27 October 2000 GST/HST Interpretation 31049 - GST/HST Status of Surveys and Installation of Signs

Dear XXXXX:

Thank you for your facsimile of April 17, 2000 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to installation services and surveys.

The following facts were presented during a telephone conversation on May 29, 2000.

•   A non-resident sign company (USCo), located in XXXXX, manufactures signs for XXXXX (Carco) in Canada. USCo is not registered for purposes of the GST/HST.

•   In order to install the signs, USCo contracts with XXXXX (Canco) for installation of the signs and, if necessary, XXXXX conducts a survey of the site for installation. Canco is resident in XXXXX and is registered for the GST/HST.

•   There are no written contracts for work; the agreements to work are on an irregular as needed basis.

•   The agreement between USCo and Carco to manufacture the sign is separate from the agreement between USCo and Canco to install the sign.

•   Carco chooses a site in XXXXX for the installation of the sign.

•   Prior to the installation of the sign, Canco conducts a survey to determine where and how the sign is to be affixed. As part of the survey Canco determines what the site looks like; and on what the sign is to be installed; i.e., on pylons, on a wall or in the ground.

•   Canco invoices USCo for the installation services. If Canco conducts a survey, prior to the installation of the sign, the survey is included in the price of the installation services. The invoice to USCo, therefore, shows one price for the survey and installation services. Canco charges 15% HST to USCo for the installation of the sign and the survey.

Interpretation Requested

1. Installation services are subject to HST at 15%.

2. USCo is eligible to apply for a rebate of the HST, paid to Canco, for the installation of the sign, pursuant to subsection 252.41(1) of the Act.

3. A survey is subject to HST at 15%.

Interpretation Given

1. The installation services are subject to HST at 15% pursuant to subsection 165(2) of the Act.

2. USCo is eligible for a rebate of the HST on the installation services, pursuant to subsection 252.41(1) of the Act.

3. A survey is subject to HST at 15%. If the survey is considered to be part of the installation services, the survey and the installation services may be eligible for a rebate pursuant to subsection 252.41(1) of the Act.

Rationale

1. Installation Services

The supply of installation services is deemed to be made in Canada pursuant to paragraph 142(1)(g) of the Act. Paragraph 2(a) of Part V of Schedule IX to the Act states that a supply of a service is made in a province if all or substantially all of the Canadian element of the service is performed in the province. Pursuant to section 144.1 of the Act, the supply is deemed to be made in a participating province if it is made in Canada and is, under the rules set out in Schedule IX, made in a province. In this case, the supply of installation services is deemed to be made in a participating province because all of the Canadian element of the service is performed in XXXXX. The supply of installation services is, therefore, subject to tax at 8% pursuant to subsection 165(2) of the Act, in addition to tax at 7% imposed by subsection 165(1) of the Act.

In situations where an unregistered non-resident supplies tangible personal property (TPP), such as a sign, to a registered person, but contracts the service of installing the TPP in real property located in Canada, to a third party registrant (installer), the non-resident recipient of the supply of the installation service may be eligible for a rebate of the GST/HST paid.

In this case, USCo supplies a sign to Carco, but contracts the service of installing the sign to Canco, a third party registrant. USCo may, therefore, be eligible for a rebate of the HST it paid to Canco.

USCo may submit the rebate application to Canco, and Canco may pay or credit USCo with an amount equal to that of the rebate. Canco must then forward the rebate application to the CCRA with its GST/HST return for the reporting period in which the rebate is paid or credited.

If Canco refuses to pay or credit the rebate, USCo may submit an application for rebate directly to the CCRA. The application for rebate must include original receipts for installation services.

A rebate claim must be filed within one year after the completion of the service.

The GST/HST Rebate Guide, enclosed for your information, provides instructions on filing the application for rebate. Reason code 10 is used in cases where a non-resident is the recipient of a taxable supply of installation services and the application is filed through a registered supplier. In this case, the GST/HST registered supplier (Canco) pays or credits the non-resident (USCo) the rebate amount and files the application on the non-resident's behalf. Canco can, subsequently, claim an input tax credit (ITC) adjustment on line 107 of the GST/HST return for the amount of rebate the supplier paid or credited to the eligible non-resident. Canco mails the rebate application to the CCRA with the GST/HST return for the reporting period in which the supplier paid or credited the rebate to the non-resident in order to claim an ITC adjustment on line 107 of the rebate.

Canco can refuse to pay or credit the rebate to the non-resident recipient of the taxable supply of installation services, in which case reason code 11 must be used when the non-resident files an application for rebate.

2. Supply of a Survey

The supply of the survey is deemed to be made in Canada pursuant to paragraph 142(1)(d) of the Act, because the survey is in relation to real property situated in Canada. Paragraph 2(a) of Part IV of the Act states that a supply of a service is made in a province if all or substantially all of the real property that is situated in Canada is situated in the province. In this case, the supply of the survey is made in a participating province because all of substantially all of the real property is situated in XXXXX. Pursuant to section 144.1 of the Act, the supply is deemed to be made in a participating province, if it is made in Canada and is, under the rules set out in Schedule IX, made in a province. Therefore, the supply of the survey is deemed to be made in a participating province and is subject to tax at 8% pursuant to subsection 165(2) of the Act, in addition to tax at 7% imposed by subsection 165(1) of the Act.

If, however, the survey is included in the price charged for the installation services, on the invoice to USCo, both the survey and the installation services are eligible for the rebate provided for the installation services.

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 Canada Customs and Revenue Agency 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) 952-6743.

Yours truly,

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