Hamilton Hunt Co. Ltd. v. The Queen, docket 98-1540-GST-I (Informal Procedure)

Date: 19991209

Docket: 98-1540-GST-I

BETWEEN:

THE HAMILTON HUNT COMPANY LTD.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Beaubier, J.T.C.C.

[1] This appeal pursuant to the Informal Procedure was heard at London, Ontario on November 5, 1999. Henry Martin, P.Eng. and William Schoenhardt, P.Eng. testified on behalf of the Appellant. The reassessment pursuant to the Excise Tax Act (the "Act") is for the period January 1, 1994 to December 31, 1996.

[2] Paragraphs 4, 5 and 6 of the Reply to the Notice of Appeal read as follows:

4. By Notice of Reassessment No. 0076, dated June 12, 1997, the Minister of National Revenue (the "Minister") assessed GST in the amount of not less than $6,669.03 and assessed late remittance penalties and interest of $732.33 and $619.29, respectively. The amount of GST assessed at issue in this Appeal amounts to not less than $3,193.37.

5. In so reassessing the Appellant, the Minister made, inter alia, the following assumptions of fact in relation to the issue of this Appeal:

(a) the Appellant was a registrant for the purposes of Part IX of the Act;

(b) the HSC operates horse and hound shows;

(c) the Appellant claimed input tax credits on all of the GST paid on its expenditures;

(d) the Appellant included the "GST included" on the entry forms for the HSC;

(e) as a registrant, the Appellant collected GST in relation to the HSC;

(f) the Appellant failed to report and remit GST in relation to the HSC;

(g) the Appellant had revenues in the amount of not less than $48,762.05 during the Period in relation to HSC and collected GST in the amount of not less than $3,193.97 on a GST included basis; and

(h) the Appellant, having collected GST, held the GST in trust for Her Majesty in Right of Canada.

6. The issues are whether:

(a) the Minister properly assessed the Appellant GST in relation to the HSC that it collected and held in trust for Her Majesty in Right of Canada; and

(b) properly assessed penalties and interest pursuant to section 280 of the Act in relation to the HSC.

"HSC" is defined in the Reply to the Notice of Appeal as the "horse show committee" of the Appellant. Assumptions 5(a), (b), (c), (f), (g) and (h) were not refuted. The remainder are in dispute.

[3] Under the auspices of the Appellant, three horse shows were conducted annually. The first two, the Trillium Series, and the Future Series, were operated by volunteers who were members of The Hamilton Hunt Company Ltd. The third, the Great Challenge Summer Series was run by commercial barns.

[4] The testimony on behalf of the Appellant is not refuted as to the following:

1. The brochures respecting the Trillium Series did not make any reference to GST.

2. The brochures respecting the Future Series may have stated "GST included" on their entry fee form.

3. The brochures respecting the Great Challenge Summer Series did say "GST included".

[5] On August 1, 1997 the Appellant was granted its application to have its Horse Show Committee, which conducts the Trillium Series and the Future Series, deemed to be a separate person for Small Supplier Status effective January 1, 1994. Therefore, this retroactive status covers the assessment period. This was done pursuant to section 129. Subsections 129(3) and (6) of the Act deal with the retroactive grant of small supplier status. They read:

(3) Where the Minister receives an application under subsection (2), the Minister may, by notice in writing, designate a branch or division specified in the application as an eligible division for the purposes of this section, effective on a day specified in the notice, if the Minister is satisfied that

(a) the branch or division can be separately identified by reference to its location or the nature of the activities engaged in by it;

(b) separate records, books of account and accounting systems are maintained in respect of the branch or division; and

(c) a revocation under subsection (4) pursuant to a request made by the body in respect of the branch or division has not become effective in the 365-day period ending on that day.

...

(6)For the purposes of this Part, where a branch or division of a public service body that is a registrant becomes at any time a small supplier division and the body does not, at that time, cease to be a registrant, the body shall be deemed

(a) to have made, immediately before that time, a supply of each of its properties, other than capital property or an improvement thereto, that was held immediately before that time for consumption, use or supply in the course of commercial activities of the body and that the body begins, immediately after that time, to hold for consumption, use or supply primarily in the course of activities engaged in by the body through its small supplier divisions; and

(b) except where the supply is an exempt supply, to have collected, immediately before that time, tax in respect of the supply equal to the total of all input tax credits in respect of the property that the body was entitled to claim at or before that time.

(emphasis added)

[6] In argument, the Respondent's counsel stated that the Appellant was obligated to collect GST for entries into the horse show. The Appellant was not providing an exempt supply. Therefore GST should have been remitted. This obligation was only annulled in 1997 when it received its new designation as a small supplier. Nonetheless if the Appellant collected GST, then it must remit GST. Under the Excise Tax Act, Section 221 requires collection, Section 232 states that the proceeds are held in trust by the Appellant, and Section 228 states that the net tax must be remitted as calculated under Section 225. Thus, the Respondent's argument is that in any event the GST is due as calculated.

[7] The Appellant's argument is that it never thought GST was due because it never collected any tax on account of the committee's activities. Whether designated or not, it felt it was a small supplier. Moreover it takes the position that it never collected GST, it never applied for credits respecting these Series and therefore it should not have to pay GST.

[8] Because the Appellant was a registrant during the period assessed, it had to collect GST pursuant to Section 221 of the Excise Tax Act. On the evidence before the Court it did collect that GST which was included in the fees it received, whether there was any reference to that or not. HSC, the operator of the Trillium Series and the Future Series was retroactively deemed to be a separate person for small supplier status effective January 1, 1994. Nonetheless, the Appellant had already received the GST in question. That GST was received in trust for the Respondent pursuant to the provisions of the Excise Tax Act. Thus, it was being held by the Appellant as trustee for the Respondent. Despite the retroactive designation of small supplier status, the money in question remained that of the Respondent. For this reason, the appeal is dismissed.

Signed at Vancouver, British Columbia this 9^th day of December 1999.

"D.W. Beaubier"

J.T.C.C.