Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 127874
Business Number: […]
November 21, 2012
Dear [Client]:
Subject: GST/HST RULING
Place of supply of goods supplied by way of sale
Thank you for your letter of August 11, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of goods by way of sale. We apologize for the delay in replying.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the facts to be as follows:
1. […]([…][Company A]) operates […] stores in Canada.
2. [Company A] is located in […][City 1, Participating Province] and is a GST/HST registrant.
3. […]([…][the Subsidiary]) is a wholly owned subsidiary of [Company A].
4. […]. These purchases are governed by the [Company A’s] […]([…][Company A Agreement]) which suppliers of goods and services to [Company A] and […][Company A stores] must agree to.
5. One of the suppliers of goods by way of sale to [the Subsidiary] and [Company A stores] is […]([…][the Supplier]), which is a GST/HST registered supplier of […] located in […][a Non-Participating Province].
6. The [Company A Agreement] provides in part that: […]
7. The […] section of the […][publication] provides in part that with respect to […][City 2, Non-Participating Province] vendors and purchase orders flagged “[…]”, the vendors must deliver the goods prepaid to the warehouse of […]([…][Company B]), […], located in [City 2, Non-Participating Province].
8. [The Subsidiary] and [Company B] have entered into a […][Warehouse Agreement] pursuant to which [the Subsidiary] has hired [Company B] to provide storage, sorting and consolidation services to [the Subsidiary] with respect to the goods delivered by the suppliers to the [Company B] warehouse in [a Non-Participating Province]. This agreement requires [Company B] to perform various tasks including […]. [The Subsidiary] is liable for the payment of the consideration for the services provided by [Company B] pursuant to the agreement.
9. [The Subsidiary] arranges shipment of the consolidated goods to its warehouses or to the [Company A stores]. [The Subsidiary] arranges the shipment of the goods to the [Company A stores] as their agent. When necessary, [the Subsidiary] subsequently […] the shipments of goods at its [City 1] location. [The Subsidiary] has a separate agreement with [Company B] to ship the goods from [City 2] to its [City 1] location. [The Subsidiary] […] the shipments at its [City 1] location on to other common carriers such as […]. [The Subsidiary] pays the common carriers on behalf of the [Company A stores]. [The Subsidiary] subsequently charges the [Company A stores] for their portion of the common carrier transportation costs. For shipments of goods to [Company A stores] […], […][the delivery company] picks up the goods at the [Company B] warehouse and delivers the goods to the [Company A stores]. The [Company A stores] are charged by [the Subsidiary] for their portion of the [the delivery company] related shipment fees.
RULING REQUESTED
You would like to know the province in which the supplies of the goods made by [the Supplier] to [the Subsidiary] and [Company A stores] as described in the facts are considered to be made.
RULING GIVEN
Based on the facts, the supplies of the goods made by [the Supplier] to [the Subsidiary] and [Company A stores] are made in [a Non-Participating Province] and are consequently subject to GST at a rate of 5%.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
A taxable (other than zero-rated) supply of a good that is made in Canada is subject to the GST at a rate of 5% if made in a non-participating province and is subject to the HST at the applicable rate if it is made in a participating province.
A supply by way of sale of a good is deemed to be made in Canada under paragraph 142(1)(a) if the good is, or is to be, delivered or made available in Canada to the recipient of the supply. Conversely, a supply by way of sale of a good is deemed to be made outside Canada, under paragraph 142(2)(a) of the ETA, if the good is, or is to be, delivered or made available outside Canada to the recipient of the supply.
Generally, the place of supply rules in section 142 for supplies of goods made by way of sale are based on where legal delivery of the goods to the recipient occurs, which can generally be determined by reference to the terms of the agreement for the sale of the goods and the applicable sale of goods law. Based on the facts, legal delivery of the goods supplied by [the Supplier] occurs in Canada and as explained below, more specifically in [a Non-Participating Province].
Section 144.1 provides that a supply is deemed to be made in a province if it is made in Canada and is, under the place of supply rules set out in Schedule IX, made in the province. Furthermore, a supply that is made in Canada that is not made in any participating province is deemed to be made in a non-participating province.
Under section 1 of Part II of Schedule IX, a supply by way of sale of a good is made in a province if the supplier delivers the good or makes it available in the province to the recipient of the supply. Generally, this place of supply rule and the previously explained place of supply rules in section 142 are based on where legal delivery of the goods to the recipient occurs. This can generally be determined by reference to the terms of the agreement for the sale of the goods and the applicable sale of goods law, taking into account the facts of each case.
Section 3 of Part II of Schedule IX further provides that a good is deemed to be delivered in a particular province by a supplier and is deemed not to be delivered in any other province by the supplier where the supplier either:
* ships the good to a destination in the particular province that is specified in the contract for carriage of the good,
* transfers possession of the good to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the good to such a destination;
This rule requires the supplier to be sufficiently involved in securing the transportation of the good by the common carrier or consignee. The supplier must retain a common carrier or consignee on behalf of the recipient (rather than on the supplier’s behalf or on behalf of a person other than the recipient) to have the good shipped to a province pursuant to terms negotiated, and instructions provided, by the supplier. A supplier that merely contacts a common carrier or consignee to indicate that the good is ready to be transported pursuant to an arrangement that has already been established by the recipient with the carrier or consignee, or that is merely made aware of such an arrangement, is not considered to have retained the carrier or consignee on behalf of the recipient.
* sends the good by mail or courier to an address in the particular province.
Based on the facts, legal delivery of the goods supplied by [the Supplier] in this case is considered to occur in [a Non-Participating Province] at the [Company B] warehouse in [City 2, Non-Participating Province] to which [the Supplier] delivers the goods pursuant to the terms of the [Company A Agreement] and the [publication]. It is at the [Company B] warehouse that has been hired by [the Subsidiary], and beyond which [the Subsidiary] arranges for the shipment of the goods to the [Company A stores] on their behalf, that possession of the goods supplied by [the Supplier] is considered to have transferred. The goods are also not deemed to be delivered in another province. The supply of the goods by [the Supplier] is therefore deemed to be made in the non-participating province […] and subject to GST at a rate of 5%.
The supply of taxable (other than zero-rated) goods by way of sale made by other registered vendors in [a Non-Participating Province] to [the Subsidiary] and [Company A stores] and delivered to the [Company B] warehouse in [a Non-Participating Province] in the same circumstances as those described in the facts would also be deemed to be made in [a Non-Participating Province] and subject to GST at a rate of 5% based on the previously explained rules.
The place of supply rules that determine the province in which a supply, including a supply of goods by way of sale, is made are explained in GST/HST Technical Information Bulletin B-103 Place of supply rules for determining whether a supply is made in a province (available on the CRA web site at: http//www.cra-arc.gc.ca/E/pub/gm/b-0103README.html). As illustrated in the examples in the publication and as previously explained, in applying the place of supply rules to determine the province in which a supply of goods by way of sale is made it is necessary to consider the province in which legal delivery of the goods occurs and the degree of involvement, if any, of the supplier in the shipment of the goods to another destination.
The province in which taxable (other than zero-rated) goods sold by other registered vendors in Canada to [the Subsidiary] and [Company A stores] are made in circumstances other than those described in the facts where the goods are delivered to the [Company B] warehouse in [a Non-Participating Province], would be determined by the application of the previously explained place of supply rules. Depending on the facts in these other circumstances, the supply of the goods could be considered to be made in the province in which the [Company A stores] that is specified in the purchase order is located. For example, this would generally be the case if, as previously explained, it is determined based on the facts that legal delivery of the goods occurs at the location of the [Company A stores], or the supplier either ships the goods to the [Company A stores] or transfers possession of the goods to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the goods to the [Company A stores].
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-4294. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Donato Licursi
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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