Date: 20010405
Docket: 1999-3262-GST-I; 1999-3263-GST-I
BETWEEN:
DRUG TRADING COMPANY LIMITED (FORMERLY NORTHWEST DRUG COMPANY
LIMITED),
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowie, J.
[1]
The Appellant is a wholesaler of pharmaceutical, health care and
related products. Its customers are independent retail pharmacies
which operate under one of a number of well-known names such as
"I.D.A.". It brings these two appeals from assessments
for goods and services tax (GST) under the Excise Tax Act
(the Act) which the Respondent asserts is payable in
respect of what is described in the "summary of
assessment" accompanying one Notice of Assessment as
"GST collectible on Visa and MasterCard charges resupplied
to customers", and on that accompanying the other Notice of
Assessment as "GST collectible on the resupply of credit
card charges to accounts receivable". There are two
assessments covering overlapping periods of time, because the
Appellant's business was carried out by two separate
corporations before their amalgamation on March 1, 1999. One
assessment covers the period from January 1, 1993 to December 31,
1996, and is for tax of $34,032.75; the other covers the period
from January 1, 1992 to December 31, 1995, and is for tax of
$120,427.35.[1]
Penalties and interest have also been assessed. The appeals from
both assessments were heard together on common evidence.
[2]
For convenience, I shall refer in these Reasons to the
predecessor companies which carried on the business during the
periods assessed collectively as the Appellant. I shall refer to
the retail pharmacy chains as I.D.A., as that is the chain that
was referred to in the evidence. The appeals were presented by
the Appellant, and resisted by the Respondent, on the basis that
the evidence as to the I.D.A. stores applied equally to the
Appellant's other customers, and that the same agreement and
procedures were in place between the Appellant and each of the
two banks with which it dealt.
[3]
There are few primary facts in dispute. The Amended Reply to the
Notice of Appeal in each case sets out exhaustively the
Minister's assumptions of fact which I reproduce here in
their entirety. The Appellant disputes only those which I have
italicized.
12(b) at all material
times the Appellant was a registrant for the purposes of the
Act;
(c)
the Appellant was required to file its returns on a monthly
basis;
(d)
the Appellant filed returns reporting tax collectible, input tax
credits and net tax as set out in Schedule A attached hereto;
(e)
at all material times the Appellant was a wholesaler/retailer
engaged in the business of making supplies to drug stores,
general stores, hospitals, clinics, veterinarians and
farmers;
(f)
the Appellant administered certain programs, such as the I.D.A.
program, which united specific customers under a "common
banner of distribution and service";
(g)
certain customers of the Appellant, in particular drug stores,
were allowed to join one of the programs the Appellant
administered;
(h)
the customers referred to in the two preceding subparagraphs were
independently owned stores;
(i)
to join a program administered by the Appellant the Member
entered into a membership agreement with the Appellant;
(j)
the Member opened a trade credit account with the Appellant to
facilitate the purchase of inventory from the Appellant;
(k)
under the terms of the membership agreement the Appellant
supplied products for resale and services and products consumed
by the Member in the course of the Member's business;
(l)
the supplies the Appellant made to the Member under the
membership agreement included, among other things, a license to
use the program's trademark and the right to receive the
benefit of any volume discounts granted to the Appellant;
(m)
the membership agreement did not specifically refer to any
arrangements the Appellant had made with the financial
institutions;
(n)
the Members did not provide express or implied consent to the
Appellant for the Appellant to act as their agent;
(o)
the Appellant entered into a MasterCard Major Merchant Agreement
with the Bank of Montreal ("Master Card
Agreement");
(p)
under the terms of the MasterCard Agreement the Appellant was
assigned an account number;
(q)
the MasterCard Agreement established the terms of the
relationship between the Bank of Montreal and the Appellant,
including the Discount Fees and the deposit procedures;
(r)
the Appellant also entered into a major merchant agreement for
Visa (the "Visa Agreement");
(s)
under the terms of the Visa Agreement the Appellant was assigned
an account number;
(t)
the Visa Agreement established the terms of the relationship
between the bank and the Appellant, including the Discount Fees
and the deposit procedures;
(u)
the Appellant also entered into similar agreements with the Bank
of Montreal and/or another financial institution for direct
deposit (debit card) transactions (the "Debit Card
Agreement");
(v)
under the terms of the Debit Card Agreement the Appellant was
assigned an account number;
(w) the
Debit Card Agreement established the terms of the relationship
between the bank and the Appellant, including the Discount Fees
and the deposit procedures;
(x)
if a Member wished to take advantage of the terms the Appellant
had negotiated in the MasterCard Agreement, the Visa Agreement
and/or the Debit Card Agreement the Member had to inform the
Appellant;
(y)
the notification referred to in the previous subparagraph
required the Member to say whether it wished to participate in
the MasterCard Agreement, the Visa Agreement and/or the Debit
Card Agreement and who it wanted to supply the point of sale
equipment;
(z)
once the Appellant received the information referred to in the
previous subparagraph it requested under its signature that the
appropriate bank of banks assign that Member a merchant number
"as part of the NWD chain" (i.e. under the
Appellant's account number);
(aa) upon
receipt of the request made by the Appellant, the bank or banks
would contact the Member, determine if the Member should be given
a merchant number and, if so entered into agreements with the
Member and informed the Appellant of the Member's merchant
number;
(bb) for
electronic MasterCard, Visa or Debit Card transactions, the
Member processed the transaction at its store and the bank
deposited the funds from the transaction into the Appellant's
account, cross-referencing the Member's merchant number;
(cc) for paper
MasterCard or Visa transactions the Member forwarded the credit
card slips to the Appellant, who deposited them into its account,
cross referencing the Member's merchant number;
(dd) using the
cross referenced merchant numbers the Appellant applied the funds
it received from MasterCard, Visa and debit cards to the
Member's trade account;
(ee) the banks
withdrew the Discount Fees from the Appellant's accounts;
(ff)
the Appellant charged the Members program fees, which included a
portion of the Discount Fees; and
(gg) the fees
referred to in the above paragraph were charged to the
Member's trade account monthly/periodically.
The Appellant also disputes the alternative basis for the
assessments set out in paragraph 13 of each Reply:
In the alternative, it is submitted that to the extent that
the Appellant's activities fall within the definition of
"financial services" in section 123 of the Act
then such activities are incidental to the provision of the main
supplies of the Appellant, namely providing property to the
stores.
[4]
Mr. David Hamanaka was comptroller of the Appellant during the
period covered by these assessments. He was fully familiar with
the Appellant's business, and in particular with that aspect
of it relating to the arrangements among the Appellant, its
member stores and the Bank of Montreal (B of M) and the
Toronto-Dominion Bank (TD Bank) relating to the use of
credit and debit cards in the customers' stores. He
identified the form of agreement which the Appellant enters into
with every drugstore joining the I.D.A. group, and the relevant
extracts from the I.D.A. Program Guidebook and the Profit Smart
I.D.A. Store Operations Guide. All of these govern the
relationship between the Appellant and its member stores. He also
identified the MasterCard Major Merchant Agreement
(MMM Agreement) which was signed by the Appellant and the B
of M. This agreement is 28 pages in length, and is apparently in
the bank's standard form for use with multi-branch retailers
to govern the terms on which they use the bank's MasterCard
credit facilities in their retail outlets. It is important to
note that this form throughout its 28 pages contemplates a
contract between the bank and a merchant conducting a retail
business. It is clear from the evidence of Mr. Hamanaka,
which I accept, that the Appellant did not conduct any retail
business itself; it sold product to the member drugstores, and
they in turn retailed to the public. I infer that when the
Appellant and the bank concluded negotiations and arrived at an
agreement whereby the Appellant's member stores could use the
bank's MasterCard facilities at a rate more favourable than
those stores could have obtained individually, then the agreement
was recorded on this bank form as a matter of convenience, even
though it is totally inappropriate for that purpose. Neither
party could have contemplated that the Appellant would make
retail sales, and so almost all the provisions in those 28 pages
are redundant. What is not redundant is paragraph 5, titled
"Discounts and Fees", which provides the rates of
discount on MasterCard sales and the monthly fees for imprinters
and terminals which the merchant is obliged to pay to the bank.
Although the parties agree that this "agreement" was
entered into between the Appellant and the bank, it is clear that
it was not the Appellant, but its member stores, that paid these
discounts and fees. In my view, this "agreement" does
not create a contractual relationship between the bank and the
Appellant, or between the bank and the stores.
[5]
Mr. Hamanaka testified that when a member merchant, that is to
say an I.D.A. drugstore, indicates to the Appellant that it
wishes to make the use of the MasterCard system available to its
customers, the Appellant then forwards to the bank a request to
establish a "MasterCard merchant number" for that
retailer. The bank then enters into a separate contract with that
retailer to govern the use of the MasterCard system at that
member's store, at the rate of discount and monthly equipment
charge which the Appellant has negotiated for all its members.
The same procedure was followed at the relevant time for both the
MasterCard system provided through the B of M, for the Visa
system provided through the TD Bank, and for the debit card
system which was also provided through the TD Bank. Copies of the
printed forms used by the TD Bank for the agreements with
individual retailers are contained in Exhibit A-1. Unfortunately,
they are almost illegible, and the forms used by the B of M were
not produced at all. However, I conclude on the basis of the
documents that were entered, and the evidence of
Mr. Hamanaka, that each retailer who made use of the credit
and debit card facilities provided by the two banks did so
pursuant to individual contracts entered into between themselves
and the banks, and that the only purpose of the
MMM Agreement which the Appellant signed was to record the
rates that the Appellant had negotiated as a service to its
members.
[6]
Mr. Hamanaka went on to describe the procedure by which credit
and debit card payments and charges are processed, referring to
certain extracts from the Appellant's ledgers to illustrate.
When a customer pays for a purchase at an I.D.A. store with a
credit card, the bank debits the customer's MasterCard or
Visa account and credits the bank account of the Appellant. The
Appellant in turn credits the trade account of the store at which
the sale took place. If a purchase is returned then the
transactions are reversed; the bank credits the customer and
debits the Appellant's bank account, and the Appellant debits
the store's trade account. Monthly charges for each store are
processed automatically by the bank, which debits the
Appellant's bank account. The Appellant passes on these
debits to individual stores' trade accounts. To enable the
Appellant to make the appropriate credit and debit entries to the
trade accounts of its members, the bank provides it with
summaries of all the transactions for each store. The procedure
followed is essentially the same whether the retail sale is by
MasterCard, Visa, or debit card. Mr. Hamanaka's evidence was
unchallenged, and I find that it accurately describes what occurs
among the Appellant, its members and the banks. It is important
to note, however, that these procedures are not set out in either
the MMM Agreement or the individual agreements between the stores
and banks.
[7]
There are obvious benefits for all parties in these arrangements.
The banks obtain the credit and debit card business of virtually
all the member stores in the chain. The stores get the benefit of
access to credit and debit card services from the banks on terms
that have been negotiated from the strength of numbers. The
Appellant has the benefit of receiving the cash flow from the
credit and debit card sales in the retail stores, thereby
reducing its accounts receivable.
[8] I
turn now to those assumptions of fact which are disputed.
12(e) at all material times
the Appellant was a wholesaler/retailer engaged in the business
of making supplies to drug stores, general stores, hospitals,
clinics, veterinarians and farmers;
...
(m)
the membership agreement did not specifically refer to any
arrangements the Appellant had made with the financial
institutions;
(n)
the Members did not provide express or implied consent to the
Appellant for the Appellant to act as their agent;
...
(q)
the MasterCard Agreement established the terms of the
relationship between the Bank of Montreal and the Appellant,
including the Discount Fees and the deposit procedures;
...
(ff)
the Appellant charged the Members program fees, which included a
portion of the Discount Fees;
[9]
12(e) is simply wrong as to the important statement that
the Appellant is a retailer. It makes some sales directly to
hospitals, clinics and other health care groups, but they are not
related to the matters with which these appeals are concerned. It
makes no sales to the general public, and the matters in issue
here relate entirely to sales by retailers which are customers of
the Appellant at the wholesale level.
[10]
12(m) and (n) assert that the membership agreement
did not refer to any arrangement made by the Appellant with the
banks, and that the member stores neither expressly or impliedly
consented to the Appellant acting as their agent. The Appellant
negotiated rates for the credit and debit card services with the
banks, and the members were free to avail themselves of those
rates if they chose to do so. The Appellant did not purport to
bind the members to any agreement with the banks, however. There
is no specific mention of these negotiated rates in the
membership agreement. However the I.D.A. Program Guidebook, which
is contemplated by the membership agreement, states that
I.D.A. has established an agreement with the Bank of Montreal
where, based on the power of the collective entity, significant
savings can be achieved in both the chargecard discount rates as
well as the related equipment rental.
The Bank of Montreal has been chosen as the 'Value Added
Supplier' because of the completeness of their offering
– particularly the inclusion of the new 'Debit
Card'.
It then goes on to set out the services and terms which are
available to the member stores as a result of the
negotiation.
[11]
12(q) is simply not correct on the evidence before me. The
MMM Agreement does not speak at all to the deposit
procedures. Nor does it create a contract. In my opinion it does
no more than record the rates at which the bank is willing to
enter into contracts with the individual stores.
[12] In
paragraph 12(ff) the Minister asserts that the Appellant
charged program fees to the member stores, and that these fees
included a portion of the "Discount Fees", that is to
say the fees paid to the banks for credit and debit card
services. I am satisfied that the program fees did not include
any amount, or any portion of an amount, that was paid by the
Appellant to the banks. However, under the arrangement described
by Mr. Hamanaka, the banks did charge the "Discount
Fees" to the Appellant's accounts at the banks, and the
Appellant in turn debited the members. In doing so, it acted as
the agent of the members for the purpose of making the payments
on their behalf to the banks.
[13] The
position of the Minister as to the basis of these assessments is
set out in paragraphs 14 to 30 and 33 and 34 of the written
argument filed after the oral hearing. I reproduce them here in
their entirety, as they defy both condensation and
comprehension.
14.
At issue in these appeals is the tax status of credit card
discount fees and debit card processing fees (referred to above
and hereinafter as the "Discount Fees") which the
Appellant charged to its customers, merchant members of programs
the Appellant administered (i.e. IDA).
15.
The Appellant was assessed GST collectible on these fees on the
basis that they were consideration for a taxable administrative
service (processing and debt collection).
16.
Taxable supply is defined under section 123 of the Excises Tax
Act (referred to above and hereinafter as the
"Act", as being a supply made in the course of a
commercial activity.
17.
Commercial activity of a person is defined as a business carried
on by a person except to the extent to which the business
involves the making of exempt supplies.
Section 123 of the Act.
18.
It is submitted that the Appellant was not providing the same
service as financial institutions do in providing for credit and
debit card facilities and therefore the Appellant was not exempt
under subsection 123(1) of the Act.
19.
The Appellant entered into the MasterCard, Visa and Debit card
agreements on its own behalf. These agreements could not be
assigned without the financial institution's approval and
that the Appellant had not assigned its rights and obligations
under the agreements to the Members.
Exhibit A-1 Tab 4
20.
Also, it is submitted that, in addition to lower Discount Fees,
the Appellant benefited from the procedures established under
each of the Agreements as the financial institutions deposited
the money payable by the cardholders directly into the
Appellant's account and the Appellant used those funds to
reduce the amounts owed by each of the Members on its trade
account.
21.
Furthermore, it is submitted that the Appellant was not arranging
for a service referred to in paragraphs (a) to (i) of the
definition of financial service in subsection 123(1) of the
Act whenever a Member wished to take advantage of the
terms of the Appellant's MasterCard, Visa and Debit
Agreements. Instead, the Appellant collected the information from
the Member and transferred that information to the financial
institution.
22.
Furthermore, once the financial institution received the
transferred information from the Appellant, the financial
institution took whatever steps were necessary to approve the
Member for a merchant's number and to arrange the financial
service, including entering into any necessary agreements with
the Member.
(Exhibit A-1 Tab 5)
23.
Consequently, it is submitted that the Appellant was not a
"person at risk" as that term is defined in subsection
4(1) to the Financial Services (GST) Regulations (the
"Regulations") and that the service the
Appellant provided to the Member was, therefore, excluded from
the definition of financial service as it was a prescribed
service pursuant to paragraph (t) of the definition,
24.
Likewise, it is submitted that the service the Appellant supplied
to the Members when it received the funds from the financial
institutions for the credit and debit card transactions was
excluded from the definition of financial service as it was a
prescribed service pursuant to paragraph (t) of the definition as
the Appellant provided an administrative service to the Members
by applying those funds to each Member's trade account with
the Appellant and the Appellant was not a "person at
risk".
25.
The facts of the Appellant's case are not identical to the
facts in Skylink Voyages Inc. v. The Queen. Contrary to
the situation in Skylink, in this case each of the
Merchant Members entered into an agreement on its own behalf with
the financial institutions. In Skylink the retail agency
had no agreement with the issuer of the credit card used by its
customer.
Exhibit A-1 Tab 5
26.
Furthermore, it is submitted that the Appellant was not
financially at risk as was Skylink. In this case, the
Appellant's risk was no greater than the risk of selling its
goods on account. The Appellant was not a person who was
financially at risk by virtue of the acquisition, ownership or
issuance of the financial instrument.
27.
Under section 178 of the Act, as it read at the time:
For the purposes of this Part, where in making a supply of a
service a person incurs an expense for which the person is
reimbursed by the recipient of the supply, the reimbursement
shall be deemed to be part of the consideration for the supply of
the service, except to the extent that the expense was incurred
by the person as an agent of the recipient.
28.
It is submitted that the Appellant was not acting as the
Member's agent. Each of the Members who benefited from the
terms of the Appellant's MasterCard Agreement, Visa Agreement
and Debit Card Agreement:
(a)
entered into an agreement on its own behalf with the financial
institution;
(b)
received a merchant number "as part of the NWD
chain";
(c)
was not assigned the Appellant's rights and obligations under
the MasterCard, Visa and Debit Card Agreements; and
(d)
did not give the Appellant express or implied authority to act as
its agent.
Glengarry Bingo Association v. The Queen,
(Respondent's Book of Authorities; Tabs 2 and 3)
29.
Therefore, it is submitted that, as the service the Appellant
provided to the Members under the membership agreements were not
financial services pursuant to subsection 123(1) of the
Act, and as the Appellant was not acting as the
Members' agent, the Appellant was required by section 178 of
the Act, as it read at the time, to include the amounts it
was reimbursed for the Discount Fees, as part of the
consideration for its supplies of services that were taxable at
7%.
30.
Consequently, it is submitted that the Appellant failed to
account for tax that it was required to collect and account for,
pursuant to sections 221(1), 225(1) and 228 of the Act, on
the supplies it made to the Members during the relevant
periods.
...
33.
In the alternative, it is submitted that to the extent that the
Appellant's activities fall within the definition of
"financial services" in section 123 of the Act,
then such activities are incidental to the provision of the main
supplies of the Appellant, are supplied together with the
Appellant's taxable supplies for a single consideration and
are deemed by section 138 of the Act to form part of the
main supplies of the Appellant.
Locator of Missing Heirs Inc. v. The Queen –
Respondent's Book of Authorities Tab 1.
34.
It is submitted that the activities of the Appellant in issue
were supplied together with the Appellant's taxable supplies
for a single consideration, as demonstrated by the Appellants
documents at Exhibit A-1 Tab 7, pp. 5, 12 and 13. The Appellant
provided the Merchant Members with a single statement in respect
of the consideration.
[14] Although
neither the pleadings nor the evidence makes it at all clear, it
appears that the Minister must have assessed tax on the total of
the fees paid by the Appellant to the banks on behalf of its
members.[2]
[15] The
Appellant takes the position that these amounts are not taxable
because they fit within the definition of "financial
services" found in subsection 123(1) of the Act, and
also on the basis that the Appellant simply acted as an
intermediary in arranging for the provision of exempt financial
services to the member stores.
[16] In an
early value-added tax case Lord Denning pointed out the
importance of asking, and answering, the question "what did
the [supplier] supply in consideration of the £ 1.50 they
received?"[3]
Soon after, Lord Widgery C.J. added this:[4]
I would only wish to repeat what I said in one of the earlier
cases, and that is to hope that when answering Lord Denning
MR's question in the future in this type of case people do
approach the problem in substance and reality. I think it would
be a great pity if we allowed this subject to become
over-legalistic and over-dressed with legal authorities
when, to my mind, once one has got the question posed, the answer
should be supplied by a little common sense and concern for what
is done in real life and not what is, as Cumming-Bruce L.J. put
it, too artificial to be recognized in any context.
In the present case the assessor seems not to have asked, or
answered, Lord Denning's question. Nor did either the
oral or the written arguments of counsel provide an answer. This
is unfortunate because, in my view, when the question is asked
the answer is, as Lord Widgery suggests, supplied by the
application of a little common sense.
[17] What
then, did the Appellant supply? Its main supply to the member
stores is goods, and on those it collects and remits GST. It also
supplies such services as promotion, the right to use trademarks
and the like, for which it charges the members a fee and which is
no doubt subject to GST. In the context of these appeals, what it
supplied was, first, the service of negotiating the favourable
discount rates and rental rates with the banks for its members.
In addition, it received payments from the banks and made
payments to them for its members. What the Appellant did not do
was to supply, or resupply, credit and debit card services to its
member stores. It is the banks, not the Appellant, that have the
equipment and the organization to supply these services, and they
are not commodities like bandages or sunglasses that the
Appellant could buy and resell. Moreover, as I have said above,
the Appellant did not enter into a contract with the bank.
[18] There was
no evidence suggesting that the Appellant received any
consideration specific to the service of negotiating the terms to
be made available by the banks to the member stores. That was
simply one of a number of services it provided to them as part of
the program, the consideration for which was the program fees
referred to in paragraph 12(ff) of the Replies. As I have
already found, no part of the discount fees is added to or
contained within these program fees. Although there was no
evidence on the point, I assume that GST is collected and
remitted by the Appellant on the program fees. The Appellant did
not suggest that any part of those fees should be exempt as being
for a financial service. If any part could be so identified, it
would be caught by section 138 as an incidental supply.
[19] I turn
now to the second part of the service in issue. It is common
ground between the parties that, because of the terms in which
subsection 123(1) of the Act defines the expressions
"taxable supply" and "commercial activity",
and because financial services are exempt under Schedule V, Part
VII, tax is not exigible on financial services. This service
clearly falls within clause (a) of the definition of
"financial service" in section 123:
"financial service" means
(a)
the exchange, payment, issue, receipt or
transfer of money, whether effected by the exchange of
currency, by crediting or debiting accounts or
otherwise.
The words I have italicized describe the function the
Appellant performs.
[20] The
Respondent argues that the service is removed from the ambit of
the definition by the operation of the Financial Services
(GST) Regulations.[5] These Regulations define certain
prescribed services which are not to be included in the
definition of "financial services". The relevant part
is section 4:
4(1) In this
section,
"instrument" means money, an account, a credit card
voucher, a charge card voucher or a financial instrument;
"person at risk", in respect of an instrument in
relation to which a service referred to in subsection (2) is
provided, means a person who is financially at risk by virtue of
the acquisition, ownership or issuance by that person of the
instrument or of a guarantee, an acceptance or an indemnity in
respect of that instrument.
4(2) Subject
to subsection (3), the following services, other than a service
described in section 3, are prescribed for the purposes of
paragraph (t) of the definition "financial
service" in subsection 123(1) of the Act:
(a)
the transfer, collection or processing of information, and
(b)
any administrative service, including an administrative
service in relation to the payment or receipt of dividends,
interest, principal, claims, benefits or other amounts, other
than solely the making of the payment or the taking of the
receipt.
4(3) A service
referred to in subsection (2) is not a prescribed service for the
purposes of paragraph (t) of the definition
"financial service" in subsection 123(1) of the
Act where the service is supplied with respect to an
instrument by
(a)
a person at risk,
(b)
a person that is closely related to a person at risk, where the
recipient of the service is not the person at risk or another
person closely related to the person at risk, or
(c)
an agent, salesperson or broker who transfers ownership of the
instrument for a person at risk or a person closely related to
the person at risk.
The concluding words of paragraph 4(2)(b) which I have
italicized clearly apply to the second part of the services the
Appellant supplied and exclude them from the category of
"prescribed services" which in turn are excluded from
the definition of "financial services".[6]
[21] There is
no consideration that has been identified as having been paid for
these services. Indeed it might be argued that the making of
payments and taking of receipts is as much a service to the
Appellant itself as to its members, considering that the
Appellant has the benefit of an accelerated cash flow against its
accounts receivable. In either event, there is no service to the
members that is not a financial, and therefore exempt, service.
As with the negotiation of the rate, to the extent that there is
a consideration for this service within the membership fees it
would be subject to tax, and has been taxed, under section
138.
[22] There was
some evidence suggesting that when credit card charges were
processed on paper rather than electronically, the vouchers are
forwarded by the stores to the Appellant and deposited by the
Appellant at the appropriate bank as cash would be. As neither
counsel made any distinction between electronic and paper
transfers in the course of the argument, I see no reason to treat
them differently in these Reasons.
[23] The
appeals are therefore allowed, and the assessments are referred
back to the Minister for reconsideration and reassessment on the
basis that the amounts assessed as "GST collectible on Visa
and MasterCard charges resupplied to customers" and as
"GST collectible on the resupply of credit card charges to
account receivable" are not subject to tax. The penalties
and interest will, of course, be cancelled as well. As the amount
of tax in dispute under each assessment exceeds $7,000, I cannot
make any award of costs.[7]
Signed at Ottawa, Canada, this 5th day of April, 2001.
"E.A. Bowie"
J.T.C.C.
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