Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 131103
February 2, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
HST Place of Supply Rules for Tangible Personal Property Supplied by Way of Sale
Thank you for your letter of December 15, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tangible personal property supplied by way of sale.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
You are requesting an interpretation of the application of the HST place of supply rules in a situation where:
• a supply of tangible personal property is made by way of sale,
• title to the tangible personal property that is sold transfers to the recipient of the supply at the supplier's manufacturing plant in Quebec,
• the recipient of the supply hires the carrier (i.e., the recipient negotiates with the carrier, enters into the agreement with the carrier to ship the property and the carrier bills the recipient directly),
• in some cases, the carrier drops off trailers at the supplier's plant because the recipient has a schedule of the loading date, and
• when the property is ready to be shipped, the supplier sends an e-mail to the carrier advising it of the destination to which the property is to be shipped (Ontario), the recipient's purchase order number, the date the property is to be picked up, as well as the required delivery date and time that the property is to be sent to the recipient's specific destination.
You have also requested whether our interpretation of the HST place of supply rules in the situation described above would be different if the recipient has the right to sell the property in Ontario only.
Interpretation Requested
You would like to know our interpretation of how, in the situations described above, the HST place of supply rules for supplies of tangible personal property by way of sale under paragraph 3(a) of Part II of Schedule IX to the ETA would operate. You are specifically requesting our interpretation of the possible application of the phrase "retained on behalf of", as found in paragraph 3(a), in the situations described above.
You have also requested whether our interpretation of the HST place of supply rules in the situation described above would be different if the recipient has the right to sell the property in Ontario only.
Interpretation Given
Based on the information provided, it is our view that, in both of the situations described above, the supply of the tangible personal property by way of sale would be made in the province of Quebec.
Under section 144.1 of the ETA, a supply is deemed to be made in a particular province if the supply is made in Canada and, under the rules in Schedule IX to the ETA, the supply is made in that province. Under section 1 of Part II of Schedule IX to the ETA and subject to section 3 of Part II, a supply of tangible personal property by way of sale is made in a particular province if the supplier delivers the property, or makes it available, in that province to the recipient of the supply. The application of this rule is generally based on the province in which legal delivery of the tangible personal property to the recipient occurs. As you know, paragraph 3(a) of Part II of Schedule IX to the ETA provides in part that tangible personal property is deemed to be delivered in a particular province by a supplier, and is deemed not to be delivered in any other province by the supplier, if the supplier transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to a destination in that province.
For purposes of paragraph 3(a) of Part II of Schedule IX, a supplier is considered to have "retained" a common carrier or consignee on behalf of the recipient if the supplier enters into a contractual arrangement (verbal or written) with the carrier or consignee to secure their transportation services on behalf of the recipient. A supplier that only informs a carrier or consignee of when and where the property is to be picked up and shipped does not thereby retain that carrier or consignee. In addition, for purposes of paragraph 3(a) of Part II of Schedule IX to the ETA, a supplier would only be considered to retain the services of a carrier or consignee "on behalf of the recipient" of the supply if the supplier were acting as an agent of the recipient in retaining those services.
Based on the information provided in your letter, it appears that legal delivery of the property to the recipient occurs at the supplier's manufacturing plant in Quebec. In addition, it is the recipient of the supply, not the supplier, who retained the transportation services of the carrier since it is the recipient who hired the carrier. Thus, it is our view that the phrase "retained on behalf of the recipient", as found in paragraph 3(a) of Part II of Schedule IX to the ETA, does not apply in the situations described in you letter. This includes the situation where the recipient would have the right to sell the property in Ontario only. It is also our view that the supply of the tangible personal property by way of sale would, as per section 1 of Part II of Schedule IX to the ETA, be made in Quebec since it appears that this is where the legal delivery of the property to the recipient of the supply occurs.
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 613-952-6743. 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,
Andrew Otto
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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