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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
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XXXXX
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Case Number: 111104
January 21, 2009
Dear XXXXX
Subject:
GST/HST INTERPRETATION
Requirement to provide supporting documents when filing a code 1 general rebate application
Thank you for your XXXXX of XXXXX (the facility), concerning the eligibility of the facility to file a code 1 general rebate application without providing supporting documentation.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Interpretation Requested
You would like to know if an exception can be made with respect to the requirement to submit supporting documentation when filing a code 1 general rebate application.
Interpretation Given
The Canada Revenue Agency (CRA) requires a third party authorization letter where a third party is acting for a person to whom a ruling or interpretation applies, and it should be specific to the request for the ruling or interpretation. As no third party authorization specific to this interpretation has been received, my response is addressed to you as an employee of the facility as was discussed with Karen Bennett during your telephone conversation with her on XXXXX.
Concerns were raised during my telephone conversation with XXXXX, and again in the email received from him, over the challenges of submitting original documents to support rebate claims filed by the facility.
There is a process whereby a band or band-empowered entity can request permission to file code 8 rebates on eligible off-reserve travel expenses (e.g. short-term accommodation, transportation, meals and entertainment) acquired by the band or band-empowered entity without submitting original invoices. The facility has applied and received that permission.
However, there is no mechanism in place to allow claimants to request permission to apply for code 1 rebates without submitting evidence that an amount was paid as tax in error. This is because code 1 rebates are intended to be filed only in exceptional circumstances where the GST is overcharged in error by the vendor. A taxpayer should rarely have to file a code 1 general rebate application because there should be very few vendor mistakes. As well, the purchaser always has the option to request an adjustment from the vendor when an amount was incorrectly charged pursuant to section 232 of the ETA. In this way the vendor becomes aware of the mistake so that it does not arise again.
In reflecting on my telephone conversation with XXXXX, I am wondering why so many vendors appear to have charged an amount as GST in error on transactions that may have been relieved of tax. As was explained to me, the facility has many boxes of invoices showing an amount charged as tax in error. This is an unusual situation and I hope the information in this letter will help rectify the problem to a great degree.
Where a band or band-empowered entity acquires goods off a reserve that are delivered to a reserve by the vendor or the vendor's agent, no GST has to be collected by the supplier if all the requirements of Technical Information Bulletin B-039R entitled, GST/HST Administrative Policy - Application of the GST/HST to Indians (B-039R), are met. Therefore, a vendor usually provides point-of-sale tax relief for off-reserve sales to a band or band-empowered entity if the vendor or the vendor's agent delivers the goods to a reserve and the vendor maintains proof of delivery.
The purchaser can assist the vendor with transportation arrangements (e.g. providing a name of a local transport company) as long as it is the vendor that has control over the transaction with the transport company so that the purchaser has no authority to have the deliverer change the destination. If a purchaser has control over the transporter and can change the destination of the delivery, the goods are not considered to be delivered by the vendor or the vendor's agent. The vendor has to be the person under contract with the transportation company, although the purchaser may be responsible for paying the transportation costs.
Arranging delivery to a point near the reserve (such as an airport) is not sufficient to meet the delivery requirements under B-039R. In situations where the delivery requirements are not met by the vendor, tax is payable and there is no code 1 rebate available to the purchaser even if the purchaser had arranged for delivery to the reserve and provided the vendor with proof (purchaser waybill) that the goods were in fact delivered to the reserve. In these instances a band or a band-empowered entity that is a "qualifying non-profit organization" may apply for the GST/HST Public Service Body (PSB) Rebate using form GST 66.
The PSB rebate under section 259 of the ETA provides for reimbursement at the "specified percentage" of 50% of the "non-creditable tax charged" for qualifying non-profit organizations. I understand that the facility has previously applied for the PSB rebate where tax relief under B-039R was not available.
In reviewing the conditions for tax relief on the purchase of goods off a reserve, it is necessary for an incorporated band-empowered entity (like the facility), to provide a signed certificate to the vendor as outlined in B-039R. In practice, a certificate is not needed for each purchase as long as one is kept on file by the vendor and the purchaser specifies that it applies to similar purchases over a specified time period (e.g. 3 months). As well, the vendor must keep documentation to show that it or its agent delivered the goods to a reserve.
There are no specific documentary requirements with respect to proof of delivery of property, as it is a question of fact and auditors will accept as evidence various documents. If the vendor delivers the property to a reserve, an indication on the invoice and certain internal documentation would normally be acceptable as proof of delivery. Acceptable evidence may include the driver's log information, expense reports (e.g. fuel purchases), disbursement records relating to the delivery, and signature of the Indian purchaser or the Indian band's representative attesting to receipt of the property on a reserve.
Where the property is delivered to a reserve by the vendor's agent, the documentary evidence retained by the vendor may include such records as a waybill showing a reserve address and signature of the purchaser accepting delivery on a reserve and an invoice from the agent for delivery services provided.
It should be noted that whether or not a vendor agrees to deliver the goods or have the goods delivered is a business matter between the vendor and the purchaser. The vendor is under no legal obligation under the ETA to deliver the goods. If a vendor does not wish to meet the delivery requirements regarding off-reserve sales to an Indian band or band-empowered entity, tax must be charged and there is no code 1 rebate available for the purchaser.
The above comments are not intended to deal with the current challenge of sending documents to support a code 1 general rebate application. They were intended to provide some guidance so that in the future the facility and its suppliers will be better able to understand the requirements under B-039R. It is hoped that this information will help facilitate matters with your suppliers so that tax will not be charged where the conditions of B-039R are met. In this manner, the facility will not have the administrative burden of filing code 1 general rebate applications except in rare circumstances.
XXXXX
The authority to provide a mechanism to recover amounts paid in error as tax is found under section 261 of the ETA. The CRA has provided a lot of material on its website to help suppliers fulfill their obligations as registrants under the ETA. The CRA also has telephone lines dedicated to assist clients in obtaining information on the GST. Furthermore, vendors and purchasers are able to obtain additional guidance by requesting written interpretations and rulings.
In the future the CRA will not undertake to make visits to the facility to review supporting documents for code 1 rebates. The facility can help ensure that tax is not incorrectly charged by providing the certification as specified in B-039R when purchasing goods for band management activities that are to be delivered by the vendor or vendor's agent to a reserve. After presenting the certification to the vendor, in situations where the vendor or its agent delivers the goods to the reserve as per B-039R, no tax will have to be charged so it will eliminate the need to file any code 1 rebate claims.
In the rare case where there is an overpayment of an amount as tax, although there is a two year time limit within which to file a rebate application under section 261 of the ETA, it is suggested that an application be filed more frequently than every two years so as to help minimize the quantity of supporting documents to be mailed in at one time. In fact, the legislation provides for filing a code 1 general rebate application as often as once per month so that taxpayers do not have to wait too long to recover amounts charged in error by a supplier.
If the facility requires any further clarification regarding the administrative policy under B-039R, or if there are situations that arise where a particular vendor has questions or concerns regarding the CRA's administrative policy regarding the tax relief for Indian bands and band-empowered entities, Karen Bennett may be contacted at 613-954-7954.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7957. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Dave Caron
Manager, Aboriginal Affairs Unit
Public Services Bodies & Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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