XXXXX
February 20, 1995
This is in response to your memorandum of August 29, 1994, and further to your E-Mail of September 12 and October 19, 1994, requesting our review of your draft GST interpretation addressed to XXXXX regarding the sale of used mobile homes.
Statement of Facts
XXXXX , doing business as XXXXX is primarily engaged in the selling of used mobile homes in XXXXX
XXXXX is not presently registered for GST purposes as it has been considered that their only supplies were exempt supplies pursuant to Schedule V, Part I, section 2 of the Act.
XXXXX provides its potential customer with videos of used mobile homes. The majority of these units are owned by a dealer in XXXXX and situated on a lot of that dealer. XXXXX deals with that dealer at arm's length. If the customer decides to purchase a particular unit, an agreement of purchase and sale is entered into between the customer and XXXXX and at that time, XXXXX also enters into a purchase agreement with the XXXXX dealer. Typically, XXXXX makes all the necessary arrangements to have the purchased unit delivered to the customer as well as providing, blocking, leveling and cement pads (setup) at the customer's site.
Section 44 of the XXXXX Manufactured Home Act provides that:
(1) No person shall import into the Province, sell, offer for sale, or move a manufactured home that is not registered under this Act.
It is not clear from the information provided whether, prior to the mobile home being transported to the customer's site in XXXXX the mobile home is registered in the name of the customer or in the name of XXXXX although you advise that it is XXXXX who enters into a contract with the transport company and that any damages en route are payable to XXXXX When a mobile home is sold by XXXXX the customer also agrees to acquire the setup at their site from XXXXX Further, it is our understanding that the customer does not have the option of acquiring the setup of the mobile home from suppliers other than XXXXX While it is customary for XXXXX to sell a used mobile home including delivery to the customer's mobile home site, the customer may make his own arrangements with a third party for shipping the mobile home from XXXXX to his site. In other words, we understand that the acquisition of freight transportation of the purchased mobile home is an option available to the customer from the supplier. You advise that on only one occasion had a customer arranged his own transportation.
The cost of a used mobile home itself may range from $6,000.00 to $18,000.00 and the freight charges for shipping the mobile home from XXXXX to XXXXX may range from $6,000.00 to $8,000.00. A copy of a typical contract submitted with your correspondence demonstrates, and you confirm, that the customer is not aware of the breakdown in the price agreed to. He pays one price which includes the mobile home, delivery and setup.
The question to be answered is whether, when XXXXX sells a used mobile home to a customer in XXXXX to be shipped from XXXXX , the sale is a single (exempt) supply of a used mobile home or multiple supplies of a mobile home, delivery and setup.
YOUR ANALYSIS
You have concluded from the application of the factors set out in the policy paper on single and multiple supplies (P-77), that XXXXX is making a single supply of a mobile home when selling a used mobile home for one price which includes the blocking, leveling and cement pads and may or may not include the freight transportation of the mobile home to XXXXX Further, the single supply will be an exempt supply pursuant to Schedule V, Part I, section 2 to the Act. If the customer purchases the freight transportation from another supplier, that purchase of the transportation will be a taxable supply at 7%. In other words, if XXXXX supplies the freight transportation, it will form part of a single exempt supply but if the freight transportation is supplied by another supplier, it will stand alone as a taxable supply at 7%.
OUR ANALYSIS
We do not necessarily disagree with your conclusion. However, in determining whether the sale of a used mobile home, delivery and setup constitute separate supplies or are part of the single supply of a used mobile home, the following factors, in their order of importance, must be considered:
1. the provisions or the terms of the agreement, contract or invoice
2. whether some elements are inputs or themselves supplies
3. the number of suppliers and/or recipients, and
4. a series of specific questions
1. From the sample contract submitted it is evident that the object of the contract is the supply of a used mobile home delivered and set up on the customer's site. A customer pays one price for the used mobile home which price includes delivery and setup. The terms of the supply, as stated in the sample contract with XXXXX clearly demonstrate the sale of a used mobile home for the sum of XXXXX and that price includes delivery, block and level. A contract of this nature would normally specify the closing date of the sale. However, it is not clear in the sample contract what that date is. There is mention of a closing date as well as an adjustment date, but such dates are not specified. This date could have relevance if, for instance, the closing date of the sale was after all conditions of the contract were fulfilled by the supplier (i.e., delivery and setup). Therefore, even if title to the mobile home passes to the customer prior to delivery and setup, an argument could be made (not without doubt) that the sale is not complete until the closing date. Accordingly, the application of this factor in the policy paper would indicate a single supply of a used mobile home.
2. Whether the transportation and setup of the mobile home are inputs of the supplier in making a single supply of a mobile home will depend on whether it is considered that these elements are consumed by the supplier in the course of making the supply of a mobile home. If the object of the contract, i.e., the used mobile home, is owned by the customer prior to the other elements (delivery and setup) being provided, it is difficult to argue that the supplier is consuming these other elements in the course of providing the used mobile home if, in fact, ownership of the mobile home has already been provided. In other words, an alternative argument could be made that those other elements would not be consumed by the supplier and therefore, could not be considered inputs of the supplier in making the supply. Because of the ownership of the mobile home by the customer at that time, the other elements could, therefore, be considered as things being provided to the purchaser. Nevertheless, this is not conclusive evidence of multiple supplies.
Alternatively, if in fact, the used mobile home is owned by XXXXX until all conditions of the contract are fulfilled by XXXXX (i.e., delivery and setup), then, in our opinion, the delivery and setup would be considered inputs required by the supplier to facilitate the supply of the used mobile home to the recipient in the course of making the supply (sale of a used mobile home) and not separate supplies. Accordingly, the application of this factor in the policy paper would evidence a single supply of a used mobile home where title of the mobile home passes after all conditions of the contract are fulfilled.
3. In this case it is important to determine if the goods or services are supplied by the same person XXXXX or by different persons (for example, a transport company). According to the facts, only XXXXX will provide the setup of the mobile home on the customer's site. Therefore, we need only determine if the delivery is being provided to the customer by XXXXX or by the transport company. We must therefore, ask the following questions: who contracts with the transport company and to whom are benefits payable should the goods (mobile home) be damaged in transport?
Again, the question of who has title of the mobile home at the time the contract is made with the transport company is relevant. Your memorandum states that it is customary for XXXXX to contract with a transport company for the delivery of a mobile home from XXXXX to the customer's site in XXXXX (even where title to the mobile home passes to the customer in XXXXX This being the case, benefits resulting from damage in transit would be payable to XXXXX by the transport company. Assuming that there is no agency relationship between XXXXX and the customer, it would follow that the transport company would be supplying the delivery to XXXXX It therefore, cannot be said that two supplies are being made to the customer by two different suppliers. Accordingly, the application of this factor, while not in any way conclusive of a single or multiple supplies, only resolves the question of a single supplier and a single recipient.
Of course, if the customer makes his own arrangements for delivery, XXXXX would have no involvement in the supply of delivery and the contract between the customer and XXXXX would not contain a "delivery included" clause which would have to be reflected in the price charged for the mobile home including setup. In this case, the conclusion would be that we have two suppliers and one recipient which, by the nature of the transactions, would constitute two separate supplies; one of a used mobile home including setup made by XXXXX and one of transportation made by a carrier.
From our application of the first three factors in the policy paper it is our conclusion that XXXXX is not making separate supplies of delivery and setup to the customer providing that XXXXX rather than the customer, contracts with the freight company for delivery. Rather, XXXXX is making a single supply of a used mobile home to the customer. We do have a concern that, in the case of the customer acquiring title to the mobile home prior to taking possession, an argument could be made that XXXXX is providing a single supply of a mobile home prior to the change of title and then several other supplies (i.e., delivery and setup) after title changes. As you can see, there is some doubt as to whether the courts would view a single or multiple supplies in that case. Nevertheless, we have no concern that a single supply exists in the case where title and possession take place simultaneously, i.e., when the terms of the contract are fulfilled.
Because of the doubt expressed with regard to the situation of title being held by the customer prior to delivery of the mobile home from XXXXX we feel that the additional questions in the policy paper should be considered. We will only consider the case where title of the mobile home is in the name of the customer and delivery from XXXXX is arranged by XXXXX We will not deal with the situation where the customer arranges his own transportation of the used mobile home from XXXXX as this is clearly a separate supply to the recipient.
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 can be argued that the customer's needs are to purchase a used mobile home setup on his lot in XXXXX When he makes his selection, he is prepared to pay the price requested, including delivery and setup in order that these needs are fulfilled. He would not, nor could not, merely acquire the transportation element since such would be of no utility to the customer by itself. He could however, acquire the used mobile home, including setup elements by themselves but, by necessity, would also have to acquire the delivery of the used mobile home so that the mobile home would be of utility to him. He may acquire the delivery by itself from the transportation company or, as is evidenced by the sample contract provided, pay one lump sum for the used mobile home including delivery and setup. In other words, to satisfy his needs, all three elements (mobile home, delivery and setup) must be acquired by the customer. No one element by itself would be of utility to the customer without the others. Accordingly, the answer to this question would indicate a single supply of a used mobile home including delivery and setup.
2. Is the provision of a particular element contingent on the provision of another element?
The question here is whether the acquisition of a used mobile home is dependent upon the acquisition of the delivery and setup of the mobile home at the customer's site. While it is indicated that the setup can only be acquired from XXXXX the acquisition of delivery of the mobile home from XXXXX to the customer's site appears to be at the option of the customer. The customer may opt to pay one all inclusive price for the used mobile home including delivery and setup or he may opt to acquire the delivery service elsewhere. We find it difficult to conclude that the acquisition of the mobile home is contingent on the acquisition of delivery when the latter acquisition is optional. Accordingly, the answer to this question would indicate two supplies by XXXXX one of a used mobile home, including setup, and a second supply of delivery. Although we are inclined to take this approach where delivery is at the option of the purchaser, we also feel that, in practical terms, the purchase of the mobile home, including the setup, and delivery are contingent on each other as is evidenced by the decision made by the customer in virtually all cases.
Of course where the customer makes his own arrangements for delivery, the contract will not specify that the price includes delivery and the price will be reduced accordingly
3. Is the customer made aware of the specific elements (in detail) that are part of the package?
Considering the sample contract provided, the customer is, in fact, made aware of the specific elements of the acquisition under the terms of the contract ("Price to include delivery, block and level to XXXXX
However, the customer is not made aware of the details of those elements. For instance, the customer will not know how the mobile home is to be transported nor the exact cost. These same comments can be said of the setup. XXXXX may perform the setup themselves or, presumably, they may contract the work out. The answer to this question would therefore, indicate a single supply of a used mobile home including delivery and setup.
On balance, the answers to the above three questions indicate that all three elements are part of a single supply.
Conclusion
Having applied all the tests outlined in the policy paper we have arrived at the following conclusions:
1. When a customer purchases a used mobile home from XXXXX and the contract specifies "price to include delivery and setup", XXXXX is making a single supply of the used mobile home if title to the mobile home passes to the customer only after all conditions of the contract are fulfilled.
2. When a customer purchases a used mobile home from XXXXX with the same contract terms but title passes to the customer prior to delivery of the mobile home, we still feel that XXXXX is making a single supply of a used mobile home but the details of a particular transaction should be considered on a case by case basis.
3. When a customer purchases a used mobile home from XXXXX but arranges his own delivery, XXXXX is making a single supply of a used mobile home including setup. The delivery, of course, will be a separate supply by the supplier providing the delivery service.
With regard to consignment sales by XXXXX we agree that there are two simultaneous transactions for GST purposes and that the above comments will apply on the sale by XXXXX to a customer.
If additional information is required, please contact Gerry O'Reilley at (613) 954-4397.
H.L. Jones
Director
General Tax Policy
Policy and Legislation
Excise/GST
Reg XXXXX
sign-off: Mitch Bloom