29 May 2006 GST/HST Ruling 55371r - XXXXX Contracts

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:

As a result of a review XXXXX, we are writing to revoke the GST/HST Application Ruling sent XXXXX and to provide you with the following revised ruling which replaces the previously issued ruling. This revised ruling is effective XXXXX.

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

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (the Corporation), has contracted with XXXXX (the Bank) for the purpose of direct marketing of credit card products and services of the Bank. The Corporation is registered for the GST/HST XXXXX.

2. The Corporation employs sales representatives to market the Bank's credit card products and services at sporting events, community events, trade shows, universities and colleges.

3. At the events the Corporation's sales representatives set up displays and distribute the Bank's credit card applications. The sales representatives offer free gifts to potential applicants. All posters, promotional gifts, premiums, original copies of applications, sales representative attire, and other items are provided to the Corporation by the Bank.

4. Once an application is completed, the sales representatives verify the applicant's full name, permanent address and social insurance number by requesting a valid drivers' license, picture identification or other form of identification. The sales representative who solicited the application initials it, indicates what identification was used to verify the identity of the applicant and includes that sales representative's identification number on the application.

5. The Corporation is paid a fee for each qualified application received. In order to be considered a qualified application the application must:

(a) be legible, all fields are filled with the exception of the social insurance number which is optional;

(b) contain accurate coded information;

(c) not be declared fraudulent by the Bank;

(d) be received by the Bank no later than one business day from receipt of the application by the Corporation.

6. After the event, the Corporation separates complete applications from those that are incomplete and delivers both to the Bank. The Corporation does not attempt to contact applicants whose applications are incomplete.

7. According to the terms of the XXXXX Agreement between the Corporation and the Bank, the Bank makes all credit decisions and bears all credit risks to each application delivered to it by the Corporation.

Revised Ruling Given

Based on the facts set out above, we rule that the supply of the services, as described in paragraphs 3,4, and 6, provided by the Corporation to the Bank under the XXXXX Agreement is an exempt supply of a financial service.

Explanation

Paragraphs (g) and (l) of the definition of "financial service" in subsection 123(1) includes "the making of any advance, the granting of any credit or the lending of money" and the "agreeing to provide, or the arranging for, a service referred to in any of paragraphs (a) to (i)" of that definition.

When the Bank issues a credit card, it is granting credit to the cardholder, therefore, the Bank is making a supply of a financial service pursuant to paragraph (g) of the definition of "financial service" in subsection 123(1).

Whether the Corporation's service is considered to be a service within the meaning of paragraph (l) of the definition of "financial service" in subsection 123(1) depends on the degree of involvement of the Corporation in the supply of the granting of credit by the Bank to the cardholder. Policy Statement P-239, Meaning of the term "arranging for" as provided in the definition of "financial service" outlines the meaning of "arranging for" for the purposes of determining whether a service is considered to be arranging for a financial service. Generally, an "arranging for" service can be described as the activities of one or more intermediaries as "go-betweens" in bringing together two (or more) persons for the supply of a financial service by one person to the other.

In this case, the Corporation has been contracted by the Bank to solicit prospective cardholders and gather the necessary information that will allow the Bank to either approve or not approve the granting of credit to the prospective cardholder. The Corporation actively markets the Bank's credit card products at various events, distributes applications, verifies the information on the applications, and forwards the completed applications to the Bank. The Corporation is directly involved in bringing together prospective cardholders and the Bank for the granting of credit. As such, the service provided by the Corporation to the Bank falls within paragraph (l) of the definition of "financial service" in subsection 123(1) and it is not excluded by any of paragraphs (n) to (t) of that definition. The provision of this supply is an exempt financial service pursuant to section 1 of Part VII of Schedule V.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9262.

Yours truly,

Susan Mills
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2006/06/08 — RITS 58290 — XXXXX Pension Plan