8 May 1995 GST/HST Interpretation 11665-4-1[1] - Application of GST to the Supply of Property Tax Certificates Issued Electronically by the to Callers Through a 1-900 Telephone Number

Dear XXXXX:

This is in response to your memorandum of February 14, 1995, to Ms Donna Harding of this unit in which you ask for our comments on a draft interpretation addressed to XXXXX of the Department of XXXXX. The subject of XXXXX December 29, 1994 enquiry to your office is in respect of the application of GST to the supply of property tax certificates issued electronically by the XXXXX to callers through a XXXXX

We have reviewed the information submitted with your request and agree with your interpretation that the supply of property tax certificates by the XXXXX maintains its exempt status, even though it is XXXXX who issues the invoice to callers in respect of the supply.

On June 4, 1993, we obtained a legal opinion on an agreement involving XXXXX and a sponsor of a XXXXX Many of the issues dealt with at that time are similar to this particular case. Under that agreement, XXXXX agreed to provide the sponsor with a 9 XXXXX through which callers could access, via XXXXX the sponsor's entertainment service.

 XXXXX

We concur with this position that a person should not be considered a "supplier" on the basis that the person issues an invoice to a recipient of a supply. As such, we share your opinion that the supply of property tax certificates in question is being made by the XXXXX and is exempt even though it is XXXXX who collects the fees in respect of this supply.

Certain provisions of XXXXX clearly support this view. As such, we suggest that the following extracts from the XXXXX and the XXXXX be included under the facts outlined in respect of XXXXX . (Please note that the following has been extracted from the XXXXX and may not be up-to-date. Where required, the following should be revised to reflect the current wording of the XXXXX and the XXXXX .)

1. Section 1 of the XXXXX defines "Minister" as "the Minister of XXXXX and includes anyone designated by him to act on his behalf."

2. Subsection 19(1) of the Act states that "upon payment of the fee prescribed by regulation, the Minister shall issue a certificate showing (a) at the date of the certificate, the taxes and penalty owing to the XXXXX upon real property ..."

3. Subsection 19(1.1) of the Act states that "The Minister may issue a certificate under subsection (1) by sending a facsimile of the certificate by telephone transmission."

4. Subsection 19(1.2) of the Act states that "A facsimile referred to in subsection (1.1) is valid for all purposes."

5. Subsection 19(2) of the Act states that "The signature of the Minister on a certificate issued under subsection (1) may be printed, stamped, or otherwise mechanically produced."

6. Subsection 12(1) of the XXXXX (Regulations) states that "The fee for a certificate or a facsimile of a certificate under subsection 19(1) of the Act is XXXXX "

7. Subsection 12(2) of the Regulations states that "Notwithstanding subsection (1), where a request for a certificate under subsection 19(1) of the Act is made using the computer assisted tax certificate XXXXX , the fee for a facsimile of the certificate is XXXXX."

Although your draft reply is technically correct, we offer the following suggestions with respect to its content. These suggested changes are minor.

1. In the third paragraph on page 2 of your draft reply you state that "In our telephone conversations, you have stated that XXXXX is to supply to the XXXXX the hardware technology and XXXXX , through an agreement with the XXXXX , the software technology to make this system work."

As indicated under Clause 1b) of the agreement between the XXXXX of XXXXX and XXXXX , XXXXX does provide software as well. As such, we suggest that you revise the wording of this paragraph to reflect this fact.

2. We suggest that you use quotation marks when quoting excerpts so as to clearly differentiate between what is being quoted and what is being paraphrased from the agreements submitted to your office by the XXXXX .

3. XXXXX is occasionally referred to as XXXXX . Since both the XXXXX and the XXXXX are between the XXXXX and XXXXX , all references should be made to XXXXX .

4. The last sentence of Clause 4 under the heading "The XXXXX and XXXXX should read "All applicable service ... will be deducted ... and a cheque for the remaining balance shall be issued and remitted to the Minister."

5. The first sentence under the heading " XXXXX between XXXXX and the XXXXX should read "In this agreement, XXXXX ... agrees to allow ... the XXXXX , to provide a message ...".

6. Under the heading XXXXX and the XXXXX , we suggest that you add "Clause 2.1 Title to such XXXXX shall pass to XXXXX immediately upon the XXXXX providing an XXXXX to XXXXX ."

7. The statement XXXXX shall bill Callers and collect GST on behalf of the XXXXX ." should be added to the information provided in respect of Clause 8.2(b).

8. With respect to the first paragraph of page 5 of the draft reply, we suggest that it be moved from the statement of facts and to the analysis. We offer the following comments with respect to this paragraph. Although it appears that clause 3.1 of the agreement between XXXXX and the XXXXX contradicts clause 4 of the agreement between XXXXX and the XXXXX , this is not necessarily the case. Clause 1 of the agreement between XXXXX and the XXXXX states that in providing this service to the Minister in accordance to the terms of the Act " XXXXX shall serve as the Minister's main point of contact with the public utilities and regulatory agencies ..." The Act allows XXXXX to act on behalf of the Minister. Their agreement specifically stipulates that XXXXX is the main contact with public utilities. Hence, amounts paid to XXXXX are paid to the Minister. This is supported by the verbal agreement between XXXXX and the XXXXX . Although the second paragraph of page 5 should remain in the statement of facts, we suggest that it be revised since its current wording is unclear. We suggest that it be revised to read "During our conversation of February 13, 1995, you stated that XXXXX will not issue a cheque payable to the XXXXX . Rather, XXXXX will issue a cheque payable to XXXXX for accounts receivable, less its service fee. This process was agreed to through a verbal agreement between XXXXX and the XXXXX ."

9. The question posed under "Interpretation Requested" is unclear. We suggest that it be revised to read "Should XXXXX charge GST on the XXXXX fee it collects from a caller for their use of the XXXXX to request a property tax certificate?"

10. The first sentence under "Interpretation Given" is unclear. We suggest that it be revised to read "The XXXXX fee collected from a caller by XXXXX is a fee for a property tax certificate issued by the XXXXX " which is exempt under paragraph 20(c) of Part VI of Schedule V to the ETA.

11. The last sentence of the first paragraph under number 2 of the "Analysis" should be revised to read "The XXXXX will not be required to collect tax on the payment received from XXXXX , the purchaser of the accounts receivable.

(Please note an "Analysis" is written as support to the position taken by the Department in preparing a response to an enquiry and is not to accompany the outgoing reply to the client.)

12. The last sentence of the second paragraph under number 2 of the analysis should be revised to read "However, no GST will be charged to the XXXXX for these services, since the XXXXX is not required to pay GST."

13. We suggest that the paragraph following number 3 be replaced with "It is the Department's view that, in the fact situation described, the XXXXX is the supplier of property tax certificate to the caller and that, with respect to that supply, XXXXX does not act as agent of or make the supply on behalf of the XXXXX . XXXXX is merely providing the medium or acting as a "courier" for the XXXXX not unlike a courier providing a delivery service for a supplier of a product or service."

14. Under the heading "Conclusion", we suggest that you revise the first two sentences of the last paragraph to read "The fact that the consideration of XXXXX is collected through intermediaries, on behalf of the XXXXX should not change the tax status of the exempt supply of a property certificate. This payment remains the consideration for an exempt supply of a property tax certificate made by the XXXXX ."

Under the heading "Issue" you indicated that you could not find any precedent nor administrative policy for this type of situation. However, this matter was addressed in two letters issued in October 1993 by GST Rulings and Interpretations in response to enquiries that are similar in nature. One enquiry was received from XXXXX and the other from the XXXXX GST District Office. These letters would have given you some guidance in preparing a reply to XXXXX request for confirmation regarding the status of property tax certificates that are electronically supplied. However, for some unknown reason they were not uploaded to the GST Rulings database, as is required of all GST rulings and interpretations issued by Headquarters. We apologize for this oversight, and will ensure that this information is uploaded to the database as soon as possible. We have attached a copy of these letters for your reference.

In addition, you may wish to review two letters currently available on the database. (I believe they were not on the database at the time of your request to us.) The first letter is addressed to Mr. Malcolm Thurlbeck, Financial Policy, Revenue Canada on August 9, 1994 from Mr. J.A. Venne, GST Rulings and Interpretations. This letter is in regard to the supply of tax forms via an electronic database network and the transfer of accounts receivable to XXXXX . (Please note that in this particular case, XXXXX is acting as agent of the XXXXX or XXXXX ) The second letter, dated August 26, 1994, is addressed to XXXXX of the XXXXX District Office. It deals with the sale of accounts receivable by the XXXXX .

We trust these comments are of assistance to you. Should you wish to discuss this further, please call me at (613) 954-3551 or Lynn Renner, Policy Officer (613) 952-9262.

Yours truly,

Marilyn Viger
Manager
Governmental Sectors/Federal Provincial Relations
GST Rulings and Interpretations

Attachments

c.c.:      J.A. Venne
Lynn F. Renner XXXXX