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File number: 11685-1
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MEMORANDUM FOR XXXXX
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October 27, 2000
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This refers to your request for XXXXX[.] The following facts were provided on this case.
• XXXXX, is a resident of Canada and is registered for the GST/HST XXXXX. XXXXX is located in XXXXX. XXXXX is a non-participating province.
• XXXXX filmed a XXXXX in the participating provinces. In order to film the program, XXXXX acquired a number of services such as imaging services, sound and lighting technicians, camera operators, courier and other ancillary services.
• The ancillary services pertained to courier and postal services. The purpose of these services was to ship goods from XXXXX, located in a non-participating province to a participating province. The supply of postal services was not a supply of a service made pursuant to a bill of lading.
• After filming, the film was brought back to XXXXX for editing, packaging and music dubbing.
• XXXXX submitted a claim for a rebate under subsection 261.3(1) of the Act, for the services it acquired in the participating provinces.
• XXXXX not entitled to a rebate on the tax payable under subsection 165(2) on services acquired in the participating provinces.
• XXXXX entitled to a rebate under subsection 261.3(1) of the Act.
To qualify for the rebate of the provincial component of the HST (8%) paid on supplies of intangible personal property or services acquired for consumption, use or supply outside the participating provinces, the following conditions must be met:
• the person claiming the rebate must be a resident of Canada (including residents of participating provinces);
• the rebate must not be payable to a listed financial institution described in subparagraph 149(1)(a)(vi) or (ix) in respect of HST paid on a supply of a management, administrative or other related service defined as a "specified service" in subsection 261.3(1); and
• the supply must be of intangible personal property or a service acquired by the recipient for consumption, use or supply primarily (more than 50%) outside the participating provinces.
It has already been established that the person claiming the rebate is a resident of Canada and is not a listed financial institution. Therefore, in order to determine whether XXXXX is eligible for the rebate, it must be determined whether the supply of the services XXXXX is acquired by XXXXX for consumption, use or supply primarily outside the participating provinces
"Supply", as defined in subsection 123(1) of the Act, means subject to section 133 and 134, the provision of property or a service in any manner, including a sale, transfer, barter, exchange, licence, rental, lease, gift or disposition.
"Consumption" and "use" are not defined in the Act, however, the words, "consumption" and "use" appear in Part V of Schedule VI to the Act and, in particular, appeared in the previous versions of section 7 of Part V of Schedule VI to the Act. P-004, Determining If A Service Is Primarily For The Consumption, Use or Enjoyment In Canada Of Any Person, and P-180, Meaning Of "Primarily For (The) Consumption, Use Or Enjoyment In Canada (Of Any Person), although obsolete, are of use in determining what constitutes "consumption" and "use" for the purposes of subsection 263.1(1) of the Act.
According to P-004, "use" refers to the act or practice of using or employing something. "Consumption" is defined as the act or instance of consuming or the process of being consumed. Whether a service will be regarded as primarily for the consumption of any person in Canada will depend on where the initial consumption takes place. "Use" stresses the practicality of the end result or purpose or service in any manner.
Although the P-004 and P-180 are obsolete, the same questions concerning "consumption" and "use" can be applied to this case.
Based on the information provided, there are two types of services: the sound and lighting technicians and camera operators; and the ancillary services such as courier and postal services. The former will be dealt with first.
Production Services
What is the purpose or objective of the services?
The objective of the supply of the services is to produce a film. The services provided by the sound and lighting technicians and camera operators are acquired for the production of the film. The suppliers of such services, however, are merely supplying a specialized service or process which is an input to the production of a film. Therefore, these services help to attain the overall objective or purpose, which is to produce a film for XXXXX[.] The supply of services for production of the film are considered to be inputs, which are consumed in the course of production of the film. The film is produced in the participating province and the services are, therefore, consumed in the province.
According to P-004, "consumption" can refer to using something up, such as time allocated to a particular activity. Furthermore, a service will be regarded as primarily for the consumption of any person in Canada, depending on where the initial consumption takes place. In this case, initial consumption takes place in the participating provinces as the services are used up in the participating provinces.
What is the connection between the purpose or objective of the service and a participating province?
XXXXX does not have any presence in the participating provinces. It is there to XXXXX produce a film. With respect to activities in the participating province, XXXXX a XXXXX resident of a non-participating province, produces XXXXX in a non-participating province. In the course of producing a XXXXX, filming is performed in the participating provinces. Again, the supply of the services may be considered to be an input to the filming. Production of the film is completed in a non-participating province Therefore, the supply of the services can be considered to be for use by XXXXX in a non-participating province. Due to the fact that the services are for use in producing the film and the film is produced in a non-participating province, the use of the services can be considered to take place in a non-participating province.
How is the "primarily" test applied?
P-180 states that the primarily test may be applied where the purpose or objective of the service is realized. Consideration should also be given to where the recipient or other beneficiary (or beneficiaries) are when the service is supplied.
The objective of the supply of the services is to produce a film. The services are performed in the participating provinces and the film is shot in the participating provinces with some activities such as editing and music dubbing being carried out in a non-participating province. Therefore, when the primarily test is applied, it is evident that the purpose or objective of the services is to produce a film, which is realized in a non-participating province.
Paragraph 2(a) of Part IV 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. In this case, the supply of the services is made in a participating province because all or substantially all of the Canadian element of the services is performed in the participating provinces. 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 production services 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.
Considering XXXXX acquired a supply of production services, including sound and lighting technicians and camera operators for use primarily in a non-participating province, XXXXX is entitled to a rebate under subsection 261.3(1) of the tax paid pursuant to subsection 165(2) of the Act.
Postal
Section 2 of Part VII of Schedule IX to the Act states that a supply of a postage stamp or a postage-paid card, package or similar item (other than an item bearing a "business reply" indicia) that is authorized by the Canada Post Corporation is made in a province if the supplier delivers the stamp or item in the province to the recipient of the supply and, where the stamp or item is used as evidence of the payment of postage for a mail delivery service, the supply of the service is made in that 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 the postal services is not made in a participating province as the payment for the postage is made in a non-participating province. Therefore, there is no question of a rebate of the HST pursuant to subsection 261.3(1) of the Act, because only GST was applicable on the supply of the postal services.
Courier
Section 5 of Part VI of Schedule IX to the Act states that, subject to Part VII, a supply of a freight transportation service is made in a province if the destination of the service is 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. Therefore, the supply of courier services is deemed to be made in a participating province because the destination of the service is a participating province.
XXXXX is entitled to a rebate under subsection 261.3(1) of the Act on the supply of the courier services because, while the services were consumed in a participating province, the services were acquired for use primarily in the participating provinces where the filming took place.
Should you have any questions, please do not hesitate to contact me at (613) 952-6743.
Cheryl R. Leyton
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Attachments: (3)
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