Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'agence.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th Floor
320 Queen Street
Ottawa, ON K1A 0L5
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Case Number: 50304
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XXXXX
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September 3, 2004
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Subject:
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GST/HST RULINGS
Application of the GST/HST to the Sale of Horses through Claiming Races
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Dear XXXXX:
This is in response to your fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of horses through claiming races.
Our understanding of the relevant facts is as follows.
1. A horse owner (the owner) offers its horse for sale through the process of a "claiming race".
2. The horse is sold through a claiming race.
3. The recipient of the horse (the purchaser) pays the amount for acquiring the horse to the racetrack XXXXX (the Racetrack).
4. The amount paid by the recipient and collected by the Racetrack includes the applicable GST.
5. Where the owner has a GST/HST registration number, the Racetrack remits the amount paid by the recipient, including the GST, to the owner. The Racetrack does not account for the GST in these circumstances.
6. Where the owner does not have a GST/HST number, the Racetrack remits the amount paid by the recipient to the owner for acquiring the horse, not including the GST. The Racetrack accounts for the GST included in the amount paid by the purchaser.
7. A particular purchaser requested that the Racetrack give him or her back the GST included in the amount paid by the purchaser where the owner does not have a GST/HST registrant number.
8. In the contract between the owner and the Racetrack permitting the owner to use the Racetrack's accommodation, the owner must indicate the name, age and sex of the horse, the date the horse would be ready to race and the claiming price.
9. The owner, pursuant to XXXXX the contract, agrees to abide by the rules, regulations and directives of the XXXXX, Standardbred Canada, and the Racetracks.
10. Section 4.2 of by-law #1 of Standardbred Canada gives that organization's Board of Directors the power to regulate the conduct of harness racing. Pursuant to that by-law, the Board adopted regulation #3. Rule 12 of regulation #3 (Rule 12) is specifically in respect of claiming races.
11. The following are extracts from Rule 12.
"12.1 Owner's Consent - Unless a horse is currently on the electronic claiming authorization system, no horse shall race in a claiming race unless the owner or his authorized agent has provided written authorization to the Race Secretary one (1) hour prior to post time of the race in which the horse is entered. If the horse is owned by more than one party, all parties must sign the authorization. (...)
12.2 Registration Certificate Requirements - Unless a horse is on the electronic registration system, the Canadian registration certificate in current ownership, duly endorsed by all registered owners, must be filed with Standardbred Canada for all horses claimed within forty-eight (48) hours after the race from which the horse was claimed. (...)
12.3 Responsibility for Eligibility - Owners, Trainers and Race Secretaries shall be responsible for the eligibility of horses declared to claiming races. (...)
12.5 Claiming Price Specified in Program - The claiming price, including any allowances, for which a horse can be claimed shall be printed in the official program adjacent to the horse's program number and a claim shall be for that amount designated, subject to correction if published incorrectly. (...)
12.10 Claiming Procedure:
(a) A person desirous of making a claim, hereinafter referred to as the claimant, must remit the required amount by certified cheque or bank draft payable to the track facility or the person desirous of making the claim and properly endorsed over to the track facility, or by cash or by transfer of purse account funds on credit with the track facility conducting the race. The required amount shall include the claiming price plus the transfer of ownership fee and any applicable taxes.
(b) The claimant shall provide all information required on the claim form provided by the track facility.
(c) The claim form shall be placed by the claimant in an envelope provided for this purpose by the track facility. The claimant shall seal the envelope and identify on the outside the date, race number and track name only.
(d) The envelope shall be delivered to the Race Secretary or a person delegated by him for this purpose, at least thirty (30) minutes before post time of the race from which the claim is being made. That person shall certify on the outside of the envelope the time it was received and whether credit in the required amount has been established.
(e) It shall be the responsibility of the Race Secretary to ensure that all such claim envelopes are delivered unopened or otherwise undisturbed to the Judges prior to the race from which the claim is being made.
(f) The Judges shall disallow any claim made on a form which is incomplete or improperly completed, or in a manner which fails to comply with the requirements of this rule.
12.11 No Withdrawal of Claim - Once a claim has been properly made, it cannot be withdrawn.
12.12 Multiple Claims on Same Horse - If more than one valid claim is made for the same horse, title to the horse shall be determined by lot under the supervision of the Judges, and all unsuccessful claims involved in the decision by lot shall, at that time become null and void, notwithstanding any future disposition of such claim.
12.13 Notification of Claim - Upon determining that a claim is valid, the Judges shall notify the Paddock Judge of the name of the horse claimed, the name of the claimant, and the name of the person to whom the horse is to be delivered. Also, the Judges shall cause a public announcement to be made.
12.14 Vesting of Title to Claimed Horse - Every horse claimed shall race in the event in the interest and for the account of, the owner who declared it in the event, but title to the claimed horse shall be vested in the successful claimant at the time the horse is deemed to have started and the successful claimant shall become the owner of the horse, whether it be alive or dead, sound or unsound, or injured during the race or after it. If a horse is claimed out of a heat or dash of an event having multiple heats or dashes, the judges shall scratch the horse from any subsequent heat or dash of the event.
12.15 Delivery of Claimed Horse - A horse claimed shall be delivered immediately by the original owner or his authorized agent or trainer to the successful claimant upon authorization of the Judges. (...)
12.21 Payment of Claiming Price - The claiming price shall be paid to the owner only when authorized by the Judges. Such authorization shall not be given until the Judges are satisfied that the claim is valid, the requirements of a "Coggins Test" have been fulfilled, and, if the horse is not on the electronic registration system, the registration certificate for the claimed horse is present, or available to affect the necessary transfer of ownership."
Ruling Requested
Does the Racetrack have the obligation to charge, collect and account for GST:
1) where the horse owner has a GST/HST registration number?
2) where the horse owner does not have a GST/HST registration number?
Rulings Given
As in our view the Racetrack is acting as an agent of the owner, we rule that:
RULING #1
When the owner is a registrant, it is the owner, and not the Racetrack, that has the obligation to charge GST on the supply of a horse made in the course of a claiming race in the above fact pattern.
RULING #2
The Racetrack has the obligation to charge, collect and account for GST where the horse owner is not a registrant for a supply of a horse that is made in Canada and made in the course of a claiming race in the above fact pattern.
Explanation
Sale of a Horse by a Registrant
A "registrant" is defined, at subsection 123(1) of the Excise Tax Act (the Act) and for the purposes of that Act, as a person who is registered or who is required to be registered. This would include some non-residents who may be registered or who have the obligation to register.
Consequently, a person who has the obligation to register and who did not do so, is still a registrant. It is therefore possible that, in some limited cases, a registrant may not have a GST/HST registration number. In those cases, the obligation to charge GST on the supply of a claimed horse remains with the owner. However, the owner and the Racetrack may make an election under subsection 177(1.1) of the Act to have the Racetrack account for the GST payable on the sale.
Sale of a Horse by a Non-Registrant
In our view, the Racetrack is supplying the horse in a claiming race as an agent of the owner in the fact pattern submitted. Therefore paragraph 177(1)(e) of the Act applies to the supply at issue.
Racetrack as agent
Whether there is an agency between two parties with respect to a particular transaction is a question of fact and law. The following are considered to be essential qualities of an agency relationship:
1. Consent of both the principal and the agent.
2. Authority of the agent to affect the principal's legal position.
3. The principal's control of the agent's actions.
In this particular case, the facts and terms of the agreement indicate that these qualities exist for the purposes of the sale of a horse made in the context of a claiming race and that the Racetrack is making such supplies as an agent of the owner.
Application of GST
Subsection 177(1) of the Act provides special rules for collecting tax in situations where a registrant acts as an agent in making a supply on behalf of another person not required to collect tax on that supply. Specifically, subsection 177(1) of the Act relates to supplies (other than supplies by auction) made on behalf of a person who is not required to collect tax, and provides that where
• a person (i.e., the principal) makes a supply (other than an exempt or zero-rated supply) of tangible personal property to a recipient,
• the principal is not required to collect tax in respect of the supply, and
• a registrant (i.e. the agent), in the course of a commercial activity of the agent, acts as an agent in making the supply on behalf of the principal,
the supply of the property to the recipient is deemed, for GST/HST purposes, to be a taxable supply made by the agent and not by the principal. The agent is deemed, for GST/HST purposes (other than for input tax credit entitlements for certain supplies made by non-residents), not to have made a supply to the principal of services relating to the supply of the property to the recipient.
Applied to this case, the sale of the horse is a taxable supply of tangible personal property (not exempt nor zero-rated), the owner is the principal, the Racetrack is the agent and the supply is not made by auction (since the horse is offered for a fixed amount).
Where the owner is not a registrant, the owner does not have the obligation to collect tax on the supply of a horse. Therefore, the Racetrack is required to account for the GST on the sale of the horse.
An exception to this requirement for the Racetrack to charge tax is when subsection 143(1) of the Act applies to deem the supply of the horse to be made outside Canada. Subsection 143(1) deems a supply of personal property or a service made in Canada by a non-resident person to be made outside Canada where the non-resident is not registered for GST/HST at the time the supply is made and the supply is not made in the course of a business carried on in Canada by the non-resident. Consequently, the sale of a horse by a non-resident owner in this case is not subject to GST, whether or not such a sale is made in the context of a claiming race.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8815.
Yours truly,
Raymond Labelle
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
2004/09/07 — RITS 50959 — Bad Debts, Accounts Receivable, and Labour and Material Payment Bonds
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