Telephone #: (613) 954-8585
Fax #: (613) 990-1233
XXXXX File #: 11685-7(glr)
XXXXX s. 142, 218, 222, 225, 228, 232, 261
XXXXX August 28, 1996
I refer to XXXXX E-mail messages of July 11 and 25, 1996, and August 15, 1996, and XXXXX facsimile message of July 15, 1996, all addressed to Mr. Garry Ryhorchuk of my staff, concerning the Goods and Services Tax (GST) remitted to the Department by the above-referenced firm.
I understand that:
1. XXXXX is an unregistered non-resident located in XXXXX[.]
2. XXXXX applied to be registered for GST purposes. Registration was denied on the grounds the services supplied by XXXXX were performed wholly outside Canada (paragraph 142(2)(g) of the Excise Tax Act (Act)).
3. On XXXXX the Service Provider, entered into an XXXXX (Agreement) with XXXXX as agent of XXXXX. The commencement date of the service was XXXXX[.]
4. Article 8.2, paragraph b) of the Agreement states that XXXXX shall bill Callers and collect GST (under Division II) on behalf of the Service Provider. The amount of GST collected by XXXXX will be forwarded to the Service Provider and the Service Provider will be responsible for the remittance of GST to the appropriate government authority. XXXXX, as agent of XXXXX charges and collects the GST on behalf of XXXXX[.]
5. XXXXX has remitted the tax, under Account #XXXXX collected on its behalf by XXXXX but has not filed returns. [NOTE: Under the terms of the standard XXXXX the Service Provider, i.e., XXXXX is responsible for determining all of the (federal and provincial) taxes application to the provision of its services and which must be levied on a caller. XXXXX must notify XXXXX (in this case, XXXXX, as agent of XXXXX of the applicability of any such taxes and the appropriate rates thereof).]
6. XXXXX is requesting a refund of the amounts it has remitted to the Department which, as of August 19, 1996, total XXXXX, so that XXXXX can return the monies to XXXXX[.]
7. XXXXX and XXXXX have not accounted for the GST collected on behalf of XXXXX in their net tax calculations.
Subsection 225(1) of the Act deals with the calculation of net tax for a particular reporting period by a person. Paragraph (a) of the subsection provides that all amounts that became collectible and all other amounts collected by the person in the particular reporting period as or on account of tax under Division II are to be included in the calculation of net tax. Subsection 228(1) of the Act requires the person to file a return and calculate its net tax in the return. Subsection 228(2) requires that where the net tax is a positive amount, the person shall remit that amount to the Receiver General. Subsection 238(1) of the Act requires a registrant to file a return for each reporting period. Subsection 238(2) requires a non-registrant to file a return for a reporting period for which net tax is remittable, within one month after the reporting period.
XXXXX collected amounts as or on account of tax from XXXXX Canadian customers (the amounts were charged on the customers' telephone bills), however, the amounts were collectible as or on account of tax by XXXXX[.] The Department's position in this situation is that both the supplier XXXXX and the third party who collects amounts as or on account of tax XXXXX are obligated to include the amounts in their net tax calculations until one of them actually accounts for the amounts and remits any net tax remittable. The remittance by one of the parties discharges the liability of both.
As of August 19, 1996, XXXXX has remitted XXXXX to the Department. Therefore, XXXXX liability to account for this amount in its net tax is discharged.
However, you may wish to check the total amount remitted by XXXXX because there appears to be a discrepancy in the amount remitted for the period ending August 31, 1995. The XXXXX shows that the amount credited was XXXXX, while the XXXXX shows that the amount remitted was XXXXX. In any event, non-personalized GST returns accounting for XXXXX net tax should be processed to offset the credits so that the account balance is "zero".
Under the provisions of section 232 of the Act, XXXXX may refund or credit its Canadian customers for the amounts charged as Division II tax in excess of the amounts that were collectible (which would be the total amounts because the supplies were deemed to be made outside Canada and not subject to Division II tax). If XXXXX issues credit notes containing prescribed information, as required under subsection 232(3), XXXXX would be eligible to file a return for the reporting period in which the credit note is issued, claiming an adjustment for the amounts credited to its Canadian customers.
I would also like to point out that XXXXX Canadian customers would be eligible to file rebate claims under the provisions of section 261 of the Act for "Division II tax paid in error". The services supplied by XXXXX are deemed to be made outside Canada under the provisions of paragraph 142(2)(g) of the Act and, as a result, not subject to the tax under Division II. However, these customers would be required to self-assess Division IV tax under the provisions of section 218 of the Act if the service was not acquired for consumption, use or supply exclusively in the course of XXXXX customers' commercial activities.
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 Operations and Border Issues Division
GST Rulings and Interpretations
Policy and Legislation Branch
| c.c.: |
Randy Nanner GOBI #: 1815(REG)
Garry Ryhorchuk |
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