27 June 2007 GST/HST Interpretation 88216 - Cancellation of the GST/HST Visitor Rebate Program

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 sent to XXXXX the Canada Revenue Agency (CRA) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to amounts that are calculated as a percentage of Surcharge Fees paid to the Licensor by the Licensee under the XXXXX Agreement. XXXXX.

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

Statement of Facts

We understand that:

1. XXXXX (Licensor) and XXXXX (Licensee) have entered into an XXXXX Agreement XXXXX (the Agreement).

2. Based on XXXXX the Agreement the Licensor owns or leases and operates Stores and the Licensee owns or leases and operates ABMs.

3. XXXXX the Agreement defines "Stores" as the facilities XXXXX, each of which being owned or leased and operated by the Licensor. It also includes all facilities that the Licensor may purchase, lease, open, obtain or acquire subsequent to the date of the Agreement.

4. XXXXX the Agreement defines the term "Surcharge Fee" as a fee charged by the Licensee and paid by an ABM customer over and above their bank fee and the Interac Fee in exchange for the privilege of conducting a Transaction.

5. A Transaction is a defined term in XXXXX the Agreement and means any transaction on any ABM.

6. Based on XXXXX the Agreement the Licensor grants to the Licensee the following:

•   the right to place ABMs in the Stores XXXXX for the purpose of conducting Transactions;

•   an uninterrupted access to each Store, and each ABM within each Store, during all hours that such Store is open for business to the general public;

•   access to each store for the purpose of installing, maintaining and servicing each ABM, including armoured car service for cash-management purposes.

7. XXXXX.

8. XXXXX the Agreement provides that the Licensee will charge ABM customers $XXXXX Surcharge Fee for each cash withdrawal.

9. XXXXX the Licensee will pay the Licensor a percentage of the Surcharge Fee based on the number of transactions.

10. XXXXX the Agreement provides that the Licensee has the exclusive right to place third-party advertisements on ABMs, ABM screens and Transaction receipts and shall pay the Licensor $XXXXX for that right.

11. Based on XXXXX the Agreement the Licensee is responsible for the installation, servicing, operation and maintenance of all ABMs.

12. Based on XXXXX the Agreement the Licensee will operate ABMs on the Licensor's communication lines and will pay a minimum of $XXXXX per ABM per month for each ABM that operates on the Licensor's network. XXXXX. The Licensor is responsible for the installation, maintenance, restoration and repair of the communication lines.

13. Based on XXXXX the Agreement the Licensor is responsible for all expenses related to utilities, including electrical power, lighting, heat and air conditioning.

14. Based on XXXXX the Agreement the Licensor provides for janitorial services on and around the ABMs and shall maintain such areas clean and sanitary.

15. Based on XXXXX the Agreement the Licensor shall designate a suitable, accessible and well-trafficked area inside each Store for the location of an ABM.

16. Based on XXXXX the Agreement, upon termination of this Agreement Licensee shall pay all expenses for removing the ABMs from the Stores and returning the area where the ABM was located in its former condition.

Ruling Requested

You would like to know how GST/HST applies to the amounts that are calculated as a percentage of the Surcharge Fee paid by the Licensee to the Licensor under XXXXX the Agreement.

Ruling Given

Based on the facts set out above, we rule that the amounts that are calculated as a percentage of the Surcharge Fee paid by the Licensee to the Licensor under XXXXX the Agreement are consideration for a taxable supply.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under 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.

Explanation

We have reviewed your submission in which you indicate that the Licensor and the Licensee are involved in a joint venture with respect to the operation of ABM machines in the Licensor's store locations. We do not agree with this position.

Based on our review of the Agreement, there is a supply by the Licensor to the Licensee for which the amount payable under XXXXX the Agreement is consideration. The predominant element of this supply is a licence in respect of real property. In this situation, no exempting provision would apply to this supply and as a result the supply is taxable.

Whether GST (at 6%) or HST (at 14%) should be collected in respect of the supply depends on where the supply is made. A supply of real property is generally considered to be made in the province in which the real property is situated. Technical Information Bulletin B-078, Place of Supply Rules Under the HST, provides further explanation on these rules.

Additional Information

We would also like to confirm that the amounts payable under XXXXX the Agreement by the Licensee to the Licensor are also consideration for taxable supplies.

If you require clarification with respect to any of the issues discussed in this letter, please call me at 613-952-9210.

Yours truly,

Dawn Weisberg
Manager
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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