Stamatopoulos – Quebec Court of Appeal finds that the ARQ failed to establish that a named supplier to the taxpayer did not act as a supplier or intermediary
A taxpayer (Stamatopoulos) serviced clothing manufacturers by securing sewing services for clothes that then were delivered to the manufacturer. He checked the GST and QST registration numbers of the subcontractors and paid the invoices delivered in their name to him once he, in turn, had been paid by the manufacturer. The QST paid by him was not remitted by the subcontractors, and the ARQ position was that he was not entitled to input tax refunds because the persons in whose names the invoices were issued were not the persons who had actually rendered the sewing services to him.
In confirming the position below that the invoices received by Stamatopoulos satisfied the documentary requirements for claiming ITRs, Marcotte JCA proceeded on the basis that:
[W]here the taxpayer has discharged the taxpayer’s initial burden of proving that the invoices in fact were issued by a person with whom the taxpayer dealt directly in a genuine commercial transaction, it then falls on the tax authorities to prove, on the balance of probabilities, that the person with whom the taxpayer dealt directly did not act as a “supplier” or as an “intermediary.”
The ARQ had not met this onus.
She also noted that it did not matter whether the subcontractors with whom Stamatopoulos had dealt had in fact provided the sewing services, because the Quebec equivalent of the Input Tax Credit Information (GST/HST) Regulations provided that a good invoice could also be issued by an intermediary. In other words, once Stamatopoulos established (as he did) that he had had business dealings with the subcontractors in whose names the invoices were issued, the onus shifted back to the ARQ even if it was clear that they were not the suppliers (but they might instead have been intermediaries).
Neal Armstrong. Summary of Agence du revenu du Québec v. Stamatopoulos, 2018 QCCA 474 under Input Tax Credit Information (GST/HST) Regulations, s. 2 – intermediary.