14 July 1998 GST/HST Interpretation HQR0000995 - Application of the GST/HST to an Employment Agreement

Dear XXXXX

I refer to your facsimile message of June 13, 1997 (with attachments), addressed to the XXXXX Tax Services office, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the services provided by XXXXX[.]

The following facts were provided in your submission:

•   XXXXX signed an employment agreement with XXXXX (Club) for a period of two years ending September 14, 1995. This agreement was used for discussion purposes to renogotiate the agreement for the next two years, which ended September 18, 1997.

•   XXXXX scouted the United States (US) teams which included high schools, junior league, college league and US teams in the Canadian major junior league.

•   XXXXX also scouted x National Hockey League (NHL) teams consisting of five Canadian teams and 21 US teams.

•   Teams in Europe, Sweden, Finland, Czechoslovakia and Russia were also scouted by XXXXX[.]

•   XXXXX attended training camp for the Club in XXXXX annually.

•   XXXXX tracks statistics on the players at all levels and maintains these records using equipment from his office in his home.

•   XXXXX is entitled to bonuses based on the play off performance of the Club. Any bonus is highly dependent on the recruiting of quality players.

•   The employment agreement is an annual one and does not specify hours of work, a specific work place and does not allow XXXXX to participate in fringe benefits such as medical, dental, group life and group disability insurance, because he is not a permanent resident or citizen of the US.

•   XXXXX is required to find and sign quality hockey players. If he does not fulfill the conditions of his contract, then the contract will not be renewed by the Club.

•   XXXXX is eligible for pension benefits, if any, which are customarily made available to employees of the Club.

•   XXXXX provides his professional expertise as a hockey scout and sets his own scouting schedule under the general supervision of the Club.

Interpretation Requested

Is XXXXX acting as an agent of the Club and are the services supplied by XXXXX to the Club zero-rated pursuant to section 5 of Part V of Schedule VI to the Excise Tax Act ("the Act").

Interpretation Given

Based on the information provided, the Department is of the opinion that XXXXX is an employee of the Club.

The provisions of section 5 of Part V of Schedule VI to the Act cannot apply because anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person is excluded, by definition of "service", under subsection 123(1) of the Act. The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-5124.

Yours truly,

Cheryl R. Leyton
Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Legislative References:           section 5 of Part V of Schedule VI
subsection 123(1) definition of "service"