11735-1(LFR)
11849-6(XXXXX[)]
Dear XXXXX
This is in response to Mr. XXXXX letter of February 7, 1994 in which he asked for our comments regarding the application of GST to the supply of marriage licences by marriage licence issuers in the province of XXXXX[.] We apologize for the delay in this response.
XXXXX letter to us is as a result of a November 1, 1993 enquiry received by your office from XXXXX[.]
Before addressing the matter of whether a GST registrant issuer is required to remit tax on the supply of marriage licences effective January 1, 1991, we looked at the facts of the case to establish whether the supply of marriage licences was made by an issuer as agent of XXXXX or the issuer him/herself. The supply of a marriage licence by XXXXX is exempt of GST pursuant to paragraph (c) of section 20 of Part VI of Schedule V to the Excise Tax Act (ETA).
As you are aware, it has always been the department's position that the existence of an agency relationship is a question of fact and law. The onus remains on the parties involved in any transaction to determine if, in fact, an agency relationship exists. To that end, the department is not in a position to provide a GST ruling where the existence of an agency relationship is questionable. However, having reviewed the information (e.g. Marriage Licence Issuer Manual; The Marriage Act and The Marriage Regulations, etc.) provided to us by XXXXX it is our opinion that marriage licence issuers are acting as agents of XXXXX when they issue marriage licences in the province of XXXXX[.] As such, the supply of marriage licences by issuers to individuals planning to marry is exempt. The service provided by issuers to XXXXX on the other hand, is taxable.
We have based this opinion upon the following:
Statement of Facts
1. Article 92 of the Constitution Act, 1867 states that "In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next herein-after enumerated; that is to say, ... 12. The Solemnization of Marriage in the Province ...".
2. Legislation respecting the Solemnization of Marriage in the province of XXXXX is The Marriage Act (the Act).
3. An "issuer" is defined in section 2 of the Act as "an issuer of marriage licences appointed under this Act and includes a deputy issuer so appointed;".
4. Section 19 of the Act states that "Forms of marriage licences shall be supplied by the director, and marriage licences shall be issued to persons requiring them by persons named by the minister for that purpose ...". "Minister" is defined as "the member of the Executive Council to whom for the time being the administration of this Act is assigned;". This being the Minister of XXXXX[.]
5. Marriage licence issuers are appointed by the Deputy Minister of XXXXX, as delegated by the Minister, and are notified in writing of their appointment by XXXXX[.]
6. Section 20 of the Act states that every issuer will forward a weekly return, in a prescribed form, to the director respecting all licences issued by him during the preceding week. The director is the person designated by the minister as director.
7. Subsection 21(2) of the Act provides that "Every issuer, shall, when called upon by the director, make a sworn return of all licence forms at any time supplied to him and shall return all forms in his possession if so required ...".
8. Section 22 of the Act provides that the Lieutenant Governor in Council may make regulations prescribing the sum to be paid by every issuer to the director for each form received; the time and manner in which this sum is to be paid and the fee that every issuer is entitled to receive from every person requiring a licence.
9. The Marriage Regulations, as amended on March 25, 1992, provides that every issuer will pay a fee in the amount of XXXXX for each form of licence before he receives it from XXXXX and is entitled to receive the amount of XXXXX from each person requiring a licence.
10. Section 26 of the Act states that "Issuers and clergy may take declarations and administer oaths for the purposes of this Act".
11. A form entitled "Marriage Licence Issuer Application Form" is used by individuals applying to XXXXX. The following statement appears on the application form:
"I, ___________ of __________ in the province of XXXXX hereby apply for appointment as a marriage licence issuer at _________________ in the province of XXXXX
In submitting this application, I am fully aware of the responsibilities involved and if appointed, will perform my duties as a marriage licence issuer in accordance with the requirements of The Marriage Act of XXXXX"
The application, which includes this declaration, is dated, signed and submitted to XXXXX by the applicant.
12. Marriage licence forms are issued by issuers in the name of XXXXX[.]
13. Paragraph (c) of section 20 of Part VI of Schedule V to the ETA provides that a supply of a licence, permit, quota or similar right is exempt of GST when supplied by a government or municipality or by a board, commission or other body established by a government or a municipality.
14. Prior to July 1992, GST was not collected by some issuers of marriage licences because they were advised by the Director of The Marriage Act at that time that a principal/agent relationship did exist.
15. Based upon GST Policy and Legislation's opinion that an agency relationship did not exist between XXXXX and its marriage licence issuers, XXXXX District GST office issued a GST application ruling on November 4, 1992 stating that the supply of marriage licences by a GST registered issuer is taxable.
Opinion Requested
Is the supply of a marriage licence by an issuer appointed by XXXXX to couples planning to marry in the province of XXXXX subject to GST?
Opinion Given
It is our opinion that the supply of a marriage licence by an issuer appointed by XXXXX to couples planning to marry in the province of XXXXX is an exempt supply pursuant to paragraph (c) of section 20 of Part VI of Schedule V to the ETA.
The matters on which a determination is made are primarily ones of fact. At the time when the department first issued its GST application ruling on November 4, 1992 concerning the GST treatment of marriage licences by issuers in the province of XXXXX, all pertinent information was not established. The department's decision was based upon information obtained verbally, together with three known facts as stated in the ruling.
Documents related to this case have since been forwarded to GST Policy and Legislation. With the review of this additional information, including various documents governing the sale of marriage licences in XXXXX our decision respecting the relationship between XXXXX and marriage licence issuers is revised.
Analysis
Paragraph (c) of section 20 of Part VI of Schedule V to the ETA provides that a supply of a licence, permit, quota or similar right is exempt of GST when supplied by a government or municipality or by a board, commission or other body established by a government or a municipality.
"Government" is defined in subsection 123(1) of the ETA as "Her Majesty in the right of Canada or a province;". XXXXX is part of the provincial entity of XXXXX[.]
In order to determine the status of the supply of marriage licences by issuers in the province of XXXXX we first had to establish whether the supply is made by an issuer as "agent" of XXXXX or by the issuer him/herself. If an agency relationship exists between an issuer and XXXXX the supply would be exempt under paragraph (c) of section 20 of Part VI of Schedule V to the ETA as XXXXX would be considered to be making the supply of marriage licences, not the issuer.
It is evident from the information provided that issuers of marriage licences in the province of XXXXX are agents of XXXXX. They possess the essential qualities of an agent/principal relationship and it is clear from the documentation submitted for our review (e.g. the marriage licence form) that issuers are agents of XXXXX[.]
The right to marry cannot be purchased from XXXXX for resupply by issuers to couples intending to marry in the province of XXXXX[.] It is XXXXX through its appointed issuers, who supplies this right.
The marriage form itself clearly indicates that it is XXXXX who supplies the right to marry. The name XXXXX and XXXXX appear at the top of the provincial marriage licence form. Issuers do not alter the form in any way either prior to or at the time of issuance. They simply complete the form by writing in the information required of the province. The fact that a receipt (e.g. cash register receipt) may be issued in the name of the issuer and not XXXXX is not an indication that the issuer is trading on his/her own account. The licence itself may be viewed as a provincial receipt.
Marriage licence forms are supplied by XXXXX to its issuers in blank form. Issuers pay an amount to XXXXX for each form they acquire. As such, issuers take ownership of the forms. The forms themselves are, however, merely the vehicle used by XXXXX in granting its approval to marry in the province of XXXXX[.] Unused forms are of no value.
The province of XXXXX approves or gives permission to marry through the issuance of marriage licences. This right is afforded to individuals under its provincial legislation respecting the solemnization of marriage (i.e. the Act). The right to marry is controlled by the province of XXXXX and is supplied by it through XXXXX a department operating within the provincial entity of XXXXX[.]
Therefore, even though several marriage licences may be supplied by XXXXX to each issuer, the right associated with each licence does not pass to the issuer.
Further evidence that the right to marry is supplied by XXXXX is reflected in subsection 28(1) of the Act. Specifically subsection 28(1) of the Act states that "no issuer shall issue a licence for his own marriage ...". This provision of the Act precludes an issuer from using a marriage licence for his/her own personal use. As such, it supports our view that the issuer does not acquire the right to marry from XXXXX whether it be for his/her personal use or for resupply to others. The issuer merely acquires blank forms.
Although it is apparent from the above that issuers of marriage licences in the province of XXXXX are agents of XXXXX for purposes of the Act, we looked at the essential qualities of an agency relationship.
The three essential qualities of an agency relationship, together with our comments on each as they relate to the case at hand, are as follows:
1. The Principal's Control of the Agent's Actions (the principal exercises a greater degree of control over the actions of the agent than in a non-agency relationship)
Although an agent is generally under the direction and control of the principal, the degree of control that XXXXX exercises over its issuers is not typical of an agent/principal relationship. Due to the restrictions imposed under the Act, an issuer has no discretionary power in carrying out his/her duties as issuer of marriage licences. Their power is restricted by the Act. The provisions of the Act ensure that XXXXX has full and tight control over all of the activities of its issuers in their capacity as issuers.
An example of how XXXXX restricts the activities of its issuers is reflected in section 22 of the Act. This section of the Act states that an issuer is required to pay XXXXX a certain amount of money for each marriage licence form they acquire. In accordance with The Marriage Regulations, the cost of each form is currently XXXXX. Under the section 22 of the Act, issuers are restricted in the amount that they can charge to individuals requiring a marriage licence. Presently, issuers are entitled to charge a maximum of XXXXX per marriage licence. Issuers cannot charge any more than this amount. There is absolutely no flexibility in terms of the maximum amount they can charge. Their maximum earnings (i.e. XXXXX on each licence issued) are set and controlled by XXXXX[.] Remuneration for their services to XXXXX is commission-based and is regulated by the province. An issuer cannot charge any more for the sale of a licence than what is legislatively dictated to him/her by XXXXX[.]
2. Consent of both Principal and Agent (agency is a fiduciary relationship where authority is granted to the agent by the principal, whether expressly or implied, to provide for representation on the principal's behalf)
Both XXXXX and issuers consent to their role as principal/agent. This is evidence through the submission of an application form to XXXXX by an individual and the approval and appointment thereafter of the individual as "issuer".
In applying for the position of "issuer", the applicant clearly indicates that he/she agrees to perform the duties of marriage licence issuer in accordance with the requirements of the Act. A declaration to that affect is specifically detailed on the application form. XXXXX in appointing issuers pursuant to section 19 of the Act accepts and authorizes individuals to carry out those activities required of them under its provincial legislation.
Because control of issuers under the Act is so stringent, a person appointed by XXXXX as "issuer" has no flexibility in terms of performing the duties required of him/her for purposes of the Act. An issuer has no alternative but to perform his/her duties in the best interest of XXXXX[.] As a result of this restrictive control, an issuer's relationship with XXXXX can be nothing but fiduciary in nature. As issuers are legally bound to comply with the legislative provisions of the Act, they are forced to issue marriage licences solely in the interest of XXXXX. Issuers cannot put their own interests before those of XXXXX[.] The Act does not allow it.
3. Authority of the Agent to Affect the Principal's Legal Position (a person acting in the capacity of agent is empowered by the principal to act on behalf of the principal)
It is clear from their appointment, that issuers are given the authority to affect XXXXX legal relationship with third parties.
A marriage licence entitles a couple to marry in the province of XXXXX[.] This entitlement is afforded under provincial legislation. A marriage licence issued by an issuer is recognized and honored by XXXXX through the solemnization of marriage. Marriage commissioners and clergy are appointed/authorized under the Act by XXXXX to solemnize marriage. Because issuers have the ability to bind XXXXX for purposes of the Act, issuers are given the power to affect XXXXX legal position with respect to the issuance of marriage licences.
On the basis that the essential qualities of an agency relationship do exist between XXXXX and its issuers, it is our opinion that their relationship is one of principal/agent. As such, the supply of marriage licences by issuers in the province of XXXXX is exempt. Therefore, neither the collection or remittance of GST on supplies of marriage licences made prior to or commencing July 1992 is required.
Marriage licences are issued by issuers appointed by XXXXX does not issue marriage licences. The service provided to XXXXX of issuing licences is represented by the XXXXX "commission" that issuers retain for each licence issued. Generally, a fee paid as "commission" is a percentage paid to a person from the profit of goods or services sold on behalf of another person. In this particular instance, however, XXXXX pays commission to its issuers directly through the collection of XXXXX from those individuals acquiring a marriage licence.
Although the service of issuing licences to couples planning to marry is subject to GST, XXXXX, as part of the provincial government entity, is not required to pay GST on its taxable purchases. This service to XXXXX is provided in the course of an issuer's commercial activity. As such, a GST registered issuer would be entitled to claim input tax credits to the extent that he/she incurred GST in the supply of this service.
We trust that these comments will be of assistance to you. Should you wish to discuss this issue further please contact me at (613) 954-3551 or Lynn Renner, Policy Officer at (613) 952-9262.
A more detailed analysis regarding the determination of principal/agent relationship between XXXXX and its issuers is attached for your reference.
Yours truly,
Marilyn Viger
Manager - Tax Policy
Governmental Sectors and Federal/Provincial Relations
Tax Policy - Special Sectors
GST Policy and Legislation
| c.c.: |
J.A. Venne
L. Renner (Doc. 525) |
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