30 July 2004 GST/HST Interpretation 53159 - Place of Supply of Goods Supplied By Way of Sale

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.

Dear XXXXX:

Thank you for your letter XXXXX with various documents attached concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transfer or cancellation of a prepaid funeral arrangement. Your request has been transferred from the XXXXX GST/HST Rulings Centre to the Services and Intangibles Unit of the General Operations and Border Issues Division for response.

Our understanding of the situation is as follows:

•   You entered into a prepaid funeral agreement XXXXX with XXXXX (the supplier) XXXXX to provide funeral services in the event of your father's death.

•   For the goods and services listed in the agreement, you paid $XXXXX plus HST of $XXXXX to the supplier. All money received by the supplier under a prearranged funeral plan, together with any interest earned thereon, is required to be held in trust in accordance with the XXXXX. The $XXXXX and accrued interest are currently in a trust fund held at XXXXX.

•   In a letter XXXXX from the supplier, you were informed that the supplier is no longer conducting a funeral business.

•   You requested a full refund of the consideration, HST and interest from the supplier in your letter XXXXX. The supplier did not respond to your request.

•   By letter XXXXX, the XXXXX confirmed that the supplier has ceased operations. As a result, the XXXXX has taken charge of the trust account established in respect of money paid in regard to prearranged funeral contracts. You have been informed that you have two choices: firstly, you could have the trust funds including the accumulated interest (less a XXXXX% administration fee), transferred to another funeral home's trust account or secondly, you could have the trust funds including the accumulated interest, (less a XXXXX% administration fee) refunded to you.

Interpretation Requested

You wish to know how to obtain a refund of the HST that you paid to the supplier for the prearranged funeral services.

Interpretation Given

We have reviewed the legislative provisions in the Excise Tax Act and unfortunately there are no provisions allowing us to give you an HST refund. We regret that we could not provide a more favourable response to you.

However, should you choose to transfer your prepaid funeral arrangement to another funeral home, no additional HST will be payable with respect to the price for funeral services specified in your original contract for those prepaid funeral arrangements. This is provided that the following conditions have been met:

•   the contributions were placed in a trust fund pursuant to provincial legislation or the terms of the contract itself;

•   the funeral home that was the original party to the agreement, has, since its registration for the GST/HST, accounted for the HST in respect of the contributions at the time the arrangements were entered into;

•   the HST has not been refunded, credited, or rebated to the purchaser; and

•   the funeral home has not subsequently claimed an input tax credit or an adjustment for that HST in its net tax.

Please note that it is up to the new funeral home to determine if HST will be payable on the funeral services provided for under the original contract. In any event, if the original contract is amended to provide additional services or goods, HST will apply on the additional cost of those goods and/or services.

In the situation where you receive a refund from the trust and you enter into a new arrangement with a funeral home, HST is payable on the amount payable for the goods and/or services under the new contract. If this contract is a prepaid funeral arrangement where the funds are held in trust, the contributions made under the arrangement will include an estimate of the eventual HST that will apply when amounts are withdrawn from the trust and are paid or become due, whichever is earlier, to the funeral home. This generally occurs at the time the funeral services are provided by the funeral home.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-9700.

Yours truly,

Michèle Routhier, CMA
Technical Analyst
Services and Intangibles Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

2004/08/19 — RITS 53344 — Tax Status of Services Provided by a Sales Representative