Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
XXXXX:
XXXXX
XXXXX
XXXXX
XXXXX
FROM:
Hélène Bustamante
Rulings Officer
Financial Institutions Unit
320 Queen Street, 14th Floor, Tower A
Ottawa, ON K1A 0L5
DATE:
July 16, 2008
CASE NUMBER:
79282
SUBJECT:
_GST/HST Interpretation
Tax status of supplies provided under agreements involving automated banking machines (ABMs)
Thank you for your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made under ABM Agreements. We apologize for the delay in responding to your enquiry.
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
As the transactions described in this letter all take place in XXXXX, reference will be made to the GST only.
You have provided us with the following documents:
• XXXXX
• A letter from XXXXX stating that XXXXX had remitted GST in error in respect to Surcharge Fees received pursuant to agreements with ABM suppliers as well as the application for the rebate (the Letter);
• The XXXXX Agreement entered into XXXXX between XXXXX and XXXXX (the Agreement);
• The XXXXX Agreement entered into XXXXX between XXXXX and XXXXX
As both agreements contain essentially identical provisions, the tax status of the supplies provided by XXXXX to XXXXX and to XXXXX will be the same. For ease of reference this letter will only refer to the agreement between XXXXX and XXXXX.
The representative of the registrant XXXXX makes representations in the Letter and applied for a rebate of GST paid in error, in part, for the following reasons:
• The surcharge fee was consideration for exempt supplies of arranging for the supply of a financial service.
• XXXXX was a party to a joint venture arrangement under which the joint venture provided ABM access to customers of financial institutions.
• The supplies made by the joint venture were the arranging for the supply of a financial service.
• When XXXXX collected its share of the surcharge fee, XXXXX erroneously deducted an amount and remitted such amount to Canada Revenue Agency (CRA) as being GST.
• As the ABM surcharge fees were consideration for an exempt supply of a financial service, no GST was charged nor held out as being charged to the cardholder and XXXXX had no requirement to remit GST on the services supplied.
• Consequently, XXXXX remitted GST in error on surcharge fees that were collected.
The issue is to determine the nature of the Agreement and the tax status of supplies under the Agreement.
FACTS/BACKGROUND
1. XXXXX entered into an XXXXX Agreement on XXXXX (the Agreement) with XXXXX.
2. Both XXXXX and XXXXX are registrants for GST/HST purposes.
3. Based on the recitals of the Agreement,
XXXXX.
4. Certain terms are defined in XXXXX of the Agreement. Several are reproduced below for ease of reference.
• "ABM Equipment" is defined as all the ABMs including all related hardware and software necessary for the equipment to operate. It does not include the power source or communication link.
• "ABM Services" is defined as the services set out in XXXXX.
• XXXXX.
• "XXXXX Sites" is defined as XXXXX locations as set out in XXXXX.
• "Interchange Charge" means the payment collected by XXXXX from the Switch Connector for each completed transaction.
• "Surcharge" means the payment collected by XXXXX from each account from which funds are withdrawn as part of each transaction completed using the ABM Equipment.
• "Switch Connector" means the entity that provides access to a payment network such as XXXXX.
5. XXXXX the Agreement provides that XXXXX retains ownership, liability and risk of loss for the ABM Equipment.
6. XXXXX the Agreement provides that XXXXX provides the ABMs and install them at the XXXXX Sites. XXXXX is responsible for determining the location of the ABMs at each XXXXX Site.
7. XXXXX provides that XXXXX is responsible for providing and installing the ABMs, performing ABM Services, collecting the XXXXX and ensure that the delivery of cash to the ABMs is done according to XXXXX policies.
8. XXXXX provides that XXXXX is responsible for preparing the location where the ABMs will be installed; performing ABM services; allowing XXXXX access to XXXXX premises, equipment, facilities and information required for the installation of the ABM Equipment; supplying electricity and communications lines; providing security to the XXXXX Sites where the ABMs are located.
9. XXXXX the Agreement provides that the parties are independent contractors in the provision and installation of the ABM Equipment and performances of ABM Services. It also specifies that the parties are not deemed agents of each other.
10. XXXXX provides that the XXXXX will be allocated between XXXXX and XXXXX as set out in XXXXX.
11. XXXXX provides that each party is responsible for their own expenses.
12. Based on XXXXX, the total XXXXX collected at XXXXX Sites XXXXX is XXXXX per transaction. Of the amount collected XXXXX is allocated to XXXXX and XXXXX is allocated to XXXXX for a transaction XXXXX XXXXX and XXXXX is allocated to XXXXX and XXXXX is allocated to XXXXX for a transaction XXXXX. XXXXX provides for a minimum allocation of XXXXX to XXXXX based on the number of transactions.
COMMENTS
We have reviewed the Letter in which XXXXX indicates that the parties are involved in a joint venture agreement with respect to the operation of ABM machines in XXXXX locations. We do not agree with this position. Based on our review of the Agreement it is our view that there is no clear indication that XXXXX and XXXXX have entered into a joint venture arrangement to provide ABM access.
We have the following comments in respect of what is being provided under the Agreement in relation to the transactions and parties involved in a shared cash dispensing transaction with ABMs.
Please refer to GST/HST Info Sheet GI-006, ABM Services (Info Sheet), for general information on the application of GST to transactions related to shared cash dispensing using ABMs.
As discussed in the above noted info sheet, a card acceptor is defined as a person who operates an ABM that accepts the card issued by the card issuer and dispenses cash to a cardholder. XXXXX of the Agreement provides that XXXXX retains all ownership, liability and risk of loss of the ABM Equipment. XXXXX is the card acceptor.
A downstream merchant is a person other than a card acceptor who houses an ABM of another person in its establishment and who may also provide additional goods and services related to the fact that the ABM is located on its premises.
XXXXX of the Agreement provides that XXXXX is responsible for determining physical location of the ABM Equipment within XXXXX Sites.
XXXXX Sites are defined in XXXXX of the Agreement as XXXXX locations set out in XXXXX.
XXXXX provides the name and addresses of the XXXXX Sites as well as the number of ABMs in each site.
XXXXX of the Agreement provides that XXXXX will:
• prepare the sites, including electric power source and communication link;
• perform ABM Services;
• allow XXXXX access to the ABMs for the installation of ABMs and the performance of ABM Services, and
• provide security for the sites.
XXXXX is housing ABMs that belong to XXXXX in its establishments as well as providing other services related to the fact that the ABMs are located in its establishments. XXXXX is providing property and services of a downstream merchant, as described in the Info Sheet.
In reviewing the Agreement we are of the view that XXXXX is providing a single supply to XXXXX.
Based on the Agreement the predominant element of the supply provided by XXXXX to XXXXX is a licence in respect of real property, i.e. agreeing to the installation and operation of ABMs by XXXXX on XXXXX premises. In this situation, no exempting provision would apply to this supply and as a result the supply is taxable.
XXXXX receives consideration for what it provides to XXXXX. Based on the definition of XXXXX in the Agreement the total XXXXX are collected by XXXXX. Based on XXXXX, the total XXXXX collected at XXXXX Sites XXXXX are XXXXX per transaction. Of the amount collected XXXXX is allocated to XXXXX and XXXXX is allocated to XXXXX for a transaction XXXXX and XXXXX is allocated to XXXXX and XXXXX is allocated to XXXXX for a transaction XXXXX. XXXXX provides additional information on how the consideration is calculated.
XXXXX is required to charge and collect GST on all fees received from XXXXX for the taxable supply provided under the Agreement.
As the XXXXX Agreement, entered into between XXXXX and XXXXX, contains essentially identical provisions, the tax status of the supplies provided by XXXXX to XXXXX is the same. XXXXX is required to charge and collect GST on all fees received from XXXXX for the taxable supply provided under the XXXXX Agreement.
If you have any questions or would like to discuss this matter further, do not hesitate to call me at 613-952-9262.
Hélène Bustamante
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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