Date: 19991022
Docket: 1999-1923-GST-I
BETWEEN:
LARRY DECAIRE/DORRIN DIESEL
dba A-OK CONSTRUCTION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bell, J.T.C.C.
ISSUE:
[1] The issue as stated in the Reply to the Notice of Appeal
is:
... whether the Appellant exceeded the small supplier
threshold, and was therefore required to be registered pursuant
to the Act.[1]
[2] At the hearing Respondent's counsel stated that the
issue was whether the partnership of A-OK Construction ceased to
be a small supplier in 1993 and was, therefore, liable to collect
and remit Goods and Services Tax ("GST").
[3] The issue, however, seems to be whether Larry Decaire
("Decaire") and Dorrin Diesel ("Diesel"), the
two persons to whom the Notice of Decision was sent were
obligated:
(a) to collect tax under section 221(1) of the Excise Tax
Act ("Act"), and
(b) to remit same, under section 228(2) to the Receiver
General.
FACTS:
[4] A-OK Construction entered into a contract in February,
1993 with Balbir Saini, Amritpal Saini and Nirmal S. Sibat
("S") for the construction of a house. It appears that
the partnership ceased to be a "small supplier"[2] in 1993. Decaire
testified that the partnership ceased activity in 1993, there
being no intention to continue the business for which it was
formed.
[5] A Notice of Assessment dated April 30, 1998 assessed
"Larry Decaire, Dorrin Diesel" on a form entitled GOODS
AND SERVICES TAX for an amount of tax in the sum of $3,328.04,
interest in the amount of $901.08 and penalty in the sum of
$1,092.48, the total being $5,321.60 without any description of
the components of the tax other than:
Adjustments to GST/HST
Adjustments to Input Tax Credits
[6] Decaire, giving evidence on behalf of himself and Diesel
stated simply that revenue under the agreement was $73,257.75. He
said that he had spoken to a person at Revenue Canada[3] about the obligation to
become a registrant under the Act and was advised that
because the partnership was being terminated, no such need
existed. On cross-examination he stated that he was aware that
the amount of Revenue exceeded $30,000 and that that is why he
contacted Revenue Canada.
[7] Julia Jennex("Jennex"), an auditor with Revenue
Canada, testified that A-OK had its own bank account and that
both Decaire and Diesel were signatories to such account. She
testified that she had itemized the jobs for the deposit books
and compared that information to the bank statements. She said
that the total was approximately $73,000 for the whole year and
computed the imputed GST by applying a factor of 7/107 to
$73,000.
ANALYSIS AND CONCLUSION:
[8] Respondent's counsel emphasized the fact that the
operation was not that of the two individuals but was that of
A-OK Construction, operating as a partnership, that the amount of
revenue exceeded the limit for small suppliers and that,
accordingly, Decaire and Diesel were obligated to collect and
remit GST.
[9] Section 123 of the Act defines person to
mean:
An individual, partnership ...
[10] There is no doubt that the supply of services by the
partnership was a taxable supply made in the course of a
commercial activity.
[11] Section 240(1) of the Act provides that every
person who makes a taxable supply in Canada in the course
of a commercial activity is required to be registered for the
purposes of the Act except where the person is a
small supplier.
[12] Section 238(1) requires every registrant to file a return
with the Minister for each reporting period.
[13] Section 228(1) requires every person who is
required to file a return to calculate the net tax of the
person for the reporting period.
[14] Section 165(1) requires every recipient of a taxable
supply to pay a tax equal to seven percent of the value of the
consideration for the supply.
[15] Section 221(1) requires every person who makes a
taxable supply to collect the tax payable by the recipient.
[16] Section 228(2) requires every person required to
file a return and calculate net tax to remit tax to the Receiver
General.
[17] Section 145 of the Act as it read to the period
under review, namely 1993, stated:
For the purposes of this Part an activity engaged in by a
person as a member of a partnership shall be deemed
(a) to be an activity of the partnership; and
(b) not to be an activity of the person.
This section was altered and expanded when section 272.1
replaced 145, subsection (1) of which was virtually the same as
section 145(1). Subsection (5) of section 272.1 provides,
inter alia, that a partnership and each member or former
member ... are jointly and severally liable for the payment or
remittance of all amounts that become payable or remittable by
the partnership.[4]
[18] Although Decaire and Diesel prepared their Notice of
Appeal using the style of cause:
LARRY DECAIRE/DORRIN DIESEL
dba A-OK CONSTRUCTION
they were appealing from an assessment made, not on the
partnership but on
Larry Decaire, Dorrin Diesel
[19] Although Decaire, at the hearing, suggested that there
was no partnership, such submission was made, respectfully,
without a full understanding of the nature of a partnership and
the effect of same under the Act. In addition, he used the word
"partnership" in the Notice of Objection in the
following fashion:
In January, 1993, a partnership was formed between myself and
Dorrin Diesel, doing business as "A-OK
Construction".
Later that year, Dorrin and I decided to end the partnership
and go our separate ways because of lack of work.
I was advised that if the partnership was dissolving and if I
did not anticipate a future income exceeding $30,000 I was not
required to apply for a G.S.T. number.
[20] Section 2 of the British Columbia Partnership Act
defines partnership as the relation which subsists between
persons carrying on business in common with a view of profit.
Given that definition, which is standard in common law provinces,
and given the foregoing facts and Respondent's counsel's
firm position that it was the partnership which conducted
business, I have no doubt in concluding that the partnership did,
in fact, carry on the above described business. In accordance
with the above provisions, a partnership is, for purposes of the
Act, defined to be a person. Since that
person conducted the business, it is the person
providing the taxable supply and required to be registered, it is
the person required to file and to calculate tax and it is
the person required to collect and remit that tax.
[21] Section 145(1), set out above, clearly provides that an
activity engaged in by a person as a member of a
partnership shall be deemed to be an activity of the partnership
and not to be an activity of the person. Support for the
conclusion that I have reached lies in the words of section
272.1(5), added in respect of the post-April 23, 1996 period,
which refers to:
... amounts that became payable or remittable by the
partnership ...
it being clearly anticipated that a partnership, under the
Act, can be the person who is required to collect
and remit tax. Since the partnership was the person which
conducted business and since a person includes a
partnership under this Act[5], that partnership was the person
required to collect and remit tax. The Appellants, having had no
obligation so to do, this appeal is allowed with the result that
they are not liable for tax, interest and penalties as
assessed.
Signed at Ottawa, Canada this 22nd day of October, 1999.
"R.D. Bell"
J.T.C.C.
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