File: 11845-2
XXXXX
XXXXX July 11, 1995
This is in response to your series of fax transmissions to Pam Lafrance, formerly of this office regarding the application of the Goods and Services Tax (GST) to transactions entered into by the XXXXX with pig producers.
As per your memo of January 25, 1995, the facts of the case are as follows:
1) A producer who is registered for GST purposes enters into a contract with XXXXX
2) Under the agreement, the producer will levy a penalty of XXXXX a day per pig for pigs which have been selected for removal from the producer's location by XXXXX yet not removed by a specified date. This penalty is to cover the producer's costs for feed, water and shelter for the additional days the pigs remain at the producer's location.
3) Under the contract, title to the pigs transfers to XXXXX upon removal from the producer's facility.
4) A separate charge is also levied by the producer for vaccinations performed on the hogs.
5) Under the contract XXXXX will pay the producer for services of persons employed by the producer. XXXXX has no authority over the producer's staff but has the right to review and have input in the hiring of new employees and advise on the duties etc. of the staff. An invoice requesting payment is sent to XXXXX each month outlining employee numbers.
You have requested our assistance regarding the following issues:
1) What is the GST status of the penalties levied on XXXXX ?
2) What is the GST status of the vaccinations?
3) What is the GST status of the charge made for employee services?
It is our opinion that the late penalties and vaccination charges can be considered part of the consideration for the supply of the zero-rated hogs. Therefore the amounts levied for the penalties and vaccinations should also be zero-rated.
On the other hand the charge made for "employee services" is not considered to be part of the consideration for the supply of the hogs. In return for the amount charged, XXXXX receives a certain amount of control in the day to day operations of the producer's farm. XXXXX recieves some control in the hiring and assignment of duties. The consideration for the "employee services" is billed on a separate invoice on a monthly basis and cannot be directly related to the supply of any hogs. Therefore it is our opinion that the consideration for the supply of the "employee services" is subject to the GST at 7%.
If you would like to discuss this matter further, please do not hesitate to contact Ken Syer at (613) 952-9590.
Yours truly,
Enikö Vermes
Manager
Health Care, Goods and Services
GST Rulings and Interpretations
XXXXX
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