1 December 1998 GST/HST Ruling HQR0001136 - Application of the GST/HST to Commissions Paid for Services Relating to Slot Machines

Dear XXXXX

Thank you for your letter of March 23, 1998 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX received from XXXXX[.]

Statement of Facts

Our understanding of the facts, the transaction, and the purpose of the transaction is as follows:

1. XXXXX[.]

2. The following facts are taken from the Agreement:

•   XXXXX means a machine or device that allows a person to play a video lottery game by the insertion of money, and that falls within the meaning of "slot machine" under subsection 198(3) of the Criminal Code (Canada).

•   The XXXXX signs and fixtures provided by XXXXX for installation, at its expense, in XXXXX premises are the sole property of XXXXX[.]

•   XXXXX acknowledges that all monies received from VLTs, less winnings and the commission it is paid, are the property of XXXXX receives, holds and deals with the same as bare trustee.

•   XXXXX shall be entitled to no other remuneration with respect to services supplied pursuant to the Agreement except such amount by way of commission based on a percentage from time to time established by XXXXX XXXXX[.]

•   XXXXX agrees to provide the following services:

•   appoint one or more of its employees to attend training required by XXXXX in order to ensure that its employees are properly trained in the operation of the XXXXX and ensure that these employees will be available to make payments to players of winnings during the hours the XXXXX are open for business;

•   make payment of all winnings to which players are entitled;

•   deposit monies received from the XXXXX (less winnings and commissions) in an account designated by XXXXX and maintain current and accurate records of all amounts paid into a XXXXX by players, of all credits paid to players from any XXXXX and of all withdrawals of monies removed from any XXXXX[;]

•   be responsible for the physical security of and to exercise due diligence in the operation of the XXXXX[;]

•   replace ribbons and ticket stock; and adjust printers and coin mechanisms as instructed by XXXXX in the XXXXX[;]

•   post and display the rules of play, point of sale, redemption and other promotional material relating to XXXXX as designated by XXXXX[.]

3. XXXXX is a distributor for purposes of section 188.1 of the Excise Tax Act.

4. XXXXX is a crown agent and a prescribed registrant for purposes of subsection 188(5) of the Excise Tax Act.

Transaction

XXXXX provides payment (in the form of XXXXX commission of net sales) to XXXXX for the services provided under the Agreement.

Ruling Requested

Are the commissions paid under the XXXXX subject to GST?

Ruling Given

Based on the facts set out above, we rule that the services XXXXX provides to XXXXX under XXXXX are deemed not to be supplies pursuant to subsection 188.1(4) of the Excise Tax Act, therefore the commissions paid for those services under paragraph 6 of the Agreement are not subject to GST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST 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.

As you have requested, I am enclosing a copy of the relevant sections of the Excise Tax Act and Part I of the Games of Chance (GST/HST) Regulations.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-7947.

Yours truly,

Darlene Wladyka
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

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