21 March 2007 GST/HST Ruling 84490 - XXXXX

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 transportation of a parcel by XXXXX(Company A) and XXXXX (Company B). We apologize for the delay in responding.

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

Statement of Facts

We understand the facts as follows:

1. XXXXX Company A and Company B concluded an Interline Agreement (the Agreement).

2. XXXXX the Agreement provides that nothing contained in the Agreement shall be deemed to or/be construed as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto XXXXX.

3. XXXXX the Agreement states, in part, that each carrier shall pay their respective licences and registration fees, taxes, added value taxes, assessments or charges, levied or rated or charged all in connection with each carrier performing the interline services contemplated under this Agreement.

4. XXXXX the Agreement provides that Company A and Company B agree to provide Interline Service between, at and to approved locations only all to service Company A and Company B XXXXX in Interline Service. XXXXX.

5. Under XXXXX the Agreement, the parties agree to reclaim revenue from each other with respect to XXXXX carried by Company A or Company B in interline services. XXXXX.

6. XXXXX a shipper, XXXXX, arranged for the delivery of a parcel on a COD basis to XXXXX. The shipper transferred the parcel to Company A XXXXX. Company A hauled the parcel to XXXXX. Company B then hauled the parcel from XXXXX.

7. XXXXX.

8. The freight-collect charge, as indicating on Company A's COD invoice, was $XXXXX and GST of $XXXXX.

9. Company B's interpretation of the GST/HST Memoranda Series 28.2 Freight Transportation Services and Guide RC4080 is that on an "Incoming Collect" Company B is acting as agent for Company A, which on the domestic freight movement is the "invoicing carrier". Company A is thus responsible for collecting any applicable GST. Therefore, Company B would do the following with the $XXXXX:

•   Submit XXXXX% of the express charge of $XXXXX to Company A for their share under the Company Agreement, which is $XXXXX.

•   Submit the GST collected on behalf of Company A, to Company A, which in this case is $XXXXX. Company A would presumably account for the GST on its GST/HST net tax return.

•   Report the remaining $XXXXX collected XXXXX as income earned, which is zero-rated under the interline rules.

Ruling Requested

You would like to know whether you are using the correct procedure in collecting and remitting the GST on interline freight shipments.

Ruling Given

Based on the facts set out above, we rule that the transportation of the parcel from XXXXX to the parcel consignee, XXXXX, is a taxable supply at the GST rate of 6% made by Company B, which is required to collect and account for the tax. We also rule that the interline settlement between Company B and Company A, with respect to the movement of the parcel in question, is zero-rated under section 11 of Part VII of Schedule VI.

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 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.

Explanation

When a carrier receives payment for a taxable domestic freight movement from a shipper (or consignee in the case of a freight-collect movement), that carrier, under subsection 1(2) of Part VII of Schedule VI to the ETA, is considered to have supplied the freight service, even if part of the payment is collected as agent for any other interline carriers involved in the movement. As such, that carrier is required to collect and remit the tax to the Canada Revenue Agency, whether or not the carrier makes use of its own invoice or one issued by any other interline carrier.

Therefore, in this instance, Company B would be required to collect and account for the GST.

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

2007/03/06 — RITS 85838 — Lease Agreement Entered into Prior to March 10, 2004