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: 137972
October 11, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Place of Supply Rules for Goods Supplied by way of Sale
Thank you for your letter of August 9, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain goods supplied to [...] ([the Company]) 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.
We understand the following based on your letter.
1. [The Company] is a resident of Canada and is registered for GST/HST purposes.
2. [The Company] operates a website through which its customers can order goods and have them delivered to a Canadian address of their choice.
3. When a customer places an order through the website, [the Company] issues a purchase order to a vendor for the goods ordered.
a. In some cases, the vendor is required to ship the goods directly to the customer at its expense. In this case, the terms of delivery are destination-based. The vendor hires a carrier of its choice and pays the freight charge.
b. In other cases, the vendor contacts a carrier that is chosen and paid by [the Company] when the goods are ready for shipment in order to have the goods delivered to [the Company's] customer. [The Company] is responsible for the goods once they leave the vendor's premises.
4. [The Company] purchases goods from both GST/HST registrants and from non-resident non-registrants. In some cases, goods are shipped from outside Canada.
5. If goods are shipped from outside Canada and the terms of delivery are those described in 3(a) above, the vendor will act as the importer of record. Conversely, if goods are shipped from outside Canada and the terms of delivery are those described in 3(b) above, [the Company] will act as the importer of record.
Interpretation Requested
A GST/HST interpretation letter (case number 59999) was provided to [the Company] in June 2006 concerning, in part, the application of the GST/HST to certain goods purchased by [the Company]. In light of certain new facts provided by you, and the adoption of the HST on July 1, 2010 by Ontario and British Columbia, you would like to know whether the GST or HST applies on the purchase of certain goods by [the Company] depending on whether the vendor hires and pays the carrier or simply contacts a carrier that is hired and paid by [the Company].
Interpretation Given
Based on the information provided,
1. A taxable supply by way of sale of goods to [the Company] made by a supplier who is a GST/HST registrant is:
• made in Canada if the vendor delivers the goods or makes them available to [the Company] in Canada;
• made outside Canada if the vendor delivers the goods or makes them available to [the Company] outside Canada; and
• made in a particular province if the vendor delivers the goods or makes them available to [the Company] in that province, including situations where the goods are deemed under the ETA to be delivered in that province by the vendor.
2. A supply by way of sale of goods made in Canada to [the Company] is deemed to be made outside Canada if the vendor is a non-resident person that is not registered for GST/HST purposes and the supply is not made in the course of a business carried on in Canada.
3. A taxable (other than zero-rated) supply by way of sale of goods made in Canada to [the Company] is subject to GST at 5% when it is deemed to be made in a non-participating province, and is subject to HST at the applicable rate when it is deemed to be made in a participating province. The participating provinces are Ontario, Nova Scotia, New Brunswick, British Columbia, and Newfoundland and Labrador.
In short, the applicable place of supply rules for goods supplied by way of sale have not changed since the time of the interpretation letter that was sent to you in June of 2006.
The ETA has various rules to determine whether a supply is made in Canada. Under paragraph 142(1)(a), a supply by way of sale of tangible personal property (hereafter 'goods') is deemed to be made in Canada if the goods are, or are to be, delivered or made available in Canada to the recipient of the supply. Conversely, under paragraph 142(2)(a), a supply by way of sale of goods is deemed to be made outside Canada if the goods are, or are to be, delivered or made available to the recipient outside Canada.
These place of supply rules are based on where legal delivery of the goods occurs. The Canada Revenue Agency's (CRA) position on where a supply of goods by way of sale is considered to have been delivered or made available is set out in GST/HST Memorandum 3.3, Place of Supply, which states that the phrase "delivered or made available" has the same meaning as that assigned to the concept of "delivery" under the law of the sale of goods. In particular, "delivered" refers to those situations where delivery of the goods under the applicable law of the sale of goods is effected by actual delivery, and "made available" refers to those situations where delivery of the goods under the applicable law of the sale of goods is effected by constructive delivery (i.e., actual physical possession of the goods is not transferred to the recipient of the supply yet is recognized as having been intended by the parties and as sufficient in law).
Thus, the place where the goods is delivered or made available may be determined by reference to the place where the goods is considered to have been delivered under the law of the sale of goods applicable in that case. Generally, the place where the goods is delivered or made available can be determined by reference to the terms of the contract.
The above-mentioned place of supply rules for goods under section 142 are subject to a further place of supply rule that applies in certain circumstances involving non-resident suppliers that are not registered for GST/HST purposes. Specifically, under section 143, a supply of goods that is made in Canada is deemed to be made outside Canada if the supplier is a non-resident person that is not registered for GST/HST purposes and the supply is not made in the course of a business carried on in Canada.
If a supply of goods is determined to be made in Canada, it must then be determined if the supply is made in a participating province. Under section 144.1, a supply that is made in Canada is also considered to be made in a particular province if it is determined to be made in the province under the place of supply rules in Schedule IX. In any other case, the supply is deemed to be made in a non-participating province.
Under section 1 of Part II of Schedule IX, a supply by way of sale of goods is made in a particular province if the supplier delivers the goods or makes them available in that province to the recipient of the supply. However, this rule is subject to the 'deemed delivery' rule in section 3 of Part II of Schedule IX. The deemed delivery rule in section 3 provides that, for HST purposes, goods are deemed to be delivered in a particular province by a supplier and are deemed not to be delivered in any other province if the supplier:
• ships the property to a destination in the particular province that is specified in the contract for carriage of the property or 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 such a destination; or
• sends the property by mail or courier to an address in the particular province.
Therefore, if [the Company] purchases goods that are delivered or made available to [the Company] outside Canada, the supply of the goods is made outside Canada (and GST/HST would therefore not apply to it). This includes situations where the goods are delivered or made available to [the Company] at the vendor's premises located outside Canada and [the Company] hires a common carrier to pick up the goods at the premises. In addition, if [the Company] purchases goods that are delivered or made available to [the Company] in Canada from a vendor that is not resident in Canada and is not registered for GST/HST purposes, and the supply is not made in the course of a business carried on in Canada, the supply would be deemed to be made outside Canada.
Conversely, if [the Company] purchases goods that are delivered or made available to [the Company] in Canada from a vendor that is a registrant for GST/HST purposes (whether the vendor is resident in Canada or not) in order to re-sell them to a customer in Canada, and
a) the vendor ships the goods to the customer at a place in Canada, then the supply by the vendor to [the Company] would be deemed to be made in the province where goods are shipped to the customer.
b) the vendor hires a courier to ship the goods, or the vendor mails the goods, to the customer at a place in Canada, then the supply by the vendor to [the Company] would be deemed to be made in the province where the goods are shipped or mailed to the customer.
c) the vendor retains a common carrier on behalf of [the Company] to ship the goods to the customer at a place in Canada, then the supply by the vendor to [the Company] would be deemed to be made in the province where the goods are shipped to the customer. A vendor would be considered to have "retained" a carrier if the vendor enters into a contractual arrangement with the carrier to secure the carrier's services. A vendor that only informs a carrier of when and where the goods are to be picked up and shipped does not thereby retain the carrier. In addition, a vendor would only be considered to retain the services of a carrier "on behalf of" the recipient of the supply if the vendor were acting as an agent of the recipient in retaining those services.
d) [The Company] hires a common carrier to pick up the goods at the vendor's premises in Canada and ship them to the customer, then the supply by the vendor to [the Company] would be made in the province where the vendor's premises are located (including situations where the vendor contacts the carrier hired by [the Company] in order to tell the carrier when and where to pick up the goods).
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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