Montecristo Jewellers – Tax Court of Canada finds that export sales were not zero-rated

ETA Sched VI, Pt. V, s. 12(a) zero-rates a supply of tangible personal property where the supplier “ships the property to a destination outside Canada that is specified in the contract for carriage of the property.” A Vancouver retailer of expensive watches and jewellery would accommodate customers who purchased such items (the “Jewellery“) as gifts to take with them on flights back to China by essentially arranging (by going through various hoops) to have the Jewellery personally delivered to the customers just as they were about to board their flights and just after a CBSA officer stamped a customs form attesting to the immediate exportation of the Jewellery. Lyons J agreed with CRA that this was not good enough to satisfy the zero-rating requirement, stating:

As no third party carrier was engaged under a contract for carriage, I find that the appellant did not ship the Jewellery within the meaning of paragraph 12(a).

As the place of delivery of the Jewellery was in Canada (i.e., at the Vancouver airport), its sale was taxable.

Neal Armstrong. Summaries of Montecristo Jewellers Inc. v. The Queen, 2019 TCC 31 under ETA Sched VI, Pt. V, s. 12(a) and s. 142(1)(a).