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
Case Number : 121991
Attention: XXXXX
XXXXX
Business Number : XXXXX
March 10, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION - Application of the HST in Ontario and British Columbia to the Air Transportation Industry
Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made in the air transportation industry. You XXXXX provided additional information by telephone on XXXXX. The additional questions regarding the HST on airport improvement fees and agency service charges that you sent on XXXXX, will be addressed separately.
The Government of Canada and the Government of Ontario have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in Ontario. The HST will come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part.
The Government of Canada and the Government of British Columbia have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in British Columbia. The HST is proposed to come into effect in British Columbia on July 1, 2010, at a rate of 12%, consisting of a 5% federal part (equivalent to the existing GST) and a 7% provincial part.
Legislation required to implement the HST in Ontario has received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. Legislation required to implement the HST in British Columbia has received Royal Assent by the Parliament of Canada. Required provincial legislation has been introduced but is still under consideration by the Legislative Assembly of British Columbia. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA). Although the Government of Canada and the Governments of Ontario and British Columbia have announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.
New place of supply rules were announced in a Backgrounder released by the Minister of Finance on February 25, 2010, entitled Place of Supply, Self-Assessment and Rebate Rules for the Harmonized Sales Tax (HST), that determine whether a supply is made in a province for purposes of determining whether the provincial component of the HST applies to a supply. GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax - Place of Supply Rules for Determining Whether a Supply is Made in a Province, (the Bulletin) released by the CRA provides further details regarding the place of supply rules. We have enclosed a copy of the Bulletin for your convenience. The new place of supply rules would, subject to legislative approval, apply to any supply made on or after May 1, 2010, and any supply made after February 25, 2010, and before May 1, 2010, if the consideration for the supply has not become due, and has not been paid, before May 1, 2010.
The following interpretation is based on these new place of supply rules and the transitional rules as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Government of Ontario on October 14, 2009, and Tax Information Notice No. 1, General Transitional Rules for British Columbia HST, released by the Government of British Columbia on October 14, 2009 (the Notices). This interpretation should not be taken as a statement by the Canada Revenue Agency (CRA) that the transitional rules for the HST in Ontario and British Columbia or the new place of supply rules will be made in their current form.
Interpretation Requested
XXXXX.
You have also asked for clarification of the language in the GST/HST Guide RC4036, GST/HST Information for the Travel and Convention Industry, concerning travel agents.
Interpretation Given
Based on the information provided, we have the following comments:
XXXXX
XXXXX focuses on HST for journeys originating in Ontario and British Columbia. As indicated previously, the Department of Finance announced new place of supply rules that determine whether a supply is made in a province for purposes of determining whether the provincial component of the HST applies to a supply. Some of the place of supply rules that relate to the travel industry are proposed to change.
Currently, a supply of a passenger transportation service that is part of a continuous journey is made in a province if, where the ticket or voucher issued in respect of the passenger transportation service included in the continuous journey that is provided first specifies the origin of the continuous journey, the origin is a place in the province and the termination, and all stopovers, in respect of the continuous journey are in Canada. No changes are proposed to this place of supply rule. Furthermore, if the origin of the continuous journey is specified in the ticket or voucher that is issued for the passenger transportation service that is provided first, but there is a termination or stopover outside Canada in respect of the continuous journey, the supply of the passenger transportation service will continue to be considered made in a non-participating province.
A supply of a passenger transportation service that is part of a continuous journey in respect of which the ticket or voucher issued in respect of the passenger transportation service included in the continuous journey that is provided first does not specify the origin of the continuous journey, is currently regarded as made in a province if the place of negotiation of the supply is in the province. It is proposed that this rule be eliminated. Instead, under the proposed rule, if there is a supply of a passenger transportation service
• that is part of a continuous journey in respect of which the ticket or voucher issued in respect of the passenger transportation service included in the continuous journey that is provided first does not specify the origin of the continuous journey, or
• that is not part of a continuous journey,
that supply will be regarded as having been made in the province in which the passenger transportation service originates.
XXXXX.
XXXXX
XXXXX.
XXXXX
XXXXX.
Please note that before determining whether a supply is subject to the transitional rules for the HST in Ontario and British Columbia, the supplier would have to determine the place of supply. The transitional rules for the proposed place of supply rules may also apply. The new place of supply rules are proposed to apply to any supply made on or after May 1, 2010, and any supply made after February 25, 2010, and before May 1, 2010, if the consideration for the supply has not become due, and has not been paid, before May 1, 2010.
The existing place of supply rules will apply to any supply made before May 2010, and any supply made after February 25, 2010, and before May 1, 2010, if the consideration for the supply has become due, or has been paid, before May 1, 2010.
Once it is determined under the place of supply rules that a supply is made in Ontario or British Columbia, the transitional rules for the HST may apply.
Under the transitional rules, the HST would not apply to consideration that becomes due or is paid without having become due, on or after May 1, 2010, for the part of a passenger transportation service that is performed on or after July 1, 2010 if the passenger transportation service is part of a continuous journey that begins before July 2010.
The HST would apply to any consideration that becomes due or is paid without having become due, on or after May 1, 2010, for a passenger transportation service that is part of a continuous journey that begins on or after July 1, 2010.
Please refer to GST/HST Info Sheet GI-054, Ontario and British Columbia: Transition to the Harmonized Sales Tax - Passenger Transportation Services, for more information on how the transitional rules will apply.
XXXXX
Generally, GST/HST applies to all passenger transportation services provided in Canada. International passenger transportation services are zero-rated. A domestic passenger transportation service may be zero-rated if it is part of a continuous journey that has an international element.
Please note that once it is determined that a supply is zero-rated, for purposes of determining the tax status of the supply, the supplier need not further consider the place of supply rules since HST does not apply to that supply.
For a continuous journey that includes air travel, as long as there is an overseas origin, destination, or stopover, all domestic passenger transportation services included in the continuous journey are zero-rated. The term "overseas" would include any place outside Canada, the United States (except Hawaii), and the islands of St. Pierre and Miquelon.
As well, where a continuous journey that includes air travel originates in the United States or the islands of St. Pierre and Miquelon, all domestic passenger transportation services in the continuous journey would be zero-rated.
XXXXX, the HST place of supply rules for passenger transportation services are proposed to change slightly. The first part of the current rule is not proposed to change. However, the place of negotiation in the second part of the current rule will no longer be a factor. If there is a passenger transportation service where the origin is not specified, this factor will be replaced by a rule that is based on whether the non-specified origin of the passenger transportation service is in the province.
XXXXX; GST does not apply to the airport improvement fee for airports in Nova Scotia, New Brunswick, or Newfoundland and Labrador. In other words, the HST would apply to the airport improvement fee for airports in Ontario or British Columbia, and in Nova Scotia, New Brunswick, or Newfoundland and Labrador.
XXXXX
XXXXX. However, flight passes are generally considered supplies of intangible personal property for GST/HST purposes. Although the end result will be the same for some flight passes, this will not always be the case.
Furthermore, XXXXX, one of the conditions of the place of supply rule for passenger transportation services is that the termination, and all stopovers, in respect of the continuous journey are in Canada. XXXXX, if there is a stopover or termination outside Canada, the supply will be considered made in a non-participating province.
The proposed place of supply rules for intangible personal property relating to services, explained in Part IV of Section 4 of the Bulletin, would apply to flight passes with a specified routing. Specifically, the place of supply of the intangible personal property would be based on the province in which the related passenger transportation services would be deemed to be supplied based on the place of supply rule for passenger transportation services XXXXX.
Flight passes with a non-specified routing that would always take place within the same province would also be subject to the place of supply rules for intangible personal property relating to services, while all other flight passes with a non-specified routing would be subject to the proposed general place of supply rules for intangible personal property explained in Part I of Section 4 of the Bulletin. Generally, under the proposed general place of supply rules for supplies of intangible personal property:
• Supplies of intangible personal property that can be used in Canada that can only be used primarily (more than 50%) in the participating provinces will be deemed to be made in a participating province and subject to HST.
• Supplies of intangible personal property that can be used in Canada that can only be used primarily (more than 50%) outside the participating provinces will be deemed to be made in a non-participating province and subject to GST.
• The place of supply for supplies of intangible personal property that can be used in Canada that can be used other than only primarily in the participating provinces and other than only primarily outside the participating provinces will depend on a number of additional factors.
Although an origin is not specified, a flight pass with a non-specified routing that would always take place within the same province (see Examples 65 and 68 of the Bulletin) would be subject to the place of supply rule for intangible personal property relating to services. Flight passes with non-specified routings that are not determined to be made in a province based on this rule would be subject to the proposed general place of supply rules for intangible personal property. XXXXX:
• Rule 1 on page 14 of the Bulletin (i.e., for consideration of $300 or less, etc.) such as illustrated in Examples 26 to 29 on page 14 of the Bulletin;
• Rule 2 on page 14 of the Bulletin such as illustrated in Example 40 on page 17; or
• Rule 3 on page 17 of the Bulletin such as illustrated in Examples 44 and 45 on page 18.
The HST would generally apply to any consideration that becomes due, or is paid without having become due, on or after May 1, 2010, for a transportation pass that entitles an individual to passenger transportation services during a certain period (hereafter the "pass period") to the extent that either the pass period begins on or after July 1, 2010 or:
• the pass period begins before July 2010 and ends after July 2010, and
• the consideration is attributable to any part of the pass period on or after July 1, 2010.
The HST would not apply if the pass period begins before July 2010 and ends before August 2010.
Please refer to GST/HST Info Sheet GI-055, Ontario and British Columbia: Transition to the Harmonized Sales Tax - Transportation Passes, for more information on how the transitional rules will apply.
XXXXX
XXXXX.
The transitional rules are generally based on the earlier of when consideration for a supply becomes due and when consideration is paid without having become due. Consideration for a supply becomes due on the earliest of:
• the date of an invoice for that consideration for the supply;
• the day the supplier first issues that invoice for the consideration;
• if there is an undue delay in issuing that invoice, the day the supplier would have issued the invoice; and
• the day the customer is required to pay that consideration under a written agreement.
Consideration is paid without having become due when a recipient pays the consideration for a supply:
• before the date of the invoice, or before a supplier issues, or would have issued, the invoice; or
• before the customer is required to pay the consideration under a written agreement and no invoice has been issued.
Sometimes, more than one amount becomes due or is paid without having become due. This could happen when, for example, a supplier issues more than one invoice or when the customer is required to make more than one payment under a written agreement. In this case, for each amount, the supplier must determine whether GST or HST applies. The supplier cannot, for example, just apply the HST on the final amount or on the total consideration payable for the supply.
XXXXX.
XXXXX
XXXXX.
XXXXX
XXXXX. Please note that the transitional rules for returns and exchanges in the Notices only apply to supplies of tangible personal property.
We are assuming XXXXX that the consideration for the passenger transportation service becomes due at the time the ticket is issued. At the time that a ticket is presented in exchange for a different passenger transportation service, the transitional rules would apply to determine whether the new supply is subject to GST or HST. The tax status of the original passenger transportation service is not relevant. If the new ticket is issued before May 2010, then GST would apply. If the new ticket is issued on or after May 1, 2010, for passenger transportation services to be provided on or after July 1, 2010, then HST would apply to the amount charged on the ticket for these services provided that the supply is not part of a continuous journey that begins before July 1, 2010.
XXXXX.
XXXXX
XXXXX, the transitional rules for returns and exchanges in the Notices only apply to supplies of tangible personal property.
It is not clear XXXXX whether the passenger transportation services that were originally paid for would still be supplied as originally requested. If these supplies are being changed (e.g., the flight from Ottawa to Calgary is changed to another day or time to accommodate the added stopover in Toronto), then all or a part of all the passenger transportation services on the new ticket, not just the added ones, could be subject to HST.
XXXXX
XXXXX. When an airline ticket is presented for a refund, it is the tax actually paid by the customer (whether GST or HST) that would be refunded if all of the conditions for providing a refund are met.
We understand that a refund exchange is when an airline accepts a ticket in exchange for one with a different, less expensive itinerary, and the difference in the cost is refunded to the customer. As a refund is provided for the first supply then, as noted above, it is the actual tax paid by the customer (GST or HST) that would be refunded, assuming the conditions for providing a refund are met.
XXXXX, the transitional rules would apply to determine whether the new passenger transportation service in the refund exchange is subject to GST or HST based on when the consideration becomes due or is paid without having become due. The tax status of the original passenger transportation service is not relevant. Again, we are assuming in this section that the consideration for the passenger transportation service becomes due at the time the ticket is issued. If the new ticket is issued before May 2010, and the consideration for the passenger transportation service becomes due at the time the ticket is issued, then GST would apply. If the new ticket is issued on or after May 1, 2010, for passenger transportation services to be provided on or after July 1, 2010, then HST would apply to the amount charged on the ticket for these services provided that the supply is not part of a continuous journey that begins before July 1, 2010.
XXXXX
Under the current place of supply rule, a supply made by a supplier of a passenger transportation service of a service of issuing, delivering, amending, replacing or cancelling a ticket, voucher or reservation for the passenger transportation service is made in the same province in which the supply of the passenger transportation service would, if it were completed in accordance with the agreement for that supply, be made. No changes are proposed to this place of supply rule.
The cancellation fee XXXXX would be subject to HST at a rate of 12%. The place of supply and application of HST to the cancellation fee is not based on whether the passenger transportation was subject to HST, but rather the province in which the passenger transportation would have been deemed supplied (under the place of supply rule that is currently in effect). The supply of the passenger transportation would have been deemed made in British Columbia under the current rule. The separate supply of the service for which the cancellation fee is charged is therefore also deemed to be made in British Columbia. It is therefore subject to HST at a rate of 12% because this separate supply is made in October 2010.
XXXXX
A supply by a person of a service of issuing, delivering, amending, replacing or cancelling a ticket, voucher or reservation for a zero-rated passenger transportation service is also zero-rated if the person that is providing this service is also the person that supplied the passenger transportation service.
Please note that once it is determined that a supply is zero-rated, for purposes of determining the tax status of the supply, the supplier need not further consider the place of supply rules since HST does not apply to that supply.
XXXXX. As with the zero-rating provision, the person that is providing this service must be the person that supplied the passenger transportation service. XXXXX.
XXXXX. It would be more technically accurate to indicate that it will be subject to tax based on the province in which the related passenger transportation service is supplied. XXXXX, this distinction is particularly important when the transportation is entirely domestic.
The rule is the same for such a service in respect of a passenger transportation service when no air transportation is involved. XXXXX.
XXXXX
XXXXX.
We are assuming that the travel agency XXXXX is acting as agent in making a supply of a tour package to the customer on behalf of the supplier of the tour package. We are further assuming that the agency service charge is an amount charged by the travel agency to the customer as consideration for services provided by the travel agency to the customer.
A tour package means a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price.
The first supplier of a tour package must prorate the selling price of a tour package into the non-taxable portion, the provincially taxable portions, and the non-provincially taxable portion to determine the amount of the GST/HST that must be charged. The all-inclusive selling price of the tour package would be prorated to determine the consideration for each portion. The non-taxable portion would be zero-rated, the provincially taxable portions would be subject to HST at the applicable rates, and the non-provincially taxable portion would be subject to GST. Please refer to GST/HST Memorandum 27.1, Calculating the GST/HST on Tour Packages, for more information on tour packages, and how to prorate the selling price of a tour package to determine the consideration for these portions.
The place of supply rules would be applied to each property and service included in the tour package as if it were supplied separately, to determine whether the property or service would be included in the provincially taxable portions and subject to HST at the applicable rates.
Once it is determined under the place of supply rules that a property or service would be considered to be supplied in Ontario or British Columbia if it were supplied separately, the transitional rules for the HST may apply. If the transitional rules apply, they would be applied to each property and service included in the tour package as if it were supplied separately, to determine whether the property or service would be included in the provincially taxable portions and subject to HST at the applicable rates.
The agency service charge is not part of the consideration for the tour package, and is not subject to these rules. This amount is consideration for a supply of a service provided by the travel agency to the customer, and would be subject to the place of supply rules for services. Please see the comments XXXXX below for an explanation of these rules.
The application of the place of supply rules and the transitional rules depend on when the tour package is supplied, and when the consideration for the supply becomes due or is paid. XXXXX.
Generally, if the consideration for the tour package becomes due, or is paid without having become due, before May 2010, the property and services included in the tour package that would be considered to be supplied in Ontario or British Columbia if supplied separately would be part of the non-provincially taxable portion of the tour package and would be subject to GST.
Furthermore, generally if the consideration for the tour package becomes due, or is paid without having become due, on or after July 1, 2010, the property and services included in the tour package that would be considered to be supplied in Ontario or British Columbia on or after July 1, 2010 if supplied separately, would be part of the provincially taxable portion of the tour package and would be subject to HST.
Assume XXXXX: On May 15, 2010, a travel agency in Ontario offers a XXXXX tour package to XXXXX, Ontario which includes a roundtrip flight from XXXXX, Ontario to XXXXX on June 30, 2010, ground transportation to and from XXXXX, sightseeing and accommodation in XXXXX, and XXXXX meals a day. The customer pays $XXXXX for the tour package and an agency service charge of $XXXXX.
In this example, the flight would form part of the non-provincially taxable portion of the tour package, since the continuous journey began before July 1, 2010. Depending on the facts, the ground transportation and sightseeing may form part of that continuous journey, and would also be part of the non-provincially taxable portion of the tour package.
For GST/HST purposes, a supply of accommodation is considered to be a supply of real property, which in this case is considered to be a supply by way of licence. Supplies of accommodation by way of lease, licence or similar arrangement are treated as a series of separate supplies for each period (referred to as a "lease interval") to which a particular payment is attributable. Generally, the HST will apply to any lease/licence payment that becomes due or is paid without becoming due during the period after April 2010 and before July 2010, to the extent that the payment is attributable to a lease interval, or any part of a lease interval, that begins on or after July 1, 2010. However, the HST will not apply to a payment for a lease interval that begins before July 2010 and ends before July 31, 2010. Assuming that each night of accommodation is a separate lease interval, the accommodation provided on the night of June 30, 2010 would form part of the non-provincially taxable portion because the lease interval begins before July 2010 and ends before July 31, 2010. The accommodation provided for the other nights would form part of the provincially taxable portion of the tour package.
The meals provided on June 30, 2010 would form part of the non-provincially taxable portion, while the meals provided on or after July 1, 2010 would form part of the provincially taxable portion of the tour package.
The travel agency would have to prorate the cost of the property and services purchased to create the tour package into the provincially taxable portion and the non-provincially taxable portion to determine the portion of the selling price that is the consideration for each portion of the tour package. The consideration for the provincially taxable portion would be subject to HST at 13% and the non-provincially taxable portion would be subject to GST at 5%.
More information on how the transitional rules will apply to tour packages will be available in a GST/HST Info Sheet to be released in the near future.
The agency service charge is consideration for a supply of a service provided by the travel agency, and in this example, if the address of the customer is in Ontario, the supply would be made in Ontario under Rule 1 described XXXXX below. GST would apply, since the supply of the service would be made before July 1, 2010.
XXXXX.
XXXXX
Commissions paid to travel agencies by travel suppliers, including airlines where applicable, are subject to GST or HST based on the proposed rules explained below unless the transaction is zero-rated or the supplier is not a GST/HST registrant.
A supply to a person of a service of acting as an agent is zero-rated when the supplier is acting as agent on behalf of that person in making a supply of a zero-rated passenger transportation service or in making a supply of a service on behalf of that person of issuing, delivering, amending, replacing, or cancelling a ticket or reservation for a zero-rated passenger transportation service.
The determination of the place of supply of the services XXXXX would be based on the proposed general place of supply rules for services that are explained beginning on page 25 of the Bulletin and that are generally based on the address of the recipient of the supply of the service that is obtained by the supplier. XXXXX. (Note: Rule 1 would likely apply in most cases to a travel agency's services provided the address of the recipient is in Canada).
Rule 1
The supply of a service is proposed to be made in a province:
• if in the normal course of business the supplier of a service obtains an address of the recipient that is located in the province and is the home or business address in Canada of the recipient that is most closely connected with the supply, or
• if the supplier does not obtain a home or business address in Canada of the recipient, any other address of the recipient that is located in the province and is most closely connected with the supply.
Rule 2
If Rule 1 does not deem the supply of the service to be made in a province and the Canadian element of the service is performed primarily (more than 50%) in the participating provinces, the supply is proposed to be deemed made in the participating province in which the greatest proportion of the Canadian element of the service that is performed in the participating provinces is performed.
Rule 3
If Rule 2 does not deem the supply of a service to be made in a participating province because the service is performed equally in two or more participating provinces, the service is proposed to be deemed to be supplied in the participating province among those provinces that has the highest rate for the provincial component of the HST. If two or more of the participating provinces in this case have the same rate for the provincial component, HST will be required to be charged by the supplier using that particular rate.
Rule 4
If Rule 1 does not deem the supply of the service to be made in a province and the Canadian element of the service is performed otherwise than primarily (50% or less) in the participating provinces, the supply is proposed to be made in a non-participating province.
XXXXX:
XXXXX.
XXXXX.
XXXXX.
XXXXX
XXXXX.
As noted in XXXXX, a domestic passenger transportation service may be zero-rated if it is part of a continuous journey that has an international element.
A continuous journey of an individual or a group of individuals means the set of all passenger transportation services provided to the individual or group for which a single ticket or voucher in respect of all the services is issued. A continuous journey also exists where two or more tickets or vouchers are issued in respect of two or more legs of a single journey of the individual or group on which there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, and all the tickets or vouchers are issued by the same supplier or by two or more suppliers through one agent acting on behalf of all the suppliers. This is provided that either:
• all such tickets are supplied at the same time and evidence satisfactory to the Minister is maintained by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, or
• the tickets or vouchers are issued at different times and evidence satisfactory to the Minister is submitted by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued.
The origin of a continuous journey means the place where the passenger transportation service that is included in the continuous journey and that is first provided begins.
The termination of a continuous journey means the place where the passenger transportation service that is included in the continuous journey and that is last provided ends.
For purposes of the HST place of supply rules, the leg of a journey on a conveyance means a part of the journey that begins where passengers embark or disembark the conveyance or where it is stopped to allow for its servicing or refueling and ends where it is next stopped for any of those purposes.
A stopover, in respect of a continuous journey of an individual or a group of individuals which includes air transportation, means any place at which the individual or group embarks or disembarks a conveyance used in the provision of a passenger transportation service included in the continuous journey, for any reason other than transferring to another conveyance or to allow for servicing or refueling of the conveyance.
A stop between two legs of a journey that is 24 hours or less is not considered to be a stopover and will not affect whether the legs are part of a continuous journey. A stop of more than 24 hours between two legs of a journey will generally be considered a stopover where two or more tickets or vouchers are issued for the legs of the journey. However, if the supplier or agent can prove that a stop of more than 24 hours is for servicing or refuelling the conveyance, or for the individual to transfer to another conveyance, the stop will not be considered a stopover and the continuous journey status will be unaffected.
The conditions under which a passenger transportation service that is part of a continuous journey is zero-rated differ depending on whether or not the continuous journey includes air travel.
A passenger transportation service is zero-rated if it is provided to an individual (or group of individuals) as part of a continuous journey that includes air travel and any one of the following applies:
(a) the origin or termination of the continuous journey or any stopover during the continuous journey is outside the taxation area (the "taxation area" means Canada, the United States (except Hawaii), and the islands of St. Pierre and Miquelon); or
(b) the origin, termination, and all stopovers during the continuous journey are outside Canada; or
(c) the origin of the continuous journey is within the taxation area, but outside Canada; or
(d) all places where the individual or group embarks or disembarks an aircraft are outside Canada and the origin or termination of the continuous journey, or any stopover during that journey, is outside Canada.
A round trip to or from Canada with only one stopover is still a continuous journey, and any zero-rated passenger transportation services will remain zero-rated. However, if there is more than one stopover in a round trip, the journey may no longer be considered a continuous journey and the passenger transportation service may no longer be zero-rated.
XXXXX
XXXXX. However, please note that as explained in Part II of Section 6 of the Bulletin, the place of supply rule for supplies of tangible personal property and services supplied during passenger transportation services is proposed to change.
Generally, under the current place of supply rule, if a supply by way of sale of tangible personal property or a service (other than a passenger transportation service) is made to an individual on board a conveyance in the course of a business of supplying passenger transportation services and physical possession of the property is transferred to the individual, or the service is wholly performed, on board the conveyance during any leg of the journey that begins in any participating province and ends in any participating province, the supply is made in the participating province in which that leg of the journey begins.
A change is proposed to the current place of supply rule. If a supply by way of sale of tangible personal property or a service (other than a passenger transportation service) is made to an individual on board a conveyance in the course of a business of supplying passenger transportation services and physical possession of the property is transferred to the individual, or the service is wholly performed, on board the conveyance during any leg of a journey that begins in any province and ends in any province, the supply of the property or service is proposed to be made in the province in which that leg of the journey begins.
XXXXX
There are no changes proposed to the place of supply rules regarding the supervision of an unaccompanied minor and the transportation of a passenger's baggage. However, please note that for these supplies, if the supplier of the passenger transportation service is different from the carrier charging these amounts, the carrier has to consider separately the tax status of each of these supplies. That is, the supply does not necessarily have the same tax status as the passenger transportation service if a different person is making the supply of the passenger transportation service.
With respect to a prepaid fee for on-board meals, XXXXX, the place of supply rule for supplies of tangible personal property and services supplied during passenger transportation services is proposed to change.
We do not have enough information to comment on how GST/HST would apply to a prepaid fee for extra frequent flyer mileage.
Finally, XXXXX there is a place of supply rule for air navigation services as explained in Part XII of Section 5 of the Bulletin.
GST/HST Guide RC4036
You indicated that one topic XXXXX was government policy referring to "commissions" (but possibly understood to mean "service charges") assessed by a travel agent in an HST province to or on behalf of a person outside of Canada or for a sale made outside of Canada to them. In this regard, you asked for clarification of the following paragraph in the GST/HST Guide RC4036, GST/HST Information for the Travel and Convention Industry, concerning travel agents:
Also, if you are a travel agency acting as an agent for a non-resident person, your service is zero-rated when:
• the service relates to a sale made outside Canada by or to the non-resident; or
• the service relates to a zero-rated sale of exported goods or services to the non-resident.
You asked us to clarify if this applied to a commission paid by a supplier to a travel agent or to a service charge levied by a travel agent on a customer.
This paragraph indicates that the service provided by the travel agency of acting as agent is zero-rated under the specified conditions; it would be the commission paid by the non-resident supplier as consideration for those services that would be zero-rated.
Please note that the paragraph preceding the one you indicated in this section states:
Your service is zero-rated when you act as an agent for a person providing passenger transportation services by:
• selling a zero-rated passenger transportation service for them; or
• issuing, delivering, amending, replacing, or cancelling a ticket or reservation for a zero-rated passenger transportation service on their behalf.
This paragraph would be more relevant to the scenarios XXXXX.
The foregoing comments represent our general views with respect to the transitional rules as announced in the Notices released by the Governments of Ontario and British Columbia on October 14, 2009, and the provincial place of supply rules released by the Department of Finance on February 25, 2010, as they relate to the subject matter of your request. Any change to the wording of the transitional rules or the provincial place of supply rules or any regulations regarding the HST in Ontario and British Columbia, if made, could have an effect on the interpretation provided herein. 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 CRA with respect to a particular situation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-7909. 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,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Enc.: GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax - Place of Supply Rules for Determining Whether a Supply is Made in a Province
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