February 23, 1995
File No: XXXXX
Dear XXXXX
Thank you for your letter of November 15, 1994, to our office, regarding the application of GST to Indians and the direct selling industry.
As discussed with XXXXX of my office, GST does not apply on sales to Indians that are delivered to a reserve by a vendor or a vendor's agent. However, sales made by a direct seller who is approved to use the Alternate Collection Method (ACM) are an exception to normal business transactions and impact on the tax relief afforded to Indians.
Pursuant to subsection 178.3 of the Excise Tax Act (ETA), under the ACM, the tax payable on a supply of an exclusive product make by a direct seller to an "independent sales contractor" is deemed not to be payable by the contractor. This deeming provision applies in all cases, an Indian independent distributor, like other independent distributors, is not considered to be paying tax. Therefore, even when the products are supplied to an Indian contractor and delivered to a reserve, the direct seller is required to include an amount in determining its net tax equal to the tax payable on the suggested retail price of the product.
If an independent sales contractor sells the product to an Indian consumer and the supply is made on a reserve or delivered to a reserve, GST is not chargeable. In this case, the direct seller may deduct an amount in determining its net tax equal to the tax that is not required to be paid by the Indian consumer.
However, the direct seller is eligible for the deduction only where it pays or credits the amount to the independent sales contractor. The direct seller has up to four years from the time the amount has been paid or credited to the contractor in which to take the deduction in determining its net tax.
If you have any further questions about this issue, please feel free to contact XXXXX . If you have further questions about direct selling, please contact XXXXX
Yours truly,
J.A. Venne
Director
Tax Policy - Special Sectors
GST Policy and Legislation
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