8 July 2005 GST/HST Ruling 54470 - XXXXX Association affinity programs

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 attachments, concerning the requirements to register for the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) ^[xxiii]*.

The CRA's policy with respect to the issuance of GST/HST rulings is outlined in the enclosed document entitled GST Memorandum 1.4 Goods and Services Tax Rulings.

Background

We understand that XXXXX is incorporated in the United States with offices in XXXXX. It is a non-resident of Canada and is not registered for the GST/HST. It does not have a permanent establishment in Canada.

XXXXX provides production crew payroll, search and booking services to its clients, which include XXXXX, among others.

XXXXX Service is aimed at employers who wish to outsource payroll and other administrative employee-related tasks (e.g., employee orientation; information capture; distribution of wages, taxes; workers compensation management; records, reports). XXXXX website includes the following in describing these services:

XXXXX

XXXXX

1. XXXXX

2. XXXXX

3. XXXXX

4. XXXXX

5. XXXXX.

In XXXXX, XXXXX was involved with a client who conducted a XXXXX seminar/workshop in XXXXX, on the topic of XXXXX. XXXXX supplied payroll and other administrative services with respect to the staff involved in this project. However, XXXXX did not become the employer of these individuals and XXXXX employees were not directly involved in providing the services. Rather, the payroll and administrative services for which XXXXX was retained were sub-contracted by XXXXX to XXXXX. XXXXX is a Canadian company whose mandate and services are similar to those of XXXXX.

We have not been provided documentation concerning the financial aspects of this project. However, you have advised that the size of the payroll for the staff involved in the seminar might be in the $XXXXX range, and XXXXX fee would be XXXXX% to XXXXX% of that XXXXX.

We have reviewed the XXXXX agreement with XXXXX. As you confirmed, the agreement covers, but does not refer specifically, to the XXXXX project. Under the agreement, XXXXX undertakes to provide to XXXXX "human resources services in relation to XXXXX employees." Notwithstanding this terminology, and as you advised, the services provided by XXXXX in relation to the XXXXX project were not provided in respect of XXXXX employees. The workers in question were, for Canadian tax purposes, either self-employed individuals and/or employees of XXXXX - XXXXX issued the pay cheques to these workers. In any case, the important point for our consideration is that they were not employees or agents of XXXXX.

You have indicated that XXXXX has had no employees working in Canada. It has no offices or permanent establishment in Canada. It is not listed in any Canadian directories (e.g., telephone directories) and has no bank account in Canada.

XXXXX may have, in past years, occasionally earned a fee for referral services supplied to Canadian clients or non-resident clients involved in Canadian projects. Such services would be similar to the "XXXXX Payroll Services" described above whereby XXXXX provides payroll and other administrative services. Any such fees would have been minimal (a few hundred dollars). We understand that XXXXX had no employees or agents in Canada with respect to these services.

Interpretation Requested

What are XXXXX GST/HST registration requirements?

Interpretation Given

All legislative references below are to the Excise Tax Act (the "ETA").

As explained below, based on the information provided, XXXXX would not be required to register for the GST/HST.

Subsection 240(1) of the ETA provides that every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for GST/HST purposes, except where

(a) the person is a small supplier (i.e., annual worldwide taxable sales, including those of the person's associates, do not exceed $30,000);

(b) the only commercial activity of the person is the making of supplies of real property by way of sale otherwise than in the course of a business; or

(c) the person is a non-resident person who does not carry on any business in Canada.

Whether a particular non-resident person is carrying on business in Canada is a question requiring consideration of all relevant facts. The factors that will be considered in determining whether a non-resident person is carrying on business in Canada for GST/HST purposes in a particular situation include:

•   the place where agents or employees of the non-resident are located;

•   the place of delivery;

•   the place of payment;

•   the place where purchases are made or assets are acquired;

•   the place from which transactions are solicited;

•   the location of assets or an inventory of goods;

•   the place where the business contracts are made;

•   the location of a bank account;

•   the place where the non-resident's name and business are listed in a directory;

•   the location of a branch or office;

•   the place where the service is performed; and

•   the place of manufacture or production.

The importance or relevance of a given factor in a specific case depends upon the nature of the business activity under review and the facts and circumstances of each case. Generally, a non-resident person must have a significant presence in Canada to be considered to be carrying on business in Canada.

Based on the information provided, XXXXX does not appear to be carrying on business in Canada, and therefore XXXXX is not required to register for the GST/HST pursuant to paragraph 240(1)(c). There are no factors in this case to support a conclusion that XXXXX is carrying on business in Canada for GST/HST purposes. In particular, XXXXX has no presence in Canada in the form of employees or agents in Canada.

Please note that if XXXXX at some point undertakes to supply services to be performed in Canada using its own employees or agents, it may then be considered to be carrying on business in Canada and would be required to register for the tax.

For your further information, please find enclosed GST/HST Policy Statement P-[0]51R2 Carrying on Business in Canada. Note that examples #18 to 21 involve the supply of services by non-residents.

We should also mention that XXXXX may voluntarily register for the tax pursuant to subsection 240(3) of the ETA. This subsection provides for the voluntary registration of a non-resident person who, in the course of carrying on business outside Canada, has entered into an agreement for the supply by the person of services to be performed in Canada. If XXXXX were to voluntarily register, it would be required to collect tax on its taxable supplies made in Canada but would also be entitled to input tax credits to recover the tax, if any, that it incurs in relation to its commercial activities.

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 contact me at (613) 954-4291.

Yours truly,

Michael Place
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/07/22 — RITS 56334 — Supplies Made Via the Internet