CRA will follow Zomaron on the same facts (re GST/HST exemption for signing up merchants for credit card processing)
Zomaron was a registered independent sales organization (ISO) for Visa (and an “MSP” for Master Card) network purposes, who obtained the agreement of merchants to use the processing services of credit card processors, subject to the approval of the merchants’ applications by such processors. Lyons J found that “the essence for what the Processor is paying Zomaron for is to ‘arrange for’ merchants to use the Processor’s card payment services,” so that those fees were for a GST/HST exempt financial service.
CRA stated that it “will only apply the Zomaron decision to supplies made by an ISO/MSP if the same fact situation exists.” In its description of the decision, CRA emphasized that “during negotiations Zomaron had considerable latitude and autonomy to set pricing, rates and fees” and that “Zomaron delivered to the … processor fully negotiated merchants” requiring the processor’s card payment processing services – so that presumably absence of these elements might cause CRA to consider that the fees were instead for taxable promotional services.
Neal Armstrong. Summary of Excise and GST/HST News - No. 109 under “Zomaron Inc. v The Queen – Application to independent sales organizations and member service providers ,“ June 28, 2021 under ETA s. 123(1) – financial service – para. (l).