for becoming a registered consumer for Carbon Tax purposes and the associated responsibilities. The proposed Carbon Tax Act provides that a registered consumer for Carbon Tax purposes is authorized to purchase a specific type of fuel exempt from Carbon Tax in British Columbia.

Retail Sales Tax

Taxable and Exempt Goods and Services
Bulletin No 030 — Summary of Taxable and Exempt Goods and Services, originally issued in April 2000, was revised in May 2008. The amendments made in the updated Bulletin include:

• additional exempt goods and services, including electricity, natural gas and manufactured gas purchased and used for heating certain dwellings, heating and cooling farm buildings and drying crops with a grain dryer in the course of farming;
• reduced 1.4% rate of RST in respect of certain electricity and piped gas used for a combination of taxable and exempt uses; and
• clarification that the exemption in relation to some of the items listed also covers repairs and services to those items.

Expanded Exemption for Smoking Cessation Products
The government of Manitoba issued Information Notice — Expanded Exemption for Smoking Cessation Products on May 1, 2008. The Notice provides details regarding the recent budgetary announcement that, effective May 1, 2008, the RST exemption for prescription smoking cessation products was broadened to include non-prescription products.

Retail Sales Tax

What to Expect During an Ontario Ministry of Revenue Audit
Tax Information Bulletin — What to Expect During an Ontario Ministry of Revenue Audit was released in March 2008. It explains the purpose of an Ontario Ministry of Finance audit and provides information regarding audit selection, audit process, audit service standards, interim assessments, payment of audit assessments, objection to audit assessments, voluntary disclosure and retention/destruction of books and records.

Farmers
Retail Sales Tax Guide 807 — Farmers, originally issued in February 2006, was revised in April 2008. The amendments include:

• expanded definition of farming to include post-harvest activities such as cleaning, sorting, grading, packing, packaging and storing of crops;
• specific exclusion from the definition of farming for the processing of crops or the manufacturing of products from the crops;
• barns, silos and packing sheds are listed as the qualifying structures for which materials used to build or modernize may be purchased exempt from RST; and
• RST is payable on insurance premiums for all-terrain vehicles (ATVs) that are registered and authorized to be driven beyond one's own property, based on the declining tax rates in effect during the period from May 2, 2000, to March 31, 2004.

Quebec Sales Tax

Documentary Requirements for Claiming Input Tax Refunds — Procurement Cards
Bulletin TVQ.201-3 — Documentary Requirements for Claiming Input Tax Refunds — Procurement Cards was issued on March 31, 2008. The Bulletin, which is effective from July 11, 2005, states the Ministere du Revenu du Quebec's position with respect to the documentary requirements that must be satisfied by registrants in order to claim Input Tax Refunds (ITRs) in the context of purchases made using procurement cards. Eligible registrants may be allowed to claim ITRs for procurement card purchases, based on an estimated amount of QST paid or payable, which is established using ratios.

Until implementation, registrants are required to provide the Ministere du Revenu with certain information including written confirmation of internal controls from the registrant's external auditor, sample data of the registrant's procurement card purchases for the year preceding the request and sampling results of details of the "eligible purchases ratio."

The information in this Bulletin is similar to that in Notice 199 Procurement cards — Documentary Requirements for Claiming Input Tax Credits issued by the Canada Revenue Agency in July 2005 for GST/HST purposes.

Revenue Act

Bulk Vendor of Electricity
Revenue Tax Act Bulletin 5068 — Notice to Bulk Vendors "Your Energy Rebate" was issued by Service Nova Scotia and Municipal Relations on April 29, 2008. The Bulletin advises that the current bulk vendor rebate for residential electricity consumers being charged a domestic service rate will be suspended temporarily from May 15, 2008, until August 31, 2008, inclusive. Effective September 1, 2008, the rebate on electricity will resume in a modified form, for certain households that are being charged a domestic rate.

International Fuel Tax Agreement (IFTA) Registrants
Revenue Tax Act Bulletin 5034R3 — Notice to IFTA Registrants was issued by Service Nova Scotia and Municipal Relations on April 1, 2008. This Bulletin provides information in respect to the Revenue Act Regulations that relate to trucking enterprises registered under the IFTA. The Revenue Act Regulations support the present procedures for administering IFTA and are in accordance with the Articles of Agreement of IFTA.

Insurance Premium Tax

Elimination of Insurance Premium Tax
The government of Newfoundland and Labrador announced on April 22, 2008, in a statement issued by the Honourable Danny Williams, Premier of Newfoundland and Labrador, that in this year's budget the government will eliminate the 15 percent Retail Sales Tax (RST) on insurance premiums, retroactive to January 1, 2008. The government asked that any taxes collected since January 1, 2008, on new contracts and renewals be refunded.

Canada

Dumping and Subsidizing of Thermoelectric Containers from China
The President of the Canada Border Services Agency (the CBSA) has initiated an investigation into a complaint respecting the alleged injurious dumping and subsidizing of thermoelectric containers that provide cooling and/or warming with the use of a passive heat sink and a thermoelectric module, excluding liquid dispensers, originating in or exported from the People's Republic of China.

On July 4, 2008, the Canadian International Trade Tribunal (the Tribunal) will determine whether or not there is a reasonable indication that the alleged dumping and subsidizing have injured domestic industry. If so, the CBSA will continue its investigation and by August 13, 2008, will issue a preliminary determination. Anti-dumping and/or countervailing duties will be imposed if the Tribunal finds that dumped or subsidized items are injuring or threatening to injure Canadian producers.

Memorandum D10-14-54: Tariff Classification of Certain Flat Water Sprint Racing Canoes and Kayaks
This Memorandum, issued May 9, 2008, explains the CBSA policy concerning the tariff classification of certain flat water sprint racing canoes and kayaks under tariff item 8903.99.10 of the Customs Tariff. Items eligible for import under this tariff item may be imported duty-free into Canada.

Memorandum D19-14-1: Cross Border Currency and Monetary Instruments Reporting
This Memorandum, originally issued May 31, 2004,was revised May 16, 2008, to reflect the recent changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the revised Cross Border Current Reporting policy. The revised Memorandum explains the legislative and regulatory provisions, guidelines and procedures associated with the requirement to report to the CBSA the physical cross-border movement of currency or monetary instruments.

European Union (EU)

Implementation of the new REACH Program for the Chemical Industry
The new EU Chemicals Regulation, Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) entered into force on June 1, 2007, applies from June 1, 2008. REACH streamlines and improves the former legislative framework on chemicals of the EU. REACH is intended to:

• improve the protection of human health and the environment from the risks that can be posed by chemicals;
• promote alternative test methods;
• promote the free circulation of substances on the internal market; and
• enhance competitiveness and innovation.

The legislation requires industry to register all existing and future new substances both manufactured in, and/or imported into, the EU with the European Chemicals Agency (ECA). All chemicals currently used or produced in the EU must be pre-registered with the ECA by November 30, 2008. Failure to do so may result in the EU closing its market to any unregistered products.