27 February 1996 GST/HST Interpretation 11640-3[14] - Supply of Drivers' Services

                                                                        Telephone #: (613) 954-8585

                                                                        Fax #: (613) 990-1233

                                                                        File #: 11640-3

                                                                        s. 133, 142, 165, 169
Sch. VI/V/7, VI/VII/6

I refer to XXXXX E-mail messages of February 8, 1996, addressed to Mr. Tom Alley, formerly of the Services Unit, Special Sectors Division, and February 14, 1996, addressed to Mr. Randy Nanner of my staff, regarding the application of the Goods and Services Tax (GST) to supplies of drivers' services to international freight transportation companies (either resident or non-resident). The services involve driving trucks from Canada to the United States. This issue was also discussed with XXXXX XXXXX on February 15, 1996, during a telephone conversation with Mr. Garry Ryhorchuk of my staff.

Paragraph 142(1)(g) of the Excise Tax Act (Act) deems a a supply of a service to be made in Canada if the service is, or is to be, performed in whole, or in part, in Canada. The trucks are being driven from Canada to the United States. Therefore, the supplies of drivers' services are deemed to be made in Canada under the provisions of paragraph 142(1)(g).

I understand that Mr. Alley previously advised XXXXX that the services do not qualify for zero-rating under the provisions of Schedule VI, Part VII, section 6 to the Act. The drivers' services are not considered to be freight transportation services.

I will now discuss the tax status of the supplies:

•   When the drivers' services are supplied to resident freight transportation companies, the services are subject to the GST at 7% under the provisions of subsection 165(1) of the Act. The resident freight transportation companies, if registered, would be eligible to claim input tax credits (ITCs) under the provisions of subsection 169(1) of the Act for the GST paid or payable.

•   When the drivers' services are supplied to non-resident freight transportation companies, the services are subject to the GST at 7% under the provisions of subsection 165(1). The services do not qualify for zero-rating under the provisions of Schedule VI, Part V, section 7 to the Act in view of the exclusion in paragraph 7(e) for services that are in respect of tangible personal property that is situated in Canada at the time the services are performed. The non-resident freight transportation companies, if registered, would be eligible to claim ITCs under the provisions of subsection 169(1) for the GST paid or payable.

In XXXXX XXXXX E-mail message of February 14, 1996, she raised the question of which person to look at when determining if a supply of a service is primarily for consumption, use or enjoyment in Canada and thus excluded from zero-rating under Schedule VI, Part V, section 7. Please refer to Draft Policy Statement P-180, which states, in part, that "effective June 10, 1993, the Department will only look to the consumption, use or enjoyment of the non-resident recipient of the supply, except in those circumstances when it can be demonstrated that the service was principally acquired for the consumption, use or enjoyment of another person at the recipient's expense."

If you have any questions or require further information, please contact Mr. Ryhorchuk at (613) 952-6743 or Mr. Randy Nanner at (613) 952-8810.

H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Policy and Legislation Branch