Geigy (Canada) Ltd. v. Social Services Tax Commissioner, [1969] CTC 79 (BCSC)

Wilson, C.J.:—This is an appeal pursuant to Section 15 of the Social Services Tax Act, R.S.B.C. 1960, c. 361, from a confirmation by the Minister of Finance dated October 31, 1966 of an assessment of tax against the appellant dated September 16, 1966.

The appellant manufactures drugs in Montreal. Its head office is there and all its officers reside there. It sells its products from its Montreal stocks to wholesalers and to institutional customers, such as hospitals, throughout Canada. Its sales to British Columbia customers are in the range of $450,000 per annum. It has no premises in British Columbia. All sales are made in response to orders received by the appellant in Montreal from wholesalers or institutions. No order from a customer is effective till accepted by the company in Montreal. Delivery is made in Montreal to carriers who deliver the goods to the customers.

The appellant employs in British Columbia four ‘‘ professional service representatives’’ (the term is the appellant’s) and an area manager. These people are not salesmen in that their primary task is not that of the ordinary commercial traveller, the securing of immediate orders. They are promoters of sales. They call on doctors, who are never customers, but whose prescriptions have a great effect on sales. They call on institutions, which may order directly from the head office of the appellant, and on pharmacists, who may only buy from wholesale distributors in the province, who in turn buy from the appellant’s headquarters in Montreal. But they do, on occasion, take orders from institutions, directed to and only effective on acceptance by the head office in Montreal.

They are paid no commissions, only regular salaries. The appellant supplies them with automobiles and with sales propaganda in the form of promotional literature.

I now cite the last four paragraphs of the statement of facts agreed to by counsel, these being the passages in which the nature of the claim for taxes is shown:

17. For use in carrying out these duties, Geigy furnishes the area manager with various printed forms, binders, a filing cabinet, and a typewriter. It does not furnish him with an office, and he keeps these items at his home.

18. The brochures, display materials, films, samples, samplecases, promotional items, order forms, office forms, stationery, and office supplies are sent to the representatives and the area manager in British Columbia by Geigy from its office in Montreal and are kept by them in their homes or cars.

19. During the period October 1, 1962 to November 30, 1965 the value of such items sent into British Columbia by Geigy was $42,732.00 made up as follows:

Literature and other promotional items	$13,460.00
Stationery and office supplies	1,977.00
Estimated freight	722.00
Samples April 1 to November 30, 1965	7,000.00
Mailings	19,573.00
	$42,732.00

20. By an assessment made September 16, 1966, pursuant to the Social Services Tax Act, Geigy was charged a tax equal to 5% of the said amounts (namely, $2,136.60), together with interest ($146.04) for an aggregate assessment of $2,282.64. The Appellant did not dispute the calculation of the said assessment.

The relevant legislation is Section 3(3) of the Social Services Tax Act, R.S.B.C. 1960, c. 361, as amended by Section 15, Chapter 50 of the Statutes of 1965 :

8. (3) Every person residing or ordinarily resident or carrying on business in the Province who brings or sends into the Province or who receives delivery in the Province of tangible personal property for his own consumption or use, or for the consumption or use of other persons at his expense, or on behalf of, or as agent for, a principal who desires to acquire such property for the consumption or use by such principal or other persons at his expense, shall immediately report the matter in writing to the Commissioner and supply to him all pertinent information as required by him in respect of the consumption or use of such property, and furthermore, at the same time, shall pay to Her Majesty in right of the Province a tax at the rate of five per centum of the purchase price of the tangible personal property.

No other attack is made upon the levy than this: that the appellant is not liable because it is not ‘‘carrying on business in the Province”, vide line 2 of the section above quoted.

It will be seen that the question before me will be answered not on the facts related to the particular goods here sought to be taxed, but on facts relating to the procedures whereby the appellant sells goods to customers in British Columbia.

Fortunately this particular phrase ‘carrying on business” has frequently been judicially interpreted in the past. The decisions are unanimous in saying that a finding that a person is or is not ‘‘carrying on business’’ in a certain area is a finding of fact. Viscount Cave in Maclaine and Company v. Eccott, [1926] A.C. 424, said at p. 432:

The question whether a trade is exercised in the United Kingdom is a question of fact, and it is undesirable to attempt to lay down any exhaustive test of what constitutes such an exercise of trade;

But he continues thus:

I think it must now be taken as established that in the case of a merchant’s business, the primary object of which is to sell goods at a profit, the trade is (speaking generally) exercised or carried on (I do not myself see much difference between the two expressions) at the place where the contracts are made.

The latter part of the opinion quoted is a statement of law. The place where the contracts in this case were made is Montreal.

In the Maclaine case the London agents of a Java firm sold goods for them in London. Payment was made in London to banks for the account of the Java firm. The Java firm was held to be ‘‘exercising a trade’’ in England so as to be liable for income tax on the profits derived from these transactions. As Viscount Cave said at p. 433:

. . . the contracts for sale were made in London through the agency of the London firm, and the purchase-money was in most cases paid through the London bank. I think it clear that this part of the trade of the Java firm was exercised within the United Kingdom.

Clearly this authority weighs on the side of the appellant because, as I have stated, all sales contracts in the present case were made in Montreal. Presumably, in the Maclaine case, if the contracts had been made in Java another conclusion would have been reached by the Privy Council. Wilcock v. Pinto & Co., [1925] 1 K.B. 30, another case cited, is of the same genre as the Maclaine case and does not assist the respondent.

I think that perhaps the root case here is Grainger & Son v. Gough, [1896] A.C. 825. In that case agents for a foreign wine merchant canvassed in the United Kingdom for orders for the sale of wines to customers in the United Kingdom. All contracts for sale and all deliveries were made in France. Lord Watson at p. 341 said:

There is no substantial difference between obtaining orders for wines, according to the method pursued by Louis Roederer, and attracting customers to Reims by advertising, and sending circulars to the trade in England. Such things are done by British merchants in foreign countries, and are also done by foreign merchants in Britain, in the interest and for the promotion of their home business. If their business consists, as that of Louis Roederer does, in the sale of wines or other merchandise, neither the British nor the foreign merchant can, in my opinion, be said to exercise his trade beyond the limits of his own country, so long as all contracts for the sale of their goods and all deliveries to the purchaser are made within these limits.

Going to nearer authority I refer to the John Deere case (John Deere Plow Co. v. Joseph Merritt Agnew et al. (1913), 48 S.C.R. 308). The plaintiff there sold plows to the defendant to be delivered at Calgary, Alberta for resale by the defendant at Elko, British Columbia. The contract for sale was made at Winnipeg, where the plaintiff carried on business. The plaintiff had no office or place of business in British Columbia. It was not licensed in British Columbia and the British Columbia Act forbade the carrying on of business in British Columbia by an unlicensed company and provided that such company could not enforce a contract made in whole or in part in British Columbia in the course of or in connection with its business.

The Court held that the company was not carrying on business in British Columbia through the defendant as agent or by contracting with the defendant. This case has been much quoted and generally followed.

Standard Ideal Company v. Standard Sanitary Manufacturing Company, [1911] A.C. 78, is a decision of the Privy Council on a Canadian appeal. I cite part of the headnote :

An American company with its headquarters in Pittsburg, which sells its goods in Montreal and throughout the Province of Quebec through an agent acting as a traveller and taking orders, and consigns them direct to the customer, who pays direct to the company, does not thereby carry on business in Quebec within the meaning of Quebec Act, 4 Edw. 7, c. 34.

Lord Macnaghten, at page 83, said this :

At the trial Mr. John M. Collins deposed that he represented the plaintiff company as sales agent for Canada, travelling and calling on wholesale houses taking orders and sending them to Pittsburg. “The goods,” he said, “are shipped direct to the customer, and the customer pays direct to the company for the goods, and we are simply the sales agents selling the goods as travellers for the company.” He added in cross-examination that it was unnecessary to have a show-room in Montreal, and that they did not now carry a stock there for the Standard Sanitary Manufacturing Company. This evidence was not contradicted. Their Lordships therefore think that it must be taken to be established that the plaintiff company is not acting in contravention of the statute, and is not in fact now carrying on business in Quebec, though it employs a traveller to solicit orders in that Province.

It appears to me that there is even less evidence in the present case than there was in the Standard Ideal case upon which to find that the appellant was carrying on business in the area in question.

The decision of Taylor, J. in Re Income Tax Act and Procter & Gamble, [1937] 3 W.W.R. 680, was relied on by the respondent. But the authority of this case was destroyed by the decision of the Privy Council in International Harvester Company of Canada, Ltd. v. Income Tax Commission et al., [1948] 2 W.W.R. 1037, reversing the decision of Anderson, J. in the same matter, reported at [1939] 3 W.W.R. 129. Anderson, J. had followed Taylor, J.’s decision in the Procter and Gamble case.

There is other authority I could cite but I think, with all respect to the respondent, that I would be driving superfluous nails into a sealed coffiin. It appears to me that the law is clear, viz. that in the absence of other evidence that the appellant is carrying on business in British Columbia the evidence as to the place where its contracts are made is decisive. Since the contracts were made in Montreal and since there is no other evidence which convinces me that the appellant was carrying on business in British Columbia the appeal must succeed.