Notice to the reader: For Retail Sales Tax (RST) – On July 1, 2010 the 13 per cent Harmonized Sales Tax (HST) took effect in Ontario replacing the existing provincial Retail Sales Tax (RST) and combining it with the federal Goods and Services Tax (GST). As a result, RST provisions described on this page and in other publications ended on June 30, 2010.
Effective July 1, 2010 this publication was archived for RST purposes only. Use caution when you refer to it, since it reflects the law in force for RST at the time it was released and may no longer apply.
About this Notice
This Notice clarifies how Retail
Sales Tax (RST) applies to packages of cereal that include taxable
goods.
Background
Current RST legislation provides
that if a package sold for a single price contains both taxable and
exempt goods, the whole package is exempt from RST if the cost of the
container and other packaging, plus the cost of the taxable goods, is
less than 10% of the vendor's cost of the exempt items in the package.
If the cost of the taxable goods and the packaging is more than 10% of
the vendor's cost of the exempt items, then RST applies on the total
package.
The RST Branch has ruled that where a small toy is placed in a box of
cereal and the cost of the toy and the packaging (i.e., the box) is less
than 10% of the total cost of the cereal (which is exempt), the total
box of cereal is exempt.
A taxable CD-ROM in a box of cereal could make the total package
taxable if the cost of the taxable good (CD-ROM) and packaging is more
than 10% of the cost of the exempt good (the cereal).
Special Exemption
A temporary exemption from RST is being granted,
by means of an Order in Council, on packages of cereal that include taxable
goods purchased during the period of August 1, 2001 to July 31,
2002, provided all of the following conditions
are met:
- the package is sold to consumers for a single price
- the total cost to the manufacturer of the taxable goods and
packaging does not exceed 50% of the manufacturer's cost of the
exempt food products
- the taxable goods do not include candies, confections, snack
foods, prepared food products, soft drinks, liquor, beer or wine
- the exempt food products do not include prepared food products
- the taxable goods are not ordinarily packaged with the exempt food
products
- the taxable goods are included in the packages to promote the sale
of the exempt food products on a periodic basis that does not exceed
182 days during the period from August 1, 2001 to July 31, 2002, and
- the manufacturer pays RST on the taxable goods purchased to be
packaged with the exempt food products.
The Order in Council, dated November 28, 2001, applies only to
packages of cereal. The exemption does not apply to other packaged
items.
For More Information
For more information, please contact the nearest
Ontario Ministry of Finance Tax Office listed in the blue pages of your
telephone directory,
or visit our website at ontario.ca/finance.
