Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Client Address]
Case Number: 247629
Dear [Client]:
Subject: GST/HST ruling - Delivery services provided through […][a platform]
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (“GST/HST”) to delivery services provided through the […] (“Platform”). […].
[…].
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The Government of Nova Scotia has proposed to decrease the rate of the HST from 15% to 14% effective April 1, 2025. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (“ETA”) unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. The relevant provisions of the (“Platform Terms”) […], include:
- […]
- These terms […] apply to all users of the […][Platform], including users that are merchants of goods or providers of […][delivery] services to other users […], users who purchase goods or services through the [Platform], […].
- […]
- […]. The [Platform] facilitates the ordering by consumers/end users of the [Platform] (“Customers”) of […] ([…] “Goods”) offered by […] (“Merchants”) and the delivery of such Goods through independently contracted […][delivery service providers] who are users of the [Platform] (the “[Delivery Service Providers]”). […].
- […]. […], [Merchants] and [Delivery Service Providers] are subject to additional terms in separate agreements […].
- […] Access to the [Platform] and Permitted Use […]:
o for Customers, […] to […], place orders and pay for Goods (including the delivery of Goods) (each an “Order”)
o for [Merchants], […] to manage the offer and fulfilment of Orders
o for [Delivery Service Providers], […] to manage and fulfill requests for deliveries of Orders.
- […]: The legal contract for the supply and purchase of Goods is between the Customer and the [Merchant] […].
- […]. [Merchants] and [delivery service providers] are independent persons […] and not representatives, agents or employees of [Platform].
- […]. […], in no event will the total aggregate liability of [Platform] in connection with or under these terms of service, […] exceed: […] $[…], […].
- […] Through the [Platform], [Customers] may place order for Goods from [Merchants], [Customers] may receive delivery of the Goods and [Platform] may provide customer care support between [Customers], [Delivery Service Providers] and [Merchants] […]. […], [Platform] does not prepare or fulfil any order for Goods or provide delivery services directly and […] will not be liable for any transaction between Customers, [Delivery Service Providers] or [Merchants].
- […] [Platform] may offer customer care in respect of issues relating to the [Merchants] and the [Delivery Service Providers]. If [Customers] have any problems, […] please contact [Platform]’s customer care team (and not the [Merchant] or [Delivery Service Provider]) […].
- […]. [Platform] may act as agent for the Customer and the [Merchant] for the legal contract for the purchase and sale of the Goods.
- […]
- […] Goods prices listed on the [Platform] from [Merchant] […] may not include applicable tax and delivery […].
- Goods’ prices, delivery charges, and any other fees are subject to change at any time at [Platform]’s or the [Merchant]’s discretion.
- […]
2. The relevant provisions of the […][Delivery Service Provider] Agreement […], include:
- This [Delivery Service Provider] Agreement (“Agreement”) is entered into between the [Delivery Service Provider] (“you”, “[Delivery Service Provider”) and […] (“[Platform]”, […]) […].
- […]
- At all times during the duration of the Agreement, you agree that you are an independent contractor […].
- This Agreement does not establish an employment relationship, agency, partnership or joint venture between you and [Platform].
- […]
- […] [Platform] shall compensate you for each Completes Delivery […] at a piece rate per delivery […] (“Delivery Fee”).
- […]
- […] Customers have the option to provide tips […]. […].
- […]
- You acknowledge and agree that you are responsible for reporting and remitting all applicable taxes, […].
- Upon providing proof of […][GST/HST] registration […], [Platform] will pay you the applicable [GST/HST] on your Delivery Fee.
3. […]
4. […] Platform’s services available to merchants:
o […] for delivery […] orders.
o […] delivery service lets you add on-demand delivery to […] online sales […]. […].
5. The Platform also provides the option of having […][certain goods] delivered with […][Consumer Service]. The Platform’s [Consumer Service] […] has local fulfillment centres, strategically located throughout Canadian cities […]. […] The items are picked and packed by the [Consumer Service] team at the closest fulfillment centre and a [Delivery Service Provider] will deliver it […]. […].
6. […], you said that when you receive a [Consumer Service] order you pick up the goods from a warehouse that has [Consumer Service] signage.
7. […]
8. […]
RULING REQUESTED
You would like to know the tax status of your delivery service provided through the [Platform].
RULING GIVEN
Based on the facts set out above, we rule that:
1. For [Merchant Service A] and [Merchant Service B] orders, the delivery service you provide to [Platform] is a zero-rated supply of a freight transportation service, pursuant to subsection 1(2) and section 11 of Part VII of Schedule VI.
2. For [Consumer Service] orders, you are making a taxable supply of a delivery service to [Platform] subject to the GST/HST at the applicable rate based on the province in which the supply is made.
EXPLANATION
The Platform facilitates the ordering of goods offered by merchants and the delivery of such goods through independently contracted [delivery service providers].
The legal contract for the purchase of goods is between the [customer] and the merchant. The [Platform] may act as agent for the merchant and acts as an agent for the [customer] for the legal contract for the purchase and sale of the goods.
[…].
The Platform Terms state that the Platform does not provide the delivery services directly. However, as discussed in […] GST/HST Memorandum 28.2, Freight Transportation Services (“Memo 28.2”), for GST/HST purposes, a person does not have to physically transport tangible personal property (“TPP”) in order to be a carrier, but only has to assume liability as a supplier of a freight transportation service. “Carrier” is defined under subsection 123(1) of the ETA to mean “a person who supplies a freight transportation service”.
The Agreement is clear that Platform is the person who is contracting with the [delivery service provider] and is the person who is liable under the Agreement to pay that consideration for the [delivery service provider]’s delivery service.
Further, according to Platform Terms, delivery charges and any other fees are subject to change at any time at Platform’s discretion.
Platform limits its liability to the [customer] to […][a specified amount].
Platform is assuming liability for the carriage of goods by acquiring a freight transportation service from the [delivery service provider] for its own account and resupplying that service to a [customer] or merchant, as the case may be. Consequently, Platform will acquire all of the privileges and obligations of a carrier.
Delivery Service
As defined in subsection 1(1) of Part VII of Schedule VI, “freight transportation service” means a particular service of transporting TPP. A domestic delivery service of delivering goods (TPP) is a taxable supply of a freight transportation service made in Canada as per paragraph 142(1)(g). The applicable GST/HST will depend on where the TPP is delivered. Section 5 of Part VI of Schedule IX states, subject to Part VII, that a supply of a freight transportation service is made in a province if the destination of the service is in the province. A delivery service in […][a province] will be subject to […][the applicable GST/HST].
A freight transportation service may be zero-rated (subject to GST/HST at the rate of 0%) under subsection 1(2) and section 11 of Part VII of Schedule VI where interlining occurs between two or more carriers. Interlining is the process whereby several carriers take part in the supply of a freight transportation service during the course of a continuous freight movement from the origin of the freight movement to its destination, but only one carrier invoices the shipper or consignee.
"Continuous freight movement" is defined in subsection 1(1) of Part VII of Schedule VI as the transportation of TPP by one or more carriers to a destination specified by the shipper of the property, where all freight transportation services supplied by the carriers are supplied as a consequence of instructions given by the shipper of the property.
“Shipper” is defined under subsection 1(1) of Part VII of Schedule VI to mean “…the person who, in respect of a continuous freight movement […] transfers possession of the property being shipped to a carrier at the origin of the freight movement and, for greater certainty, does not include a person who is a carrier of the property to which the freight movement relates.”
The term "consignee" is not defined in the ETA but generally means the person to whom a consignment is made. It is normally the person named on the bill of lading to whom or to whose order the bill promises delivery.
When a particular carrier receives payment for a taxable continuous freight movement from a shipper or consignee, that particular carrier, under subsection 1(2) of Part VII of Schedule VI to the ETA, is considered to have supplied the freight transportation service, even if part of the payment is collected as agent for any of the other carriers involved in the movement. As such, that particular carrier is required to collect and remit the tax to the CRA.
The shipper or consignee is deemed to have received a supply of a freight transportation service from the particular carrier and not from any of the other carriers who participated in the continuous freight movement.
To the extent that any part of the consideration is paid by one of the carriers (the first carrier) to another carrier (the second carrier), the first carrier is deemed to have received from the second carrier, and the second carrier is deemed to have made to the first carrier and not the shipper or consignee, a supply of a freight transportation service in relation to the continuous freight movement. As a result, the payment (interline freight settlement) by the first carrier to the second carrier is consideration for the deemed supply of the freight transportation service and zero-rated.
Based on the facts provided, for [Merchant Service A] and [Merchant Service B] orders, either a [customer] (consignee) and/or a merchant (shipper) contracts with Platform (the first and particular carrier) for the delivery of goods received from the merchant’s (shipper) premises to the [customer] (consignee). Platform is the carrier that invoices the taxable supply of the delivery service and receives payment from the [customer] or merchant. Platform subcontracts the zero-rated delivery service to a [delivery service provider] (the second carrier) such as yourself.
For [Consumer Service] orders it is Platform that is fulfilling the orders for goods made by consumers. As explained in Memo 28.2, where a carrier hires another carrier to transport the first carrier’s property, the first carrier is the shipper of the property. As would generally be the shipper of the goods for [Consumer Service] orders it cannot be a carrier. The [delivery service provider] such as yourself is making a supply of a delivery service to Platform and would be required to charge the applicable tax if not a small supplier.
Registration Requirement
In general, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for GST/HST purposes pursuant to subsection 240(1).
One exception to the registration requirement is for a person who is a small supplier. Generally, a small supplier refers to a person whose total revenue (along with the revenue of all persons associated with that person) from worldwide taxable supplies is equal to or less than $30,000 ($50,000 for public service bodies) in a calendar quarter and over the four previous calendar quarters.
Whether gratuities should be included in the total revenue when determining if the $30,000 threshold has been exceeded depends on whether the gratuities would be subject to the GST/HST.
When a business that is registered for GST/HST includes a mandatory gratuity as part of the charge for a taxable supply, GST/HST will be calculated on the total amount including the gratuity. Gratuities that are mandatory would be included in the calculation of the $30,000 threshold.
On the other hand, gratuities are not subject to the GST/HST when given voluntarily by a customer. Any gratuities that were given freely by a customer would not be included in the calculation of the $30,000 threshold.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 236-330-8126.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Sungjin Kim
Rulings Officer
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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