16 November 2005 GST/HST Interpretation 61756 - Acquiring tobacco on a tax-free basis for resale

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.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of goods made via the Internet to Indians by one of your clients.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Statement of Facts

We understand that:

1. Your client is based in and has operations in Canada XXXXX.

2. Your client is a GST/HST registrant that carries on commercial activities for purposes of the ETA.

3. Your client operates retail stores. It also sells taxable goods to consumers via the Internet and delivers goods directly to its customers.

4. One of your client's customers sent digital images via the Internet to your client for processing. The customer is an Indian. Once the digital images were processed, your client delivered the prints of the digital images to the Indian customer on a reserve.

Ruling Requested

1. You would like to know whether the supply of goods (e.g., digital prints) by your client to Indians is taxable when sold via the Internet.

2. You would like to know if the retention of the nine or ten-digit registry number or the band name and family number on the invoice, or other sales documents, constitute sufficient evidence to substantiate the non-collection of GST by your client on goods sold to Indians via the Internet.

3. You would like to know if the retention of additional information such as the postal code pertaining to a reserve constitutes sufficient evidence to substantiate that the goods were delivered to a reserve by your client should it be determined that the numbers and names without the physical validation are not sufficient.

Ruling Given

Based on the facts set out above, we rule that

1. The supply of goods (e.g., digital prints) by your client to Indians when sold via the Internet is not subject to GST if the Indian presents proof of registration under the Indian Act and the goods are delivered to a reserve.

Under Technical Information Bulletin B-039R2 - GST/HST Administrative Policy Application of GST/HST to Indians (B-039R2) - an Indian must present proof of registration under the Indian Act before tax relief can be provided on a good delivered to a reserve. Therefore, in order to acquire a good sold via the Internet tax-relieved, an Indian must provide a copy of their Certificate of Indian Status card (Status Card) to your client by way of mail or facsimile transmission prior to a sale. A copy of the registry number or the band name and family name retained by your client will be acceptable evidence if the information contained on the Status Card matches the notation on the sales documentation. For example, if an Indian uses a credit card to make a purchase and the name shown on the Status Card is the same name as the credit card holder, the retention of a copy of the Status Card together with the credit card documentation maintained by your client would constitute satisfactory documentary evidence.

2. The retention of the nine or ten-digit registry number or the band name and family number on the invoice, or other sales documents does not, on its own, constitute sufficient evidence to substantiate the non-collection of GST on goods sold to Indians via the Internet. Your client must also retain a copy of the Status Card provided by Indian customers and documentary evidence (e.g., mileage log, dispatch records) to support that the goods were delivered to a reserve.

3. If your client identifies all postal codes pertaining to Indian reserves across Canada and makes sure that deliveries are made to a location on a reserve that matches the postal code, this would constitute sufficient evidence to substantiate that the goods were delivered to a reserve subject to its acceptance, on a case-by-case basis, by the Verification and Enforcement (V&E) Division (Audit) of the local Tax Services Office.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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

The supply of photofinishing using digital images furnished to the supplier by the recipient is a supply of tangible personal property. In accordance with the information contained in the enclosed B-039R2, a supply of property made off a reserve to an Indian is relieved of GST/HST if the Indian provides proof of registration under the Indian Act and the property is delivered to a reserve by the vendor or the vendor's agent.

It is a question of fact whether the conditions described in B-039R2 to provide tax relief to Indians are met and whether the documentary evidence retained by a vendor to support the non-collection of tax on a supply is adequate. This determination is ultimately a V&E decision. The value of the transaction(s), the frequency of the transaction(s), the nature of the supply and the status of the recipient are among the factors that will be considered by V&E in establishing whether the requirements set out in B-039R are met.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-7952.

Yours truly,

Lynn F. Renner
Aboriginal Affairs Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2005/11/18 — RITS 62401 — New Housing Rebate - Sale of Complex by Estate