11755-20(AR)
XXXXX
Interpretation and Services
XXXXX District Office June 21, 1995
This is in response to your memorandum to myself dated December 17, 1993 regarding the review of a draft letter which involves the application of the Single and Multiple Supplies policy (P-077), and is also in response to a telephone conversation between XXXXX of your staff and Anny Roy of my staff. We apologize for the delay in responding to your letter.
As a general comment, I would like to mention that it is not possible to provide definitive answers to the questions asked by the registrant, given that the scenarios described in their letter are hypothetical and do not include enough facts. As you have informed us that it is not possible to obtain more information from the registrant, we are providing you with general guidelines, as per your request, regarding how to apply the policy on single and multiple supplies in such situations.
From the various scenarios provided, only scenario 2, scenario 3 and scenario 6a (in part) involve the application of P-077. The others relied on the need to distinguish between a good and a service. A policy to address the latter is being developed and should be available in the near future.
Therefore, our comments are limited to scenario 2, scenario 3 and scenario 6a of your letter.
General facts
Company ABC operates an audio/visual department that provides several types of goods and services. Supplies can be made in Canada as well as outside Canada, to Canadians residents as well as to non-residents. The non-resident recipients could remain outside of Canada at all times, or could, on occasion, be present in Canada.
Where company ABC makes combined supplies of goods and services, ABC will at times only indicates an amount on their invoices for the supply of a service and where as at other times will only indicate an amount for the supply of goods. Other invoices indicate separate amounts for goods and services.
Analysis:
Scenario 2:
Company ABC rents equipment with an operator to a customer.
To determine whether each element is a separate supply or is part of a single supply, it is necessary to consider all the factors included in the policy. For instance, we would have to determine whether an element is an input used by the supplier in the making of a supply. Further, the conditions of the contract or agreement may be instructive. Equally some elements may be provided by different suppliers or acquired by different recipients and this too may be of assistance. However, we would need more facts to apply these factors.
Nevertheless, if a determination cannot be made solely on the basis of the factors outlined in the preceding paragraph, we can use the three additional questions provided in the policy. The following is our analysis of these questions.
1. If the customer did not receive all of the elements would each, in itself, be, in the context of this transaction, of any use to the customer?
It is important to consider what need the recipient is trying to satisfy and whether, in the context of that need, each element would be of utility to the customer. Virtually any element provided to a person can be viewed as being of some utility to that person. Therefore, the critical aspect to this test is to specify the context, given the circumstances and parameters established by a particular customer's objective requirements.
It appears to us that the operator would not be of any use without the equipment, and vice versa, even if, physically, both can be separate and functional. The equipment would not be of any use either if the customer does not know how to operate it. Similarly, it would not seem that the operator would have any separate use, given that the operator is needed specifically to operate the particular equipment provided by the supplier.
If we follow the assumptions in the previous paragraph, it appears that the customer would want to obtain both the equipment and the operator to perform a particular task.
The answer to this question indicates that both elements may constitute a single supply.
2. Is the provision of a particular element contingent on the provision of another element?
Put differently, this question could be: does the customer have the option of acquiring the elements separately? If the answer is yes, then the elements would not be contingent upon each other.
In analyzing this question, it appears that you conducted the same kind of analysis as under the previous question. However, as previously noted, this question tries to determine if each element can be acquired without the other (whereas the first question is focusing on whether each element would be acquired separately). There is simply not enough information to respond to this question. However it would seem from the incoming letter that ABC offers each of these arrangements separately which, if this is the case, would seem to suggest that each item (listed as 1 through 9) is viewed as a separate but integrated good/service. If this is the case, it is likely that the elements being provided are contingent on one another and therefore, any one of these items could be considered a single supply in its own right.
3. Is the customer made aware of the specific elements (in detail) that are part of the package?
It will not be unusual for the customer to be made aware of the various elements in a package. Consequently, this question attempts to establish the relative importance, if any, of the individual elements and the emphasis put on those elements. The fact that the invoice specifies the elements separately is not conclusive. Detailed indication of specific elements might include the quantity of the particular elements being supplied, their physical characteristics and/or specifications, or the specific steps to be followed in providing a particular element. In the present case, we would need more information to answer this question. For instance, does the supplier indicate to the customer the serial or model number of the equipment and the name of the operator?
If the supplier provides specific information about the equipment and the operator, this would indicate that the two elements may be separate supplies. If the supplier does not provide the customer with such information this could indicate that both elements are part of a single supply.
Scenario 3:
Company ABC rents their mixing equipment and filming/sound studio to a customer on an hourly basis. Company ABC has a separate charge for the equipment and the studio.
Again, in the analysis of this scenario, all of the guidelines included in the policy should be applied. Specifically, in addition to the three specific questions, consideration should be given to the three other factors.
However, given the lack of background information, we have limited our discussion to the three specific questions.
1. If the customer did not receive all of the elements would each, in itself, be in the context of this transaction, of any use to the customer?
As mentioned in the analysis of the first question of the previous scenario, it is important to consider what need the recipient is trying to satisfy and whether, in the context of that need, each element would be of utility to the customer. Would the mixing equipment be of any use to the customer without the filming/studio? And would the filming/sound studio be of any use to the customer without the mixing equipment? If any one element could be viewed as satisfying the customer's need(s) on its own, all of the elements would be viewed as a separate and therefore multiple supplies.
In the context of this transaction, it appears that the customer wants to obtain both the equipment and the studio.
The answer to this question indicates that the two elements may be single supply.
2. Is the provision of a particular element contingent on the provision of another element?
As previously mentioned this question asks: does the customer have the option of acquiring the elements separately? If the answer is yes, then all the elements would not be contingent upon each other. As you are aware, we do not have enough information to respond to this question. Even if the company indicates separate amounts for the equipment and the studio, it is not clear if the customer may rent the studio without the equipment and vice versa, although it is doubtful that this is the case.
3. Is the customer made aware of the specific elements (in detail) that are part of the package?
The points in question 3 of scenario 2 have to be considered in answering this question. Furthermore, in the present case, we need more information on the transaction to answer this question. For instance, does the customer have a detailed list of the equipment being rented?
Scenario 6a
Company ABC makes a promotional video for a customer. ABC supplies all the artistic design work, all filming and sound work etc., and supplies the customer:
i) One copy of the completed tape
ii) Several copies of the completed tape.
While the core question would appear to be whether ABC is supplying a service of making a promotional video, or making a supply of the copy (or copies) of the tape, it has to be first determined if there is a single or multiple supplies.
As the facts are not sufficient ( for instance we do not know what the registrant meant by referring to "etc." in this scenario), we cannot apply the criteria of the policy. However, an analysis similar to the previous scenarios could be made in this instance if there were more facts.
To conclude, we suggest that in the answer to the client, you apply the policy by referring to the criteria in the policy and that you inform the client that detailed information would be needed to respond in a specific way to each of these scenarios.
Should you wish to discuss this issue further, please contact Anny Roy at (613) 954-2560.
H.L. Jones
Director
General Application Division
GST/Interpretation and Ruling XXXXX
c.c.: Imposition Team
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