TELEPHONE 954-8585
FACSIMILE 990-1233
11755-13(sn)
XXXXX August 1995
Dear XXXXX
Further to correspondence of January 25, 1995, received from XXXXX of your office, her telephone conversation of April 5, 1995 with Suzanne Leclaire and our receipt of additional information provided on the same day, the following summarizes our comments with respect to the application of GST to coins denominated in US. currency which are collected by the XXXXX ("the Town") in its coin-operated parking meters.
Background
1. The Town operates coin-operated parking meters.
2. Due to the Town's proximity to the US. border, the parking meters are frequently used by American visitors using coins denominated in US. currency.
3. The parking meters request $.25 for the supply of the right to park for a specified period of time. The parking meters will accept both US. and Canadian $.25 coins.
4. The XXXXX District Office received a ruling request from XXXXX as to the liability of the Town to remit GST on the Canadian dollar value of the US. coins removed from the parking meters.
5. After verbal consultations with Lalith Kottachchi on December 21, 1994, a response was sent to XXXXX stating that based on the facts presented, the Town was liable to remit GST on the Canadian dollar value of the US. coins removed from the parking meters.
6. The XXXXX District Office has now received a second letter from XXXXX requesting clarification and further explanation as to the basis of the ruling given.
Questions
1. XXXXX takes the position that the amount that is legally payable for the right to park is $.25 Canadian and that there is no requirement for any purchaser to pay in US. denominated currency. XXXXX makes the statement "... consideration for the supply is the Canadian value."
2. XXXXX believes that the amount in excess of the $.25 Canadian should be treated as a voluntary payment akin to tips for purposes of GST, on the basis that the amounts paid are not consideration payable for a supply.
3. XXXXX has asked for legislative authority to support the position taken in the ruling.
4. XXXXX asks how GST would be applied if coins from other countries are used in the meters and those coins have a Canadian dollar value of less than $.25.
Discussion
Subsection 165(1) is the basic taxing provision of the Excise Tax Act ("the Act"). In part it states that "... every recipient of a taxable supply made in Canada shall pay tax ... equal to 7% of the value of the consideration for the supply." This subsection establishes who pays tax, the rate of tax, the circumstances under which tax is payable and the tax base. The tax base for the purposes of GST is the "value of consideration". This should not be confused with the actual consideration given for a supply. Although in many supplies the amount of consideration given and the value of consideration are the same, there will be instances where the two amounts are different. In such instances it is the value of consideration which is the base on which tax is calculated and not the amount of consideration actually given. Nowhere is this distinction made more clear than when the consideration being given for a supply is denominated in a foreign currency.
Section 159 of the Act states in part that "where the consideration for a supply is expressed in a foreign currency, the value of the consideration shall...be computed on the basis of the value of that foreign currency in Canadian currency." It is section 159 which is the legislative basis for the position taken with respect to the application of GST to US. denominated consideration received by the Town in its parking meters.
It is not significant that there is no legal requirement for a purchaser to pay in US. currency. The fact of the matter is that he has done so and when this occurs, the value of consideration, which is the base on which GST must be calculated, is adjusted pursuant to the provisions of section 159.
If the consideration deposited in the parking meter was a foreign currency having a value of less than $.25 Canadian, the value of consideration would be adjusted to the lower Canadian dollar amount by the provisions of section 159. It is the Canadian dollar equivalent of the foreign currency denominated consideration which becomes the tax base on which GST is calculated.
Section 159 acts to ensure that the gains and losses a person realizes on the translation of foreign currency received as consideration for a taxable supply, are included in the tax base. If the provisions of section 159 had not been included in the Act, it could be argued that the gain or loss on translation of foreign currency denominated consideration should not be included in the GST tax base, as has been suggested by XXXXX in its comparison of the translation gain to tips, however, such is not the case.
Should you have any further questions on this issue, do not hesitate to contact one of the members of the Application Team in the Tax Provisions Unit. They are: Ken Mathews (613) 952-9585, Suzanne Leclaire (613) 954-7931 and Sara Nixon (613) 954-4397.
Yours truly,
H.L. Jones
Director
General Applications Division
GST Rulings & Interpretations - XXXXX
Mitch Bloom (signoff)
c.c.: Application Team
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