RST Information Notice, January 2002

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 Revenue Tax Office listed in the blue pages of your telephone directory, or visit our website at ontario.ca/revenue.

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