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: 245192
Business Number: […]
Dear [Client]:
Subject: GST/HST ruling
Delivery and shopping 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 and shopping services provided through the […][Platform]. We apologize for the delay in this response.
[…]
The HST applies in the participating provinces at the following rates: 13% in Ontario; 14% in Nova Scotia; and 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island. 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. […]
2. The relevant provisions of the […][Platform Use and Delivery Terms] (“[…][Terms]”) […], include:
[…]
* By […] placing an order via the [Platform], [Consumer] […] accepts[s] these terms and conditions and agree[s] that they will apply […] each time [Consumer] request[s] a Delivery Service […] [or] […][Shopping and Delivery] Service […]. […]
[…]
* These [Terms] govern […] the provision of Delivery Services [or] [Shopping and Delivery] Services […] sold to [Consumer] by [Platform]. […].
[…]
* […][Consumer’s] access and use of the [Platform] […] establishes a contractual relationship between [Consumer] and [Platform].
[…]
* […] Merchants are solely responsible for the goods […] they provide […].
* […] [Consumer] may place orders for […] (“[…][Goods]”) and request Delivery Services or [Shopping and Delivery] Services using the [Platform].
[…]
* […] If [Consumer] choose[s] Delivery Services, [Platform] will […] charge [Consumer] directly for the Delivery Services. […].
* If [consumer] choose[s] [Shopping and Delivery] Services, [Platform] will […] charge [consumer] directly for the [Shopping and Delivery] Services. […].
[…]
* […] [Consumer] agree[s] to pay […] and [is] responsible for paying all [Delivery] Charges and [Shopping and Delivery] Charges incurred […] inclusive of applicable taxes […].
* […] [Consumer] […] [is] free to provide gratuities to [Delivery Service Provider] […]. […].
[…]
If [Consumer] ha[s] […] issues with any Services, [Consumer’s] sole recourse will be with [Platform] […]. [Platform] will provide refunds […] in its sole discretion.
[…]
* In no event shall [Platform]’s total liability […] exceed the amount paid by [Consumer] for the relevant services.
[…]
3. The relevant provisions of […] ([…][Agreement 1]) […], include:
[…]
* [Agreement 1] applies to […][Delivery Service Provider’s] use of the [Platform].
* [Platform] will […] purchase Delivery Services from [Delivery Service Provider] […]. [Delivery Service Provider] may receive instructions about the location and manner of delivery from Merchants or [Consumers].
* [Agreement 1] is entered into between [Delivery Service Provider] and [Platform].
[…]
* [Platform] enter[s] into separate agreements with Merchants and [Consumers] to provide deliveries of [Goods]. Under [Agreement 1] [Delivery Service Provider] agree[s] to sell Delivery Services to [Platform], […].
[…]
* “[Delivery Service Provider]” means an individual who […] uses the [Platform] to receive and respond to requests, and who transports [Goods] […].
[…]
* “Delivery Services” means services, which [Delivery Service Provider] provide[s] […], to [Platform] whereby [Delivery Service Provider] deliver[s] [Goods] […].
[…]
4. The relevant provisions of […] ([…][Agreement 2]) […], include:
[…]
* [Agreement 2] applies to [Delivery Service Provider’s] use of the [Platform] to receive and fulfil Requests for [Shopping and Delivery] Services […], including [shopping] for [Goods] […].
* [Platform] will […] purchase [Shopping and Delivery] Services from [Delivery Service Provider] […]. [Delivery Service Provider] may receive instructions from Merchants and Consumers about the location and manner of shopping and delivery.
* [Agreement 2] is entered into between [Delivery Service Provider] and [Platform].
[…]
* [Platform] enter[s] into separate agreements with Merchants and Consumers to sell [shopping] and delivery services for [Goods]. Under [Agreement 2] [Delivery Service Provider] agree[s] to sell [Shopping and Delivery] services to [Platform], […].
[…]
* “Consumer” means the person who selects and requests [Goods] sold by Merchants using the [Platform] […].
* “Merchant” means a person whose [Goods] are made available for purchase […] using the [Platform].
[…]
* “[Shopping and Delivery] Services” means services, which [Delivery Service Provider] provide[s] […] to [Platform] whereby [Delivery Service Provider] [shops] for [Goods] […] at Merchant’s premises and then deliver[s] [Goods] to Consumers […]. In the context of this [Agreement 2], “[shop]” means to gather.
5. […]
6. […]
RULING REQUESTED
You would like to know the tax status of your Delivery and Shopping Services provided through the [Platform].
RULING GIVEN
Based on the facts set out above, we rule that:
The Delivery Services you provide to [Platform] are zero-rated supplies of a freight transportation service, pursuant to subsection 1(2) and section 11 of Part VII of Schedule VI.
The Shopping and Delivery Services you provide to [Platform] are a supply of a freight transportation service which is also zero-rated pursuant to subsection 1(2) and section 11 of Part VII of Schedule VI.
EXPLANATION
According to the [Platform Use and Delivery Terms] the consumer is advised that they may place orders for [Goods] and request Delivery Services or [Shopping and Delivery] Services using the [Platform].
[…]
If a consumer chooses Delivery Services (delivery of goods only), [Platform] will request and arrange for a [Delivery Service Provider] to undertake the Delivery Services and will charge the consumer directly for the Delivery Services. If a consumer chooses [Shopping and Delivery] Services (which includes [shopping] and delivery of the goods), [Platform] will request and arrange for a [Delivery Service Provider] to undertake the [Shopping and Delivery] Services and will charge the consumer directly for the [Shopping and Delivery] Services.
For the Delivery Services […] or [Shopping and Delivery] Services provided by [Platform] to the consumer, [Platform] limits its liability to the amount paid by the consumer for that service.
[…]
The [Agreement 1] and [Agreement 2] indicate that [Platform] enter[s] into separate agreements with merchants and consumers to provide deliveries of [Goods] or to sell [shopping] and delivery services for [Goods]. Under the [Agreement 1] the [Delivery Service Provider] agrees to sell Delivery Services to [Platform] […]. Under the [Agreement 2], the [Delivery Service Provider] agrees to sell [Shopping and Delivery] Services to [Platform] […].
[…], the [Agreement 1] and [Agreement 2] are clear that [Platform] is the recipient of the [Delivery Service Provider]’s services.
[…]
Property or services that may be part of, or incidental to, a freight transportation service
Freight transportation service is defined to include any other property or service that is part of, or incidental to, a freight transportation service when supplied to the recipient of the freight transportation service by the carrier who supplies the freight transportation service, even if there is a separate charge for the other property or service. As a result, a supply of property or a service that is part of or incidental to a supply of a freight transportation service is taxed at the same rate as the freight transportation service.
Whether a supply of property or a service is part of, or incidental to, a freight transportation service is a question of fact. Refer to GST/HST memorandum 28-2, Freight Transportation Services for additional information.
Refer to GST/HST Policy Statement P-077R2, Single and Multiple Supplies and GST/HST Policy Statement P-159R1, Meaning of the Phrase "Reasonably Regarded as Incidental" for an explanation on how to determine the existence of single or multiple supplies, and if multiple, whether those supplies are incidental to another supply.
Packing service and loading and unloading services are examples of services that can be part of, or incidental to, a freight transportation service and have the same tax status as the supply of the freight transportation service.
The [Agreement 2] defines [Shopping and Delivery] Services to mean services, which the [Delivery Service Provider] provides […] to [Platform] whereby [Delivery Service Provider] will [shop] for goods […] at the Merchant’s premises and then deliver the goods to Consumers. [Shop] is further defined to mean gather. When a consumer places an order for goods the consumer selects the specific merchant and the specific goods that they want […]. The [Delivery Service Provider] goes to the merchant selected by the consumer and gathers the specific goods requested by the consumer.
The purpose of gathering the goods is to be able to deliver those goods to the consumer and would be part of the packing process.
When a carrier, in the course of providing a freight transportation service, also provides a packing service of its customer's goods, the packing service will take on the same status as the basic freight transportation service, as forming part of, or being incidental to, it.
Delivery Service
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 the consignee.
Section 11 of Part VII of Schedule VI zero-rates:
"A supply of a freight transportation service made by a carrier of the property being transported to a second carrier of the property being transported, where the service is part of a continuous freight movement and the second carrier is neither the shipper nor the consignee of the property being transported".
"Carrier" is defined in subsection 123(1) as the person who supplies a freight transportation service. For a person to be considered a "carrier", the person need only assume liability as a supplier of a freight transportation service.
"Continuous freight movement" is defined in subsection 1(1) of Part VII of Schedule VI as the transportation of tangible personal property 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.
Based on the facts provided, for Delivery Services and [Shopping and Delivery] Services, a merchant (shipper) and a consumer (consignee) contracts with [Platform] for the delivery of goods received from the shipper’s premises to the consignee. [Platform] is the carrier that invoices and receives payment from the consignee or shipper and subcontracts the performance of the work to [Delivery Service Provider]s (another carrier) such as yourself.
ADDITIONAL INFORMATION
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 gratuity as part of the charge for a taxable supply and the gratuity is mandatory, 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 Canada Revenue Agency (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.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-3972.
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 or by fax to 1-418-566-0319.
Sincerely,
David Phoenix
Industry Sector Specialist
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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