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Citation: 2003TCC894
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Date: 20031202
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Docket: 2002-1241(GST)I
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BETWEEN:
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ROSAIRE MALTAIS,
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Appellant,
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And
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HER MAJESTY THE QUEEN,
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Respondent.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre
Proulx J.
[1] This is an appeal under the informal procedure from a
reassessment made under the Excise Tax
Act ("the Act") concerning the period from August
1, 1996, to December 31, 1999. The notice
of reassessment bears the number 2‑17‑5002 and is dated April 4,
2002.
[2] The issue is
whether the Appellant, during the years in issue, was a small supplier as
defined in subsection 123(1) and within the meaning of section 148 of the Act. If
so, the Appellant would not be required to collect tax on the consideration for
services provided by his business.
[3] During the years
in issue, according to Exhibit A-1, the Appellant operated first under the
business name Massage RM Imm and subsequently under the business name
Pro-massage Enr. It has been admitted that the Appellant operated a massage
parlour in the basement of his residence.
[4] To ascertain whether the Appellant qualifies as a
small supplier, it must be determined whether the amounts received from clients
in consideration of the services rendered should be attributed in their
entirety to the Appellant's business, or whether they can be attributed in part
to the persons working for the business.
[5] The Minister of
National Revenue ("the Minister") is of the opinion that the workers
are employees. The Appellant argues that they are self-employed workers. This
is the issue that I must settle, although I am not convinced that it is the
right issue.
[6] In my view, the issue should have been whether there
was a single consideration or separate considerations. A business can supply
its services through employees or through self-employed workers. That does not alter the nature of the business as a
supplier of services. It is the nature of the operation that must be considered.
Is it an operation in which services can usefully be acquired separately? As
purchasers of services, the clients paid the massage parlour a single amount. That
amount was set by the Appellant for the services of the massage parlour. As the
owner and operator of the massage parlour, the Appellant was, in my view, the
supplier of the services for which the clients paid a single consideration.
[7] In any case, as I
said, I shall make my decision based on the nature of the workers’ legal
situation and whether it constituted an employment contract or a contract for
services.
[8] The first witness
for the Appellant was Suzie Côté.
She has been working for the Appellant’s massage parlour for the past two and a
half years. She testified that she had training in massage therapy and that she
had previously worked for another massage parlour.
[9] Counsel for the
Respondent objected to her testimony on the grounds that she had not worked for
the Appellant’s massage parlour during the taxation years in issue. Counsel for
the Appellant argued that the purpose of her testimony was to explain how the
massage parlour operated.
[10] Ms. Côté’s
testimony differed little from that of the persons who had worked there during
the period in issue, except with respect to hiring practices and the sexual
aspect of the massages.
[11] The Appellant
testified. He is a trained electrician. During the years in issue, he worked as
an electrician foreman for
Industries Davie Inc.
[12] He testified that he
had learned to perform Californian and Swedish massage as well as specific
massages. In 1995, he converted the basement of his residence into a massage
parlour. He sought clients through newspaper advertisements. The parlour’s
business hours were 9:30 a.m. to 11:00 p.m.
[13] He confirmed that it
was not he who replaced a masseuse who could not come in. She would arrange for
her replacement with her other colleagues.
[14] Three workers
testified at the request of counsel for the Respondent. They all worked for the
massage parlour during the period in issue.
[15] The masseuses
testified that they had been recruited through advertisements that the
Appellant had placed in the newspaper. Some of these advertisements were filed
as Exhibit I‑3.
Under the heading [TRANSLATION] “Jobs Offered”, they stated that masseuses were
sought to perform Californian massage full time in the Rive‑Sud area. The
Appellant confirmed that the telephone number listed was his own.
[16] One of the young
women already knew how to perform massage. The two others were trained by the
Appellant.
[17] The work schedule
was established by the Appellant. The worker had to be present at the parlour
in accordance with the schedule. She was not paid an hourly rate but rather
based on the number of massages performed. She would not know in advance how
many clients she would have.
[18] Each testified that
she reported to the Appellant, that he was the boss, and that he had to approve
her absence or replacement by a colleague.
[19] Each testified that
the Appellant wanted the premises kept clean. The workers had to wash the
sheets and towels. They also had to maintain the premises.
[20] The masseuses were
required to answer the telephone and make appointments. The appointments would
be for the same day. The caller’s telephone number would be noted.
[21] They neither dealt
with nor paid for advertising. The business was advertised under the name Pro massage Enr. These advertisements were
filed as Exhibit I‑3.
[22] Each masseuse had a
key to the premises. She would open up when she arrived and lock up when she
left.
[23] There were no
guaranteed wages. Clients paid for the massage sessions according to rates
established by the Appellant, starting at $35 and increasing to $40. The workers handed $15 or $20 over to
the Appellant and kept $20. They were entitled to keep any extra fees for
services such as stripping.
[24] D During a police raid in October 1999, an intercom system was found in the
electrical panel of one of the rooms in the parlour. The Appellant said it was
not working. On the other hand, one of the masseuses said that he heard
everything. All the workers were under the very clear impression that he knew
everything that happened in the parlour.
[25] Ms. Suzanne Tremblay was the tax
auditor. She met with one of the masseuses. She spoke to others by phone. The
Appellant’s counsel filed the audit report as Exhibit A‑2. The
auditor referred to Appendix 2 to explain that at the end of June 1996, by
adding the portion received by the masseuses, the Appellant had exceeded the
threshold of $30,000. He had a month to register. Thus, the tax account
commenced at the beginning of August 1996. In addition, for 1998, according to
the books that were seized, $7,361 had not been reported. It was added to the
total supplies to be reported.
[26] The auditor also
noted that the Appellant paid all the expenses. The workers did not decide anything. The
auditor also stated that, for income tax purposes, the amounts paid to the
masseuses were deducted in computing the Appellant’s income.
Analysis and conclusion
[27] The issue to be
determined is whether the persons who rendered services to the Appellant’s business were employees or
self-employed workers.
[28] I refer to the
Supreme Court of Canada decision in 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., [2001] 2 S.C.R. 983:
... The central question is whether the person who has been engaged
to perform the services is performing them as a person in business on his own
account. In making this determination, the level of control the employer
has over the worker’s activities will always be a factor. However, other
factors to consider include whether the worker provides his or her own
equipment, whether the worker hires his or her own helpers, the degree of
financial risk taken by the worker, the degree of responsibility for investment
and management held by the worker, and the worker’s opportunity for profit in
the performance of his or her tasks.
[29] The young women were
recruited for full-time work through an advertisement in the newspapers. Some
had experience as masseuses. Others were trained by the Appellant. They had to be available for the
Appellant’s business. This is a key factor for me. They were not paid by the
hour but had to work in that way. Each masseuse had three roles: receptionist,
masseuse and maintenance worker.
[30] Let us review the
various tests. Control. The Appellant
decided everything: the schedule, the terms and conditions of work and the fee
to be charged to the client.
[31] The ownership of
tools: everything belonged to
the Appellant and he had paid for all of it.
[32] The opportunity for profits or losses: the
advertising was done in the Appellant’s business name. The clients were clients
of the massage parlour. The workers had to record their time, and their
remuneration was based on the number of clients. Tips or the number of clients
that a business has cannot be considered as a source of profits for a
self-employed worker.
[33] Integration. It was the Appellant’s business, not the
workers’. The evidence in this case did not reveal any business element on the
part of the workers.
[34] All the
consideration received for the massage services must be included in computing
the Appellant’s gross income. The computation was not disputed.
[35] Therefore, the
appeal must be dismissed.
Signed at Ottawa, Canada, this 2nd
day of December 2003.
Lamarre
Proulx J.
Translation
certified true
on
this 13th day of June 2008.
Susan
Deichert, Reviser
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