6 November 2006 GST/HST Ruling 81221 - Application of the GST/HST to Packing Services

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 letters XXXXX in which you requested a ruling concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to packaging services performed by XXXXX.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

As you know, effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers [http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html] on the CRA Web site.

Statement of Facts

We understand the facts as follows:

1. XXXXX is made up of XXXXX referred to as XXXXX.

2. XXXXX provides administrative and operational support XXXXX for long distance moves.

3. In providing its administrative and operational support, XXXXX acts as an intermediary in arranging for a long distance move XXXXX on behalf of XXXXX.

4. XXXXX role is limited to "brokering" or arranging for a move, which is performed by XXXXX.

5. In this capacity XXXXX will prepare the costing for a move and will invoice the customer once the move is complete.

6. To effect the move, XXXXX arranges with XXXXX to provide various services necessary for a successful move, such as dismantling, packing and unpacking, bracing or stabilizing where necessary, loading and unloading, transporting, and storing tangible personal property (TPP).

7. XXXXX service providers.

8. For a long-distance move that takes place within Canada, XXXXX charges GST/HST to a customer and accounts for the tax in the proper manner.

Ruling Requested

You would like to know the tax treatment with respect to the packing services XXXXX.

In accordance with GST/HST Memorandum 1.4 of the GST/HST Memoranda Series, copy enclosed, an application ruling can only be issued with reference to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and where the taxpayer has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. We are pleased to issue you an interpretation, which will elaborate in detail on how the GST/HST applies to the questions raised in your letter.

Interpretation Given

A "carrier" is defined under subsection 123(1) of the ETA as a person who supplies a freight transportation service within the meaning assigned by subsection 1(1) of Part VII of Schedule VI to the ETA.

A "freight transportation service" is defined, in part, in subsection 1(1) of Part VII of Schedule VI to the ETA as "a particular service of transporting tangible personal property and, for greater certainty, includes

(a) ...

(b) any other property or service supplied to the recipient of the particular service by the person who supplies the particular service, where the property or service is part of or incidental to the particular service, whether there is a separate charge for the other property or service ..."

"Packing services", within the transportation industry, generally means a service of packing for safe shipping by utilizing one or more packing materials to secure goods in place. It also includes placing goods in an appropriate container and marking and labelling the container with customer shipping destination data, as well as other information that may be required.

The Canada Revenue Agency's (CRA) position is that when a carrier, in the course of providing a freight transportation service, also provides a packing service of its customer's TPP, the packing service will take on the same status as the basic freight transportation service, as forming part of, or being incidental to, it.

A supply of a packing service made in Canada by an independent contractor, who is not a carrier in respect of a particular transaction, and who is not making a supply of "transporting tangible personal property" is viewed as not being part of, or incidental to, a freight transportation service and is considered to be a separate taxable supply of a packing service. It is our view that paragraph 1(1)(b) of Part VII of Schedule VI to the ETA, which defines the definition of "freight transportation service", that only includes incidental property or services when supplied as part of a supply of transporting TPP, indicates that such property or services are not part of a freight transportation service when supplied on their own.

The broad interpretation of the meaning of the term "freight transportation service" as set out in the Bam Packaging Ltd. case does not reflect the CRA's position or its interpretation of that term, as defined in subsection 1(1) of Part VII of Schedule VI to the ETA. Furthermore, this case, which was decided under the informal procedures of the Tax Court of Canada, is not considered by the CRA to be precedent setting.

Accordingly, only the packing service provided XXXXX that is a carrier in the course of providing a freight transportation service would be part of or incidental to that particular freight transportation service.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8223.

Yours truly,

Daniel Chamaillard
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

2006/11/02 — RITS 82152 — Health Care Services Supplied by a Medical Practitioner