31 March 2006 GST/HST Interpretation 63336 - Cemetery property and/or services under a pre-need arrangement

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 fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of tickets to the XXXXX festival XXXXX.

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

Statement of Facts

We understand that:

1. XXXXX. The promoter is not registered for GST/HST purposes.

2. The promoter entered into an agreement with XXXXX the ticket seller wherein the promoter and the ticket seller agreed that the ticket seller would provide the ticketing service for the festival.

3. The promoter sets the prices for admission tickets and wristbands, camping and parking.

4. The promoter provides the ticket seller with and ensures the accuracy of all pertinent ticket information.

5. The promoter is responsible for remitting all taxes and for advertising the festival.

6. The promoter must provide adequate telephone lines for the installation of the ticket seller's equipment at the site of the festival and pay the cost of repairs or replacement of such equipment if it is destroyed, lost or stolen while on the promoter's premises.

7. The promoter is responsible for the physical security of the ticket seller's staff and providing them with accommodations, access to the festival site and weather protected workstations.

8. The promoter must provide for the safe transfer of cash and safe storage and escort to the nearest banking facility.

9. The promoter must provide adequate liability, property, crime prevention and business disruption insurance for both the promoter and the ticket seller.

10. The ticket seller must provide the necessary equipment and staff to handle the sales and distribution of advance ticket sales and camping passes through its system, as well as admission wristbands, camping and parking sold at the festival site.

11. The ticket seller is responsible for providing a telephone reservation service, a reasonable number of ticket outlets throughout the City XXXXX and point of sale credit card terminals.

12. Should the festival be cancelled, the ticket seller will handle any refunds to original buyers in accordance with its standard refund practices.

13. The ticket seller will produce reports for the promoter detailing advance ticket sales and applicable taxes and, within five business days after the festival, produce a settlement payment to the promoter after deducting its recoverable costs such as fees, liens on the proceeds of ticket sales, wristbands, parking and camping and any other costs directed by the promoter to be paid.

14. The ticket seller will charge an agency fee on all tickets it sells to buyers. An agreed portion of these agency fees will be rebated to the promoter. The ticket seller will be entitled to a credit card recovery fee on all credit card sales.

Ruling Requested

You would like to know when supplies of admissions to the festival are made and when the tax liability arises in respect of such supplies.

Interpretation Given

Paragraph 20 of GST/HST Memoranda Series Chapter 1.4, Goods and Services Tax Rulings indicates that a request for a GST ruling may be refused when a matter on which a determination is requested is primarily one of fact and the circumstances are such that all pertinent facts cannot be established at the time of the request. As we are unable to determine whether the promoter is required to be registered and to charge tax on the supply of the admissions, based on the information provided we offer you the following interpretation.

Where there is an agreement to make a supply, section 133 of the ETA considers a supply to exist and the further provision of property or services under the agreement is considered part of the original supply. Subsection 152(1) of the ETA provides that consideration (or a part thereof) for a taxable supply becomes due on the earliest of the day the supplier first issues an invoice in respect of the supply, the date of the invoice, the day when, but for an undue delay, the supplier would have issued an invoice in respect of the supply, and the day that consideration is due pursuant to an agreement in writing.

The word "invoice" is defined in subsection 123(1) and includes, but is not limited to, a statement of account, a bill and any other similar record, regardless of its form or characteristics, and a cash register slip or receipt. Under this broad definition, any record of a supply, along with the consideration due or paid for the supply, will be considered to be an invoice. Generally, an invoice is issued after, or as a record of, an agreement to make a supply or when the supply is made.

Under the provisions of subsection 168(1), the tax, if applicable, is payable by the recipient of a taxable supply on the earlier of the day that consideration for the supply is paid and the day that the consideration becomes due.

Therefore, by virtue of section 133, supplies of tickets for the right to attend an event are made on the day the tickets are sold. Under the provisions of subsection 152(1), the consideration for the supply is due on the day the supplier issued the ticket and, pursuant to subsection 168(1), the tax, if applicable, is payable by the recipient of the supply on the day the consideration was paid (i.e., at the time of sale).

Requirement for registration

Paragraph 240(1)(a) 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 the GST/HST except where the person is a small supplier. Paragraph 240(2.1)(b) requires a person who is not a small supplier to register for the GST/HST before the day that is thirty days after the person first makes a taxable supply in Canada otherwise than as a small supplier. Small suppliers may voluntarily register for the GST/HST pursuant to paragraph 240(3)(a).

Subsection 148(1) provides that a person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies, including zero-rated supplies, made by the person (or an associate of the person at the beginning of the particular calendar quarter) that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000 or, where the person is a public service body, $50,000.

There is an exception to this rule in subsection 148(2). Subsection 148(2) provides that a person ceases to be a small supplier at any time in a calendar quarter if the total value of the consideration that becomes due, or is paid without becoming due, in that quarter for world-wide taxable supplies (other than consideration attributable to the sale of goodwill of a business, supplies of financial services, and supplies by way of sale of capital property) made by the person, or an associate of the person at the beginning of the calendar quarter, exceeds $30,000 or, if the person is a public service body, $50,000. The person ceases to be a small supplier immediately before the consideration becomes due or is paid for the particular taxable supply that puts the person over the $30,000 or $50,000 small supplier threshold.

A registrant is defined in subsection 123(1) to mean a person who is registered, or who is required to be registered, for the GST/HST. Generally, a registrant who makes a taxable supply of property or services will be required, pursuant to subsection 221(1) of the ETA, to collect tax on that supply. Pursuant to subsection 225(1), the amount of tax collected as well as tax collectible is included in determining the net tax of the registrant for the reporting period in which the amount became collectible.

Consequently, if the promoter is registered or is required to be registered for the GST, it must charge, collect and remit the tax on its supplies of admissions to the festival.

If a supplier hires an agent to sell rights of admission to an event, the following rules apply:

The supplier is a registrant

Where a person acts as an agent in making a taxable supply on behalf of a principal who is required to collect tax in respect of the supply, the principal is considered to have made the supply and is consequently required to account for any tax collectible or any tax collected by the agent in respect of the supply in the net tax for the reporting period in which it became collectible or was collected, as the case may be, and to remit any resulting positive net tax.

Therefore, if the ticket seller is acting as an agent in making a taxable supply of rights to admission on behalf of the promoter, it is the promoter who is considered to be making a taxable supply to the recipient and the ticket seller, as an agent, is considered to be making a taxable supply of its service of acting as agent to the principal. An agent who is registered for the GST is required to collect tax from the principal on the value of the consideration for its service. A principal who is registered for the GST is generally eligible to claim an ITC provided all of the conditions for claiming an ITC are met.

Special rules apply in certain circumstances where a person acts as an agent in making a supply on behalf of a principal. Specifically, subsection 177(1.1) permits a registrant who, in the course of its commercial activity, acts as an agent in making a supply (otherwise than by auction) on behalf of a principal who is required to collect tax in respect of the supply to elect jointly with the principal to account for the tax collectible in respect of the supply as if the tax were collectible by the agent. In this case, the agent is required to include the tax collectible in respect of the supply in its net tax as if it were collectible by the agent and to remit any resulting positive net tax. However, the agent and the principal are jointly and severally liable for all obligations that arise upon or as a consequence of the tax becoming collectible, any failure to account for or remit net tax, and the repayment of any overpayment of a net tax refund. The election has to be made on prescribed form (form GST506 - Election and Revocation Between an Agent and Principal), a copy of which is enclosed. Under subsection 177(1.1), where an election is made, the treatment of the agent's service is still subject to the general rules. The agent is required to collect any tax payable in respect of its supply of services made to the principal and to account for that tax in its net tax.

Proposed amendments to the rules relating to the accounting of tax by agents were announced on December 20, 2002. Under the proposed amendments to subsection 177(1.1), the following rules apply to agents and principals who make this election with respect to the particular supply for which the election is in effect:

•   Any amount charged or collected by the agent on behalf of the principal as or on account of tax is deemed for certain purposes, including the net tax calculation, to be charged and collected by the agent.

•   The rules pertaining to refunds, credits or adjustments of tax to the recipient apply to the agent and not the principal.

•   If a price reduction is offered to the recipient and a refund, credit or adjustment is provided to the recipient, the agent can claim a deduction from net tax equal to the amount of tax refunded, credited or adjusted.

•   The agent and principal are jointly and severally, or solidarily, liable for all tax obligations for the supply (including net tax remittance, bad debt adjustments, recovery of bad debts, and penalty and interest charged for overpayment of net tax refund or under payment of net tax).

•   The agent, and not the principal, has to include the consideration for the supply in the calculation of the threshold amounts that determine their respective reporting periods.

Generally, these amendments will apply to supplies made after December 20, 2002.

Therefore, where a ticket seller acts as agent of a promoter with respect to supplies of rights to admission, an election can be filed under subsection 177(1.1) by the ticket seller and the promoter to have the ticket seller account for any amount charged or collected as or on account of tax on the supplies.

To the extent an election under subsection 177(1.1) is not made, the principal is solely liable for all GST obligations on its supplies of admissions.

Whether or not an election under subsection 177(1.1) is made, the treatment of the agent's services is always subject to the general rules i.e., the tax in respect of the agent's services is payable by the principal and accounted for by the agent in its net tax.

The supplier is not a registrant

When a person acts as an agent on behalf of a principal who is not required to collect tax in respect of the supply (for example, a small supplier who has chosen not to voluntarily register), the general rules apply unless the supplies are of tangible personal property. Neither the principal nor the agent is required to charge, collect or remit tax in respect of the supplies. However, the agent, if a registrant, is required to charge tax on supplies of its services to the principal and to account for that tax in its net tax calculation.

The Canada Revenue Agency's (CRA's) position with regard to agency relationships is illustrated in policy statement P-182R Agency. The policy indicates that a person will be considered and treated for GST/HST purposes as an agent based on fact and the principles of law. The policy can be found at http://www.cra-arc.gc.ca/menu/GTPP-e.html.

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 Series 1.4, Goods and Services Tax Rulings, do not bind the CRA 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) 954-7931.

Yours truly,

Anne Kratz
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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