Docket: 2012-1109(GST)I
BETWEEN:
Alex Blouin
O/A Cantin Électronique AB
Enr.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal
heard on February 12, 2013, at Sherbrooke, Quebec.
Before: The Honourable
Justice Lucie Lamarre
Appearances:
|
For the appellant:
|
The appellant himself
|
|
Counsel for the respondent:
|
Chantale Paris
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made by the Agence
du revenu du Québec on December 23, 2010, regarding Part IX of the Excise
Tax Act for the periods from October 1, 2006, to December 31, 2006, from
October 1, 2007, to December 31, 2007, from October 1, 2008, to
December 31,2008, and from October 1, 2009, to December 31, 2009, is
allowed simply to cancel the penalty. In all other respects, the assessment
dated December 23, 2010, is confirmed.
Signed at Ottawa, Canada, this 22nd day of
February 2013.
“Lucie Lamarre”
Translation certified true
on this 28th day
of March 2013
Janine Anderson, Translator
Citation: 2013 TCC 68
Date: 20130222
Docket: 2012-1109(GST)I
BETWEEN:
Alex Blouin
O/A Cantin Électronique AB
Enr.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1]
The appellant is
appealing an assessment made on December 23, 2010, by the Agence du revenu du
Québec (Minister) regarding Part IX of the Excise Tax Act (ETA) for the
periods from October 1, 2006, to December 31, 2006, from October 1, 2007,
to December 31, 2007, from October 1, 2008, to December 31, 2008,
and from October 1, 2009, to December 31, 2009.
Issue
[2]
The appellant operates a
company that sells electronics. In auditing the appellant’s business, the
Minister found discrepancies between the sales that were reported by the
appellant on which he collected goods and services tax (GST) and the sales that
appear on the financial statements for the relevant period.
[3]
Thus, the Minister found
that the appellant failed to remit a total of $4,691.04 in GST.
[4]
The appellant is of the
opinion that he was not required to remit that amount because the amounts received,
on which no GST had apparently been paid, were promotional allowances or “volume
discounts” from suppliers, which are not taxable supplies pursuant to section
232.1 of the ETA. The section reads as follows:
Excise Tax Act
232.1
Promotional allowances — For the purposes of this
Part, if
(a) a particular registrant acquires particular tangible
personal property exclusively for supply by way of sale for a price in money in
the course of commercial activities of the particular registrant, and
(b) another registrant, who has made taxable supplies of the
particular property by way of sale, whether to the particular registrant or
another person,
(i) pays to or credits in favour of the particular registrant, or
(ii) allows as a discount on or credit against the price of any
property or service (in this section referred to as the “discounted property or
service”) supplied by the other registrant to the particular registrant,
an
amount in return for the promotion of the particular property by the particular
registrant,
the following rules apply:
(c) the amount is deemed not to be consideration for a supply
by the particular registrant to the other registrant.
(d) where the amount is allowed as a discount on or credit
against the price of the discounted property or service,
(i) if the other registrant has previously charged to or collected
from the particular registrant tax under Division II calculated on the
consideration or part of it for the supply of the discounted property or
service, the amount of the discount or credit is deemed to be a reduction in
the consideration for that supply for the purposes of subsection 232(2), and
(ii) in any other case, the value of the consideration for the
supply of the discounted property or service is deemed to be the amount, if
any, by which the value of the consideration as otherwise determined for the
purposes of this Part exceeds the amount of the discount or credit, and
(e) if the amount is not allowed as a discount on or credit
against the price of any
discounted property or service supplied to the particular
registrant, the amount is
deemed
to be a rebate in respect of the particular property for the purposes of
section 181.1.
[5]
To the contrary, the
Minister found that the income was actually sales commissions received by the
appellant from his suppliers, which are taxable supplies.
Facts
[6]
The appellant submitted
into evidence samples of the cheque stubs paid to him by Bell Canada (Bell) (his
primary supplier) that are the subject of this dispute.
[7]
The appellant notes
that the documents do not indicate that part of the amount paid corresponds to
GST that was apparently paid by the supplier.
[8]
He referred to the
GST/HST P-243 policy statement on promotional allowances (which he submitted with
his documents, in a bundle, under Exhibit A‑1). In the statement, the
appellant referred to example No. 2. It states that Manufacturer A makes
taxable supplies by way of sale to distributors and retailers. Retailer B acquires
supplies from Manufacturer A exclusively for resale in the course of its
commercial activities. Manufacturer A agrees to provide an allowance or bonus
to Retailer B to induce the signing of a new merchandising agreement. In
that case, the allowance is not subject to GST. The appellant maintains that
his case is similar to this example.
[9]
The respondent called
Marc Breton, a sales manager with Bell, to testify. The cheque stub that the
appellant was referring to and that was reproduced in Exhibit I-1, tab 5, was
submitted to him.
[10]
Mr. Breton explained
that it was indeed a sales commission paid to dealers further to a distribution
agreement. Mr. Breton explained that, according to the agreement, commissions
are paid with no invoicing.
[11]
He explained that, when
a dealer sells Bell products, the dealer enters the sale into a computer
system. This informs Bell of the sale and Bell pays the dealer a commission. It
may be an activation commission (for a first client) or simply a payment to the
dealer in compensation for the installation that the dealer performed in Bell’s
place. The payments are made monthly and the dealer can verify the details of
each of those payments in the computer system, by going to his or her account.
[12]
The account details in
relation to the cheque given as a sample by the appellant were provided in the
document submitted as Exhibit I-1, tab 6. The document clearly indicates that
it was a commission payment.
[13]
The details on the
commission or compensation paid, and the GST and provincial sales tax totals,
are clearly indicated on the document. The total corresponds to the cheque amount.
Josiane Déry, the appellant’s accounting technician, pointed out that GST is normally
collected only if the supplier indicates its GST registration number, and that that
number was not on the cheque stub. She therefore determined that the payments made
by Bell did not include any GST.
[14]
In fact, suppliers write
their registration number on the invoices that they produce. In this case, Mr. Breton
explained that Bell was paying commissions based on the electronic information
entered by the dealer on his sales. No written documents were sent so as to
save costs. The computer system had existed since 2005. Mr. Breton also
mentioned that Bell did not pay any allowances and very rarely paid “volume
discounts”.
[15]
The appellant indicated
that he had contacted Bell representatives and was simply told that all of the necessary
information could be found on the cheque stub. He bought his business in 2004 and
acknowledges that he did not pay attention to the existence of a distribution
agreement with Bell. Because he was a small business owner, he had to use an
intermediary body to market Bell products.
[16]
The intermediary body
provided him with a document, which he submitted in his bundle of documents (Exhibit
A-1), explaining the compensation plan. It is clear from this very brief document
that dealers are entitled to a certain amount of money for activating plans. Mr.
Breton stated that the document was not from Bell, but probably from the intermediary
body, and that the compensation amounts identified were pre-tax amounts. Mr. Breton
also told the appellant that there was an internal sales service available to
answer dealers’ questions. He explained that it was up to each supplier to
verify, in its electronic account, the state of its transactions. All clients
were informed of the change from paper to electronic correspondence in order to
limit costs.
Analysis
[17]
The appellant argues
that he received promotional allowances and that he was not obligated to
collect tax. He relies on the dictionary definition (Le Petit Larousse), which
defines an allowance as a commission paid to an occasional intermediary.
[18]
The GST/HST P-243
policy statement on section 232.1 issued in May 2004 by the Canada Revenue
Agency (CRA) submitted by the appellant indicates at page 3 that section
232.1 applies where: a particular registrant [the appellant] acquires tangible
personal property from a supplier [Bell or an intermediary body], exclusively
for supply by way of sale for a price in money in the course of his or her commercial
activities and another registrant [Bell] pays to, or credits in favour of, the
reseller [the appellant], or allows as a discount on, or as a credit against,
the price of any property or service supplied by that registrant to the reseller
an amount in return for the promotion of the particular tangible personal
property by the reseller.
[19]
Thus, to be considered
an allowance, there must be an agreement between the supplier and the reseller
that the payment in question be made for the promotion of the product, or that
the supplier allow a credit against or discount on the price of the product.
[20]
In this case, several
elements in the evidence support the finding that the appellant did not receive
promotional allowances like he suggested.
[21]
The cheque stub clearly
states “comm” or “dealer compens” (Exhibit I-1, tab 5). According to Mr.
Breton, commissions are paid when a new client is activated or in compensation
for dealer installations. They are not paid for signing a new merchandising
agreement, as was the case in the example given by the appellant. Finally and most
importantly, Mr. Breton demonstrated that tax had indeed been paid and was part
of the total on the appellant’s cheque (Exhibit I-1, tab 6). Mr. Breton clearly
stated that the amounts were commissions on which Bell paid GST.
[22]
It is clear from the
case law that, when tax is paid to a registrant, the registrant must remit that
tax to the government even if the registrant believes that it was not obligated
to collect the tax (see Gastown Actors’ Studio Ltd v. Canada, [2000] F.C.J.
No. 2047, at paragraph 10:
10
In our view, the respondent is responsible for remitting any GST it has
collected with respect to its two year full time program and its independent
study program, even though they are exempt supplies, as well as its part-time
programs. We agree with the Crown that a taxpayer who has in fact collected
GST, whether for services that are taxable or for services that are later
determined to be exempt supplies, must remit those amounts and is liable to be
assessed if they are not remitted. . . .
[23]
Thus, because the
appellant was unable to show that the amounts received were allowances under
section 232.1 of the ETA, and, more importantly, because the respondent showed
that the payments to the appellant included GST amounts, the appellant had to
remit those taxes to the respective governments.
[24]
Regarding the penalty
imposed under section 280 of the ETA, I am of the view that it should be cancelled.
Indeed, the appellant states that he was not made aware of the detailed statement
of accounts established by Bell on the computer system. He had called Bell several
times and was told that all of the information could be found on the cheque
stubs. However, the GST amount paid was not indicated on the cheque stub. His
accountant and accounting technician had informed him that they were allowances
on which no GST was charged.
[25]
I therefore find that
the appellant showed that he made a reasonable error in his understanding of the
facts in this case (see Comtronic Computer Inc. v. The Queen, 2010 TCC
55, paragraph 34 and 35).
[26]
The appeal is allowed
simply to cancel the penalty. In all other respects, the assessment dated
December 23, 2010, under appeal is confirmed.
Signed at Ottawa,
Canada, this 22nd day of February 2013.
“Lucie Lamarre”
Translation
certified true
on this 28th day
of March 2013
Janine Anderson,
Translator
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