23 November 1998 GST/HST Interpretation HQR0000980 - Foreign Income and the Small Supplier Threshold

Dear XXXXX

Thank you for your letter of September 18, 1997, which has been forwarded to us from XXXXX TIS office concerning the small supplier threshold under the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) and your client's operations. We apologize for the delay in responding to your request.

Interpretation Requested

In your letter, you have stated that your client who is a landed immigrant earns income in Canada as a self-employed actor (estimated at XXXXX in 1997) and is also employed as an actor in XXXXX United States XXXXX (earnings estimated at $100,000 U.S. in 1997). It is your understanding that under XXXXX U.S. XXXXX tax laws, the income that is earned in XXXXX U.S[.] XXXXX is considered to be "employment income with business expenses' deductions". You would like to know whether or not the U.S. income should be included as part of the total consideration for taxable supplies when you make the determination as to whether or not your client exceeds the small supplier threshold.

Interpretation Given

In determining whether or not a person is a small supplier, a person must include the total consideration for taxable supplies both inside and outside Canada (i.e., including those that are zero-rated under Schedule VI to the Excise Tax Act (ETA) and excluding financial services, supplies by way of sale of capital property of the person or associate, and consideration attributable to the sale of goodwill of a business).

The calculation to determine whether your client is within the small supplier threshold or exceeds it, is based upon an amount that consists solely of taxable supplies. Subsection 123(1) of the ETA defines a supply as "the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift, or disposition." A "service" is defined under subsection 123(1) of the ETA as "anything other than property, money, and anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person." In a situation where your client is an "employee", as defined under subsection 123(1) of the ETA, rather than self-employed, his or her acting services would not be considered "a service" for the purposes of the ETA.

A "taxable supply" is defined under subsection 123(1) of the ETA as "a supply that is made in the course of a commercial activity." The definition of "commercial activity" includes "a business, an adventure or concern in the nature of trade." According to subsection 123(1) of the ETA, a business "includes a profession, calling, trade, manufacture, or undertaking of any kind whatever ... but does not include an office or employment." For GST/HST purposes, when your client is a self-employed actor, he is engaging in the commercial activity of making a taxable supply of his acting services. However, in a situation where your client is an employee, he is not making a "taxable supply" as defined by the ETA, as the performance of his duties as an employee is not "a supply made in the course of a commercial activity."

Under subsection 148(1) of the ETA, generally a person and its associates qualify as a small supplier throughout any calendar quarter and the following month if the total consideration for taxable supplies made inside or outside Canada (including those that are zero-rated under Schedule VI to the ETA and excluding financial services, supplies by way of sale of capital property of the person or associate, and consideration attributable to the goodwill of a business) does not exceed the small supplier threshold (i.e., $30,000 or $50,000 where the person is a public service body) in the preceding four calendar quarters. If, in any one calendar quarter, the GST/HST taxable sales exceed the threshold amount (either as the result of one supply or cumulative supplies in the same calendar quarter), the person is no longer a small supplier immediately before that time the transaction occurs that causes the person to exceed the threshold.

In Canada, performers are normally considered to be self-employed and their income is included as part of the total consideration for taxable supplies when they are determining whether or not they are small suppliers. Based on the information in your submission, you have stated that in the United States your client is an employee. For GST/HST purposes, provided that the income earned in the United States is properly treated as employment income, these foreign revenues are not to be included in determining the person's status as a small supplier.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8806.

Yours truly,

Robert Bowman
A/Rulings Officer
General Operations Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

References GST Pamphlet:     Basics for Self Employed Performing Artists

1 Note a policy has been proposed which, once adopted by the Department, will result in a modular home, subject to certain criteria, being treated as meeting the definition of "mobile home" in subsection 123(1) of the ETA.

2 Note all references to Sites in this document should be read as referring not only to the land designated as a particular site on the bare land strata plan but also as referring to any land not subject to the exclusionary provision following paragraph (c) in section 7 of Part I of Schedule V to the ETA.

1 The Draft Regulations (which include the proposed entering into force provisions) are also attached to this letter.

1 Les modules usagés ne créent pas de CTI et ne posent pas de problèmes.