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: 132350
October 31, 2011
Dear [Client]:
Subject:
GST/HST RULING
Place of Supply of Services
Thank you for your letter of January 27, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by and to [...] [the Corporation].
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.
Our understanding of the facts as follows is based on [...].
Statement of Facts
1. [...] [the Corporation] is a corporation that is registered for purposes of the GST/HST
(BN [...]).
2. [The Corporation] is a personnel services company, the function of which you have described as matching people with companies in the form of temporary staffing, permanent placement and the recruitment [...].
3. [The Corporation] has national contracts with a number of clients including [...] ("[...] [Client 1]"); [....] ("[...] [Client 2]"); [...] ("[...] [Client 3]"); [....] ("[...] Client 4]"); and ("[...] [Client 5]") for the provision of services that are performed in various locations throughout Canada.
4. [Client 1] contracts with [the Corporation] for services provided by independent contractors who will provide the services at the premises of [Client 1's] clients. [The Corporation] enters into separate client agreements with [Client 1] for each individual contractor that is assigned to provide services to [Client 1]. The only address that is included in the client agreement is the physical location of [Client 1's] client where the independent contractor will be located in the course of performing the service.
5. [The Corporation] obtains in the ordinary course of its business, an address of [Client 1] in [...] [Participating Province X] that it uses for submitting invoices.
6. [The Corporation] obtains other addresses in Canada of [Client 1] in the ordinary course of its business. Its account managers may obtain the business address of the hiring managers, or procurement or human resources, depending on who they deal with. Its account receivable team may also obtain business addresses from individuals who they are in direct contact with for collections purposes. In these circumstances, the additional addresses are not obtained under an agreement for the supply that hires [the Corporation].
7. [The Corporation] and [Client 3] have entered into [...] [Agreement 3] (a copy this agreement was submitted for our consideration), the preamble of which describes the agreement as establishing [...] under which [the Corporation] will provide the deliverables and services described in Statement of Works (SOWs) and/or Work Authorizations (WAs).
8. A business address of [Client 3] in [Participating Province X] is included in [Agreement 3]. The address appears after the signature block in the agreement.
9. Where [Client 3] engages [the Corporation] through the use of a SOW (a copy of a [...] Statement of Work was submitted for our consideration), details and terms specific to that engagement are set out in the SOW. However as specified in the preamble of the [...] Statement of Work and confirmed in discussions with [...], the SOW adopts and incorporates by reference the terms and conditions of [Agreement 3].
10. An address for [Client 3] in [Participating Province X] is provided in [...] the SOW. This address which is identified as the address for submitting notices, requests, demands and determinations under the SOW, is the same address that appears after the signature block in [Agreement 3].
11. [Client 3] can also engage [the Corporation] pursuant to the terms of [Agreement 3] by issuing a Purchase Order ("PO") [...].
12. There are two addresses identified on the PO; specifically [...] which is the work location in Canada where the independent contractor will physically be located (e.g. [...] in the copy of the PO submitted for our consideration [it] is in [...] [City 1, Non-participating Province X]) and a [...] billing address which may be outside Canada.
13. In the ordinary course of its business [the Corporation] may acquire other addresses of [Client 3]. Its account managers may obtain the business address of the hiring managers, or procurement or human resources, depending on who they deal with. Its account receivable team may also obtain business addresses from individuals who they are in direct contact with for collections purposes. In these circumstances, the additional addresses are not obtained under an agreement for the supply that hires [the Corporation].
14. [Client 2] and [the Corporation] have entered into [...] [Agreement 2] which provides the general framework for work undertaken by [the Corporation] or the independent contractors hired by [the Corporation]. However, pursuant to the terms of the agreement an obligation vis-à-vis [Client 2] and [the Corporation] is not established until the execution of a statement of work. [...]
15. [Agreement 2] contains a business address of [Client 2] in [...] [Participating Province A]. It is the address where notices and communications required or permitted pursuant to the agreement must be delivered.
16. A copy of a Statement of Work which contains information specific to each engagement (e.g., billing rates, start dates, end dates, and work location) and which is made pursuant to [Agreement 2] contains an address for notices for scope of work and an address for administration/invoicing was submitted for our consideration. However, engagement of [the Corporation] by [Client 2] is not ordinarily done by use of a statement of work.
17. Normally, an engagement of [the Corporation] by [Client 2] under the terms of [Agreement 2] is done by way of a Work Order ("WO"). The WO is [...] that [the Corporation] is required to use for dealings with [Client 2]. The WO issued by [Client 2] contains details such as the identity of the contract position, hours of work and compensation amounts. The WO that was submitted with [Agreement 2] for our consideration contains an address of [Client 2] in [...] [Non-participating Province Y].
18. [The Corporation] may acquire other addresses in Canada of [Client 2] in the ordinary course of business. Its account managers may obtain the business address of the hiring managers, or procurement or human resources, depending on who they deal with. Its account receivable team may also obtain business addresses from individuals who they are in direct contact with for collections purposes. In these circumstances, the additional addresses are not obtained under an agreement for the supply that hires [the Corporation].
19. [The Corporation] has [...] [Agreement 4] with [Client 4] for the provision of services. The agreement specifies [...] a physical address of [Client 4] in [...] [Non-participating Province Z] for submitting notices under the terms of the agreement to [Client 4]. Similar to [Client 2], [Client 4] issues [...] to [the Corporation] [...] to engage [the Corporation] under the terms of [Agreement 4].
20. The sample WO that we have reviewed contains an address of [Client 4] that is a post office box in [...] [City 2, Non-participating Province Z].
21. [The Corporation] may acquire other addresses in Canada of [Client 4] in the ordinary course of business. Its account managers may obtain the business address of the hiring managers, or procurement or human resources, depending on who they deal with. Its account receivable team may also obtain business addresses from individuals who they are in direct contact with for collections purposes. In these circumstances, the additional addresses are not obtained under an agreement for the supply that hires [the Corporation].
22. [Client 5] and [the Corporation] have entered into [...] [Agreement 5] (a copy of the agreement was submitted for review) for services to be provided to [Client 5]. [The Corporation] will provide independent contractors who will provide services to [Client 5's] client and who will be physically located at that client's work location.
23. [Client 5] engages [the Corporation] for work under the terms of [Agreement 5] by issuing [...]. As is the case with [Client 2] and [Client 4], [the Corporation] [...].
24. In section [...] of the agreement, the address the contracting authority for [Client 5] in [...] [City 3, Participating Province X] is provided. The contracting authority is the person at [Client 5] who is responsible for management of the contract including authorizing any changes to the contract.
25. [The Corporation] may acquire other addresses in Canada of [Client 5] in the ordinary course of its business. Its account managers may obtain the business address of the hiring managers, or procurement or human resources, depending on who they deal with. Its account receivable team may also obtain business addresses from individuals who they are in direct contact with for collections purposes. In these circumstances, the additional addresses are not obtained under an agreement for the supply that hires [the Corporation].
26. [The Corporation] contracts with independent contractors to provide services to the aforementioned companies or on behalf of these companies.
27. A business address in [Participating Province X] of [the Corporation] is included in [...] the sample contractor agreement. This address is identified as the address for the submission of written notices required or permitted under the agreement.
28. In addition to the sample agreement, a copy of a Purchase Order used by [the Corporation] in its dealings with the independent contractors was also submitted for our consideration. The PO is issued to an independent contractor at the beginning of an engagement, prior to the independent contractor commencing work with [the Corporation's] client. [...]. In addition, the Purchase Order provides [...] as part of the arrangement between [the Corporation] and its client.
29. The business addresses for both [the Corporation] and the independent contractor appears on the PO. The business address for [the Corporation] that appears on the PO is the same [...] [City 4, Participating Province X] address on the agreement.
30. As clarified [...] each Independent Contractor is required to submit [...] to [the Corporation] (either approved by client prior to submission or afterwards) which is the basis for the amounts charged by [the Corporation] to its clients and which is also retained by the clients as proof of fulfillment. [The Corporation] pays the contractors and [provides] [...] (copy submitted for consideration) with its address to the contractors for their records. The address on the [...] is the same address that appears on the contract and the PO.
31. You have stated that [the Corporation] has clients [...].
32. You have stated the following as an assumption in respect of the service provided by [the Corporation] to the above clients under the agreements identified above: the services provided are not in relation to real property or tangible personal property and they do not quality as personal services, computer-related services or services in relation to a location-specific event.
Ruling Requested
1. You would like confirmation that subsection 13(1) of Division 3 of Part 1 of the New Harmonized Value-Added Tax Systems Regulations (the "Regulations") is the relevant provision to determine the place of supply of the services supplied by [the Corporation] to its clients.
2. You would like to know which address of its client obtained by [the Corporation] would be determinative in respect of the provinces in which the services supplied by [the Corporation] are made.
3. You would like confirmation that subsection 13(1) of Division 3 of Part 1of the Regulations is the relevant provision to determine the place of supply of the services supplied by independent contractors to [the Corporation].
4. You would like know which addresses provided by [the Corporation] to the independent contractors are relevant for purposes of determining the place of supply of the services provided by the contractors to [the Corporation].
5. Would the answer provided to question #4 above change if [the Corporation] included the address of its local branch office, i.e., the office the contractor is likely to communicate with in respect of the supply, in the [...] PO?
6. What is the tax treatment of services provided by the independent contractor to [the Corporation] where [the Corporation] is engaged by a client [...]?
Ruling Given
As discussed with [...], based on the information provided, we are unable to give a GST/HST Ruling with respect to each of the rulings requested. Based on the facts set out above, we provide the following rulings:
With respect to the Ruling Requested 1, subsection 13(1) of Division 3 of Part 1 of the Regulations applies for purposes of determining the place of supply of the services supplied by [the Corporation] to its clients.
With respect to Ruling Requested 2, the supply of the services made by [the Corporation] to [Client 5] is considered to be made in [Participating Province X]. The hiring address of [Client 5] obtained by [the Corporation] in the ordinary course of business is identified in [Agreement 5] as being in [Participating Province X].
With respect to Ruling Requested 3, the place of supply of a service supplied by an independent contractor to [the Corporation] will be determined by subsection 13(1) of Division 3 of Part 1 of the Regulations.
With respect to Ruling requested 6, the services supplied by independent contractors to [the Corporation] are subject to the GST/HST at the rate as determined based on the application of the place of supply rules in subsection 13(1) of Division 3 of Part 1 of the Regulations.
These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by these rulings provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
With respect to Ruling Requested 2 as it relates to the determination of the place of supply of the services supplied by [the Corporation] to [Client 1], [Client 3], [Client 2] and [Client 4], we are unable to provide a ruling. With respect to these supplies, please see Interpretation 2 below.
With respect to Ruling Requested 4, we are unable to provide a ruling. With respect to these supplies, please see Interpretation 4 below.
With respect to Ruling Requested 5, we are unable to provide a ruling. With respect to these supplies, please see Interpretation 5 below.
General
Section 3 of Part IX of Schedule IX provides that, notwithstanding any other part of Schedule IX, a supply of property or a service is made in a province if the supply is prescribed to be made in the province.
Pursuant to subsection 13(1) of Division 3 of Part 1 of the Regulations, a supply of a service is considered to be made in a province based on the home or business address in Canada of the recipient of the supply obtained by the supplier in the ordinary course of the supplier's business. Thus, in cases where the supplier obtains, in the ordinary course of its business, only one home or business address of the recipient that is located in Canada, the place of supply of the service will be deemed to be in the province where that address is located.
If the supplier obtains more than one home or business address in Canada of the recipient in the ordinary course of business of the supplier, the place of supply of the service is deemed to be in the province of the address that is most closely connected with the supply. As explained in GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax - Place of supply rules for determining whether a supply is made in a province for purposes of subsection 13(1), any address in Canada that is obtained by the supplier in the ordinary course of its business, whether included in the agreement for a particular supply or not, must be considered. The business address of the recipient in Canada that is obtained by the supplier in the ordinary course of business that is the business address of the recipient from which the supplier is hired will be considered to be the address that is most closely connected to the supply. This address of the recipient in Canada does not have to be an address obtained by the supplier in respect of every supply made to the recipient for it to be considered a relevant address obtained in the ordinary course of business of the supplier.
If a supplier does not obtain a home or business address of the recipient but, in the ordinary course of business, obtains an address or addresses (e.g., billing address) in Canada of the recipient, the place of supply of the service is deemed to be made in the province of the address that is most closely connected to the supply.
Interpretation 2
With respect to the determination of the place of supply of the services supplied by [the Corporation] to [Client 1], [Client 3], [Client 2] and [Client 4], in each of these cases multiple addresses of the recipient in Canada are obtained by [the Corporation] in the ordinary course of its business. These addresses are obtained by [the Corporation] in many ways, such as through: [...] Purchase Orders, Services Agreements [...], among others. Also, based on the information provided, in addition to the addresses noted above, [the Corporation] obtains other addresses of the recipients in Canada in the ordinary course of its business for the supplies of services it makes to [Client 1], [Client 3], [Client 2] and [Client 4]. As noted above, the business address of the recipient in Canada that is obtained by the supplier in the ordinary course of business that is the business address of the recipient from which the supplier is hired will be considered to be the address that is most closely connected to the supply. Therefore, where, one of the addresses obtained by [the Corporation] in the ordinary course of its business is the business address of the recipient from which it is hired with respect to the supply, the place of supply of that service is determined based on the province in which that address is located.
Interpretation 4
As noted above, the business address of the recipient in Canada that is obtained by the supplier in the ordinary course of business that is the business address of the recipient from which the supplier is hired with respect to the supply will be considered to be the address that is most closely connected to the supply. Therefore, the place of supply of the supply of the services made by independent contractors to [the Corporation] will be determined based on the province in which this address is located in circumstances where this address is obtained by the supplier in the ordinary course of its business.
If it is determined that an independent contractor obtains only one business address of [the Corporation] in Canada in the ordinary course of its business, whether through a particular agreement or otherwise, and that address is in [Participating Province X], the place of supply will be determined to be in [Participating Province X]. If it is determined that multiple business addresses of [the Corporation] are obtained by an independent contractor in the ordinary course of its business, the place of supply will be determined based on the address that is most closely connected with the supply.
Interpretation 5
The response in Interpretation 4 would not change should [the Corporation] modify their practices as described.
The place of supply of the services will be determined by applying the rules in subsection 13(1) of Division 3 of Part 1 of the Regulations and will be based on the business address of [the Corporation] that is obtained by the independent contractor in the ordinary course of its business that is most closely connected with the supply.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-7841. 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,
Dwayne Moore
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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