1 September 1994 GST/HST Interpretation 11680-6(glr) - The "Place of Supply" of Imported Goods Sold

                                                                        Telephone: (613) 954-8585
Fax: (613) 990-1233

I refer to your E-mail message of August 23, 1994, addressed to Mr. Garry Ryhorchuk of my staff, concerning the "place of supply" of imported goods sold by the above-referenced GST-registered firm to its Canadian customers.

I understand that XXXXX a registered resident, supplied goods to various customers located in XXXXX. The terms of delivery for the goods were "F.O.B. XXXXX". The goods were shipped directly to XXXXX customers by XXXXX supplier, an unregistered non-resident, located in XXXXX. The Canadian customers were the importers of record and paid Division III tax to Canada Customs at the time of importation. XXXXX did not charge Division II tax to its customers.

As XXXXX is supplying goods to its customers "F.O.B. XXXXX", the supplies are deemed to be made in Canada under the provisions of paragraph 142(1)(a) of the Excise Tax Act (Act). As the recipients of taxable supplies made in Canada, subsection 165(1) of the Act requires XXXXX customers to pay Division II tax equal to 7% of the value of the consideration for the supplies. Subsection 221(1) of the Act requires XXXXX, as the person making the supply, to collect the tax from its customers. The fact that XXXXX customers were the importers of record and paid tax under Division III to Canada Customs is not relevant when determining tax under Division II.

If XXXXX customers are registered for GST purposes, subsection 169(1) of the Act provides that they would be eligible to claim input tax credits equal to the fraction of the tax paid or payable (under both Division II and Division III) that represents the extent to which the goods are for consumption, use or supply in their commercial activities. If the customers are persons who are eligible to claim a rebate of a percentage of the GST paid, such as charities, municipalities, schools or hospitals, they would be eligible to claim the prescribed percentage of the tax paid under Division II and Division III.

There are two possible solutions to the problem of XXXXX customers being required to pay tax under both Division II and Division III, as follows:

1. XXXXX could change the terms of delivery to "F.O.B. shipping point (i.e., F.O.B. XXXXX)". If this were done, subsection 142(2)(a) would deem the supply to be made outside Canada. As a result, XXXXX would not be required to charge tax under Division II to its customers.

2. XXXXX becomes the importer of record for customs purposes. As the importer of record, XXXXX would be eligible to claim an input tax credit for the tax paid at the time of importation.

XXXXX[.] If you require any further information, please contact Mr. Ryhorchuk at (613) 952-6743.

H.L. Jones
Director
General Tax Policy
Excise/GST
Policy and Legislation