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.
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XXXXX
XXXXX
XXXXX
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October 1, 2004
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Dear XXXXX:
I am writing in reply to your letter XXXXX addressed to Chris Lewis of this office, concerning the recovery of the Goods and Services Tax (GST) that you paid to XXXXX on the purchase of XXXXX products for resale.
I understand that these products were contaminated by mould and you could not resell them to your usual customers. At the moment, these products have been abandoned in your home.
I have reviewed in detail the circumstances of your case and the legislative provisions of the Excise Tax Act. Unfortunately, there is no legislative relief available to recover by means of a rebate the GST you paid to XXXXX when you purchased the inventory of exclusive products.
I would like to outline how the legislation applies to your situation.
XXXXX must account for GST on the suggested retail price of its exclusive products sold to independent sales contractors (Contractors) like you; XXXXX charges tax when it issues the invoice for these sales. The Contractor cannot claim an input tax credit (ITC) as the amount collected on account of tax by XXXXX from the Contractor is deemed not to be tax payable by the Contractor. Similarly, the Contractor is not entitled to a rebate of the tax. The Contractor recovers the amount of the tax from a final purchaser by including the amount in the total charges to the purchaser. These legislative provisions are referred to as the Alternate Collection Method.
The Alternate Collection Method presumes that exclusive products will ultimately be sold at suggested retail prices to final purchasers. However, in some cases, the products are not actually sold at that price or are returned to XXXXX. Accordingly, under such circumstances, you as a Contractor may recover the GST from XXXXX.
For example, you may make a supply to XXXXX (i.e., by returning the exclusive products to XXXXX). In that case, a Contractor is deemed not to have supplied the product and XXXXX may deduct, in determining its GST liability, an amount equal to tax calculated on the suggested retail price of the product at the time of the original supply. Whether XXXXX pays or credits you with an amount, when you supply the exclusive product to it, is a private matter between you and XXXXX.
I trust that this explains how the legislation applies to your (situation) The Canada Revenue Agency is responsible for administering and enforcing the legislation as enacted by Parliament. Matters relating to tax policy and amendments to the Excise Tax Act, which governs the GST, are the responsibility of the Department of Finance. I am therefore forwarding a copy of this letter to Mr. Jim Daman, Director, Sales Tax Division, so that he is aware of this matter.
Thank you for bringing this matter to our attention.
Yours sincerely,
John Sitka
Director
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
2004/10/13 — RITS 54857 — Application for Designation of XXXXX as a Hospital Authority
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