Precious Metals and GST/HST
According to subsection 123 of the Excise Tax Act, a precious metal is part of the definition of “Financial Instrument”. This is important because “Financial Instruments” are not subject to GST/HST on their sale.
Precious Metals
Precious metals are bars, ingots, coins or wafers of gold and platinum that are refined to a purity level of 99.5%. Silver is also a precious metal if it is refined to a purity level of 99.9%.
If a precious metal that meets the definition of financial instrument are sold, there is no GST/HST charged.
Scrap Gold
An issue that the Canada Revenue Agency (CRA) typically has with sellers of precious metals, is the sale of scrap gold. Scrap gold is not refined to a purity of at least 99.5% and thus GST/HST is chargeable on the sale. Where this gets complicated is through the following example:
- Lebron sells scrap gold to Steph;
- Steph purchases more scrap gold and then sends it all to a refiner;
- The refiner smelts down the gold and turns it into 99.5% pure; and
- The refiner takes a fee for the service and then ships the 99.5% pure gold back to Steph.
The CRA occasionally takes the position that Steph sold the scrap gold to the refiner, and then purchases the pure gold. Why this matters is if that was indeed the case, Steph would have to charge GST/HST on the sale of the scrap gold to the refiner.
If you are being audited for the sale of precious metals, contact us today to see how we can help!
Case Law
Bombay Jewellers Ltd. v. The Queen, 1998 CanLii 320 – What is a Bar, Ingot, Coin or Wafer
Michaud v. The Queen, 2014 TCC 83 – Gold Prospecting
TricomCanada Inc. v. The Queen, 2016 TCC 8 – GST/HST and the sale of Scrap Gold
**Disclaimer
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer.
Kendal Steele