2 September 1997 GST/HST Interpretation HQR0000631 - Sales of Used Recreational Vehicles (RVs)

Dear XXXXX

Thank you for your letter of April 7 1997 (with attachments) in which you requested a ruling on whether your client, XXXXX, is the supplier of the used RVs and is required to collect the Goods and Services Tax (GST) on the sale to the buyer. You also requested a ruling on whether section 177 (agents) and 274 ("GAAR") of the Excise Tax Act (ETA) apply to the proposed arrangement.

Our understanding of the facts, the proposed transactions, and the purpose of the transaction(s) is as follows.

Statement of Facts

XXXXX is in the "used recreational vehicle" business; and is the only significant dealer arranging for the acquisition of used RV's who does not normally take them on trade-ins for new RVs.

XXXXX obtains its business by advertising for individuals who want to sell used RVs.

These individuals are not using the RVs in commercial activity and they are not required to collect GST on the sale.

XXXXX proposes to enter into contracts with private owners of RVs. Under the contracts, XXXXX would provide service to the owners with respect to the sale of RVs. The proposed arrangements are as follows:

•   XXXXX would continue to advertise to find sellers of used RVs;

•   XXXXX would enter into a "Listing Agreement" (copy of agreement provided) with each seller;

the agreement would specify that:

•   a specific dollar amount (the "seller's price") which the Seller wishes to receive for the RV,

•   the name of the Finance company as well as a description of the year, make, model and serial number of the RV;

•   the Seller agrees to exclusively list and sell the RV through XXXXX will arrange for a bank or other financial institution ("Finance Co") to make a loan to the Seller in the amount of the Seller's Price (the loan will give Finance Co the right to seize the RV in the event of non-payment, but will otherwise be a "non-recourse" loan against the Seller);

•   XXXXX will guarantee re-payment of the loan in event of default and will also make interest payments on the loan;

•   XXXXX will advertise to find buyers of RVs; on finding a Buyer who wishes to purchase a used RV, XXXXX will enter into a "Referral Agreement" (copy of agreement provided) with the Buyer; once Buyer indicates a desire to purchase a specific RV, XXXXX will have the Buyer complete an "Offer to Purchase" (copy of Offer provided);

•   upon receipt of an offer, XXXXX will forward the Seller an "Offer to Purchase" on behalf of the purchaser. The Seller is under no obligation to accept the offer. However, if the offer is in the amount of the Seller's price, and the Seller refuses the offer, the agreement will be considered terminated and the Seller will be required to repay the loan to the finance company and pay compensation fees to XXXXX which are the total of:

•   reimbursement of the interest that XXXXX has paid Finance Co or has accrued on the loan to date, plus

•   reimbursement of the towing costs for the RV if XXXXX has paid such costs to bring it to XXXXX premises, plus

•   a fixed 10% of the Seller's Price (minimum $1000);

•   the Buyer and the Seller sign the "Offer of Purchase";

•   if the Seller accepts the "Offer to Purchase", the Seller will direct the Buyer to make the payment for the Seller to Finance Co on the Seller's behalf. The Seller, in turn, will execute a transfer of ownership of the RV to the Buyer;

•   the Buyer has agreed to pay XXXXX a fee for XXXXX brokerage services (the "Referral Fee").

This fee includes GST.

Prior to using the proposed arrangement, XXXXX was making sales on consignment of RVs and was required to charge and collect GST on the sale of RVs to the buyer.

Ruling Requested

Whether XXXXX XXXXX is the supplier of the used recreational vehicles (RVs) and is required to collect the GST on the sale to the buyer according to the proposed statement of fact.

Whether sections 177 and 274 ("GAAR") apply to the proposed arrangement.

Ruling Given

Based on the facts set out above, we rule that, provided XXXXX only involvement in the sale of a particular unit would be within the provisions of the arrangements as stated and provided that XXXXX does not take legal ownership of a unit from an owner, XXXXX will not be accountable for any GST payable on the sale of a unit from the owner to a buyer. We also rule that section 177 does not apply to the sale of the used RVs provided again that XXXXX only involvement in the sales of the used RVs is within the provisions of the arrangements stated in the letter.

As a result of the proposed transactions, in and of themselves, section 274 will not be applied to re-determine the tax consequences as described in the rulings given.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 952-8812.

Yours truly,

Mariette Leblanc
Acting Policy Officer
Industries Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate