22 July 2005 GST/HST Interpretation 56334 - Requirement to Register

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 transactions undertaken by your client XXXXX (the Company). We apologize for the delay in responding to your request.

Since the Company's services are performed exclusively in XXXXX, this letter will not make any references to the HST.

Statement of Facts

•   The Company is registered for GST/HST XXXXX.

•   The Company operates a silent on-line auction, XXXXX, available to the local population. The web site is stored on a web server that is situated in XXXXX. Any employees or officers of the Company are also situated in XXXXX.

•   Local vendors who wish to sell their goods or services may list them for free on the Company's web site. Local residents may purchase these goods or services. The Company does not have any non-resident customers.

•   There is no formal agreement between the Company and the vendors.

•   The purchasers and vendors involved in these transactions are generally not GST/HST registrants.

•   Purchasers submit a bid for an item by clicking on the item's corresponding link on the website. This link allows a purchaser to send an e-mail to the Company specifying the amount of their bid.

•   When the Company receives a bid, it contacts the vendor to ask if the bid is acceptable.

•   If the bid is accepted, the Company then contacts the purchasers to let them know their bid was successful. The Company facilitates payment for the item by collecting the proceeds from the purchasers via their credit card.

•   The Company then forwards the proceeds of the sale to the vendor less the Company's commission.

•   Generally, the purchaser picks up the goods from the vendor. Occasionally, the vendor may ship the goods to the purchaser.

•   The Company does not at any time take possession or ownership of the goods.

Ruling Requested

You would like to know the tax status of the Company's commissions.

Ruling Given

Based on the facts set out above, we rule that the Company is making taxable supplies of services at 7%.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts for which you requested a ruling.

Explanation

Section 165 of the Excise Tax Act (ETA) requires that every recipient of a taxable supply (other than zero-rated) made in Canada shall pay GST at 7% on the value of the consideration for that supply. Therefore, the Company's services are taxable at 7% because there are no exempting provisions in the ETA.

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

2005/07/27 — RITS 58794 — Application of GST/HST to Cranberry Juice