8 January 2007 GST/HST Ruling 81915 - Tax Status of Real Estate Commissions

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 whether XXXXX is required to register for GST/HST purposes.

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 based on your letter and our subsequent telephone discussions is as follows:

•   XXXXX is a non-resident vendor of goods based in XXXXX, US.

•   XXXXX acquires the goods on a delivered in Canada basis from XXXXX, a GST/HST registered non-resident company.

•   The goods acquired by XXXXX are manufactured and packaged in XXXXX US. by XXXXX and delivered to XXXXX on a FOB XXXXX basis.

•   XXXXX has contracted with XXXXX to store the goods until they are sold.

•   XXXXX has XXXXX Canadian clients for the goods XXXXX. The goods are stored and available for sale in Canada by XXXXX at XXXXX.

•   XXXXX maintains the inventory of goods in the warehouse facility in Canada to satisfy future orders from it's XXXXX Canadian clients. Once an order is received by XXXXX, it issues a release to XXXXX who then releases the appropriate quantity of goods to the purchaser at its warehouse facility in XXXXX.

•   XXXXX supplies the goods to either of its clients on a delivered in Canada basis, FOB XXXXX.

•   XXXXX has entered into agreements with both Canadian clients obligating XXXXX to maintain a level of inventory in Canada that will adequately address their projected needs. The arrangement to procure these future orders was solicited in Canada.

•   XXXXX issues invoices and receives payment for its supplies to its Canadian clients through its office in XXXXX US. XXXXX sales revenue from supplies of goods made to its Canadian clients that are delivered in Canada exceeds $30,000 CDN annually.

Ruling Requested

You would like to know if XXXXX is required to register for GST/HST purposes and, if not, whether the drop shipment rules could deem the supplies made by XXXXX to XXXXX to be made outside Canada.

Ruling Given

Based on the facts set out above, we rule that XXXXX is required to register for GST/HST purposes on the basis that it is making supplies in Canada in the course of carrying on a business in Canada.

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.

Explanation

Every non-resident person who carries on business in Canada, other than a small supplier, must register for GST/HST purposes if the non-resident person makes a taxable supply in Canada (footnote 1) Subsection 240(1) of the Excise Tax Act.

As set out in the enclosed GST/HST Policy Statement P-051R2: Carrying on Business in Canada, whether a non-resident is carrying on business in Canada for GST/HST purposes is a question that requires consideration of all relevant facts. The factors to consider in determining whether, for GST/HST purposes, a non-resident person is carrying on business in Canada in a particular situation include:

•   the place where agents or employees of the non-resident are located;

•   the place of delivery;

•   the place of payment;

•   the place where purchases are made or assets are acquired;

•   the place from which transactions are solicited;

•   the location of assets or an inventory of goods;

•   the place where the business contracts are made;

•   the location of a bank account;

•   the place where the non-resident's name and business are listed in a directory;

•   the location of a branch or office;

•   the place where the service is performed, and

•   the place of manufacture or production.

The importance or relevance of a given factor in a specific case depends upon the nature of the business activity under review, and the facts and circumstances of each case.

Based on the information provided, XXXXX maintains an inventory of goods available for sale in Canada, has solicited orders for the supply of these goods in Canada, and makes supplies of the goods on a delivered in Canada basis. These factors alone are sufficient to conclude that XXXXX is carrying on a business in Canada and required to register for GST/HST purposes. Example 9 of enclosed Policy Statement P-051R2 is particularly relevant to XXXXX business activities in Canada.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-8812.

Yours truly,

Jeff Frobel
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/01/10 — RITS 82341 — Eligibility to Claim Input Tax Credits (ITCs) in Respect of Hedging Activities