12 August 1997 GST/HST Interpretation HQR0000597 - GST on Consigned Units

                                                                        August 12, 1997

Dear XXXXX

Thank you for your letter dated March 8, 1997 with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your proposal on the sale of recreational vehicles (RV's) and subsequent telephone conversation of August 7, 1997 with the undersigned concerning this matter. We apologize for the delay in responding to your letter.

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows.

Statement of Facts

1. XXXXX is registered for GST purposes and is engaged in the business of buying, selling, trading, consigning and storing vehicles and RV's.

2. XXXXX proposes to enter into contracts with private owners ("owners") to provide services to the owners with respect to the sales of RV's to third party recipients.

3. The contract (copy of Service Agreement provided) will indicate that XXXXX will, for a pre-arranged fee, provide the following:

a) display the owner's unit for a minimum of XXXXX days and, in the event of a breach of the agreement, the owner will pay XXXXX XXXXX dollars per day storage from the commencement of the agreement,

b) demonstrate the unit to prospective third party recipients,

c) negotiate a bill of sale (copy of Sales Agreement provided) that both parties sign as XXXXX does not have the authority to accept an offer. Any amount owing over a fixed amount shall be deemed to be XXXXX earned service fee. XXXXX shall advise the owner of all offers received,

d) secure a deposit and full payment on behalf of the owner,

e) place the secured funds in a trust account in XXXXX name,

f) provide lien searches,

g) maintain the RV in presentable condition.

4. The owner shall maintain fire, theft and comprehensive insurance while the RV is in XXXXX possession. The vehicle is left with XXXXX "at the risk of the owner".

5. The owner shall set the price and control the sale.

6. Once a bill of sale is signed by the third party recipient and the owner, the owner authorizes XXXXX to deduct their earned service fee from the trust proceeds. The balance due shall be paid to the owner.

Ruling Requested

Is XXXXX responsible for collecting and remitting the GST (if any) payable on the sale of the unit?

Ruling Given

Based on the facts set out above, we rule that XXXXX as a GST registrant, would be required to charge and collect GST from the owner of the unit for the earned service fee it receives in respect of the sale of the unit as well as the storage charges XXXXX may receive as a result of a breach of the Service Agreement. XXXXX would report this GST as tax collected/collectible on its GST return.

Where the owner of the unit is a GST registrant and the supply of the unit is made in the course of a commercial activity, the owner would be required to collect and remit GST from the buyer based on the value for consideration for the supply pursuant to subsection 165(1) of the Excise Tax Act. Where the owner of the unit is not a GST registrant there would be no GST collected and remitted on the value for consideration for the supply.

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 transactions for which you requested a ruling. We have included a copy of GST Memorandum 1.4 with our letter.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact the undersigned at (613) 952-3413.

Yours truly,

T.R. Côté
Rulings Officer
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
Policy and Legislation Branch