3 August 2004 GST/HST Interpretation 52336 - Application of GST/HST to Delivery Charges

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 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of tangible personal property (TPP) by a registered non-resident.

Background

Our interpretation is based on the following information:

•   XXXXX is a U.S. company, headquartered in XXXXX, and is registered for the GST/HST XXXXX.

•   XXXXX is in the business of designing, manufacturing and selling visual technology, such as monitors and projectors.

•   XXXXX has sales representatives located at its Canadian branch XXXXX.

•   While the Canadian sales representatives contact customers to solicit sales of the XXXXX products, all orders are concluded at the XXXXX head office in XXXXX.

•   The products are considered TPP for GST/HST purposes.

•   XXXXX sells its products to XXXXX with the following terms of delivery:

i. Free on Board (FOB) origin (i.e., title to the products passes to XXXXX at XXXXX warehouse located in XXXXX); and

ii. Freight prepaid as the carrier bills XXXXX for the freight charges.

•   XXXXX of the Distribution Agreement between XXXXX and XXXXX states that:

XXXXX.

•   Based on directives from XXXXX, XXXXX ships (via the carrier) the products directly from its warehouse to XXXXX location in Canada.

•   XXXXX is the importer of record (i.e., XXXXX clears the products through the Canada Border Service Agency and pays the applicable duties and taxes).

Interpretation Requested

You request confirmation that the supply of the products are made outside Canada in accordance with paragraph 142(2)(a) of the Excise Tax Act (ETA) and as a result XXXXX is not required to charge GST/HST on the sales pursuant to section 165 of the ETA.

Interpretation Given

The Canada Revenue Agency's (CRA) position with respect to where a supply of TPP 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.

Specifically, for purposes of paragraphs 142(1)(a) and 142(2)(a) of the ETA, 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. "Delivered" refers to those situations where delivery of the TPP under the applicable law of the sale of goods is effected by actual delivery, while "made available" refers to those situations where delivery of the TPP under the applicable law of the sale of goods is effected by constructive delivery (i.e., actual physical possession of the TPP is not transferred to the recipient of the supply yet is recognized as having been intended by the parties and as sufficient in law).

In any given case, the place where TPP is delivered or made available may be determined by reference to the place where it is considered to have been delivered under the law of the sale of goods applicable in that case. Generally, the place where the TPP is delivered or made available can be determined by reference to the terms of the contract of sale.

For purposes of the GST/HST, where a contract of sale for a particular supply of TPP by a non-resident registrant specifies that delivery of the TPP is to be FOB the vendor's premises, such as in XXXXX case, the place at which the TPP is considered delivered or made available for purposes of section 142 of the ETA is the vendor's premises at which the non-resident supplier hands over the TPP to the carrier for shipment to the purchaser. Therefore, where the contract of sale uses the term "FOB vendor's warehouse in the U.S." such as the XXXXX contract does, delivery of the TPP to the purchaser is considered to take place outside Canada at its warehouse when the supplier gives the goods to the carrier for shipment to the purchaser. The supply in this case is consequently deemed to be made outside Canada under paragraph 142(2)(a) of the ETA.

A registrant who makes a supply of a property or a service that is deemed to be made outside of Canada pursuant to subsection 142(2) of the ETA, such as XXXXX, is not required to collect the GST/HST on the consideration payable for that supply.

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) 957-7841.

Yours truly,

Dwayne Moore
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2004/07/30 — RITS 53159 — Transfer or Cancellation of a Prepaid Funeral Arrangement