21 April 1998 GST/HST Interpretation HQR0001024 - Flowers by Wire

                                                                        GST/HST Rulings and Interpretations
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Vanier, Ontario
K1A 0L5

I refer to XXXXX E-mail message of January 13, 1998 (copy attached), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to flowers ordered at a location in Canada for delivery at another location, which may be in or outside Canada. Please accept my apologies for the delay in this response.

This type of transaction normally consists of the following elements, as follows:

1. the customer ordering the flowers from a local florist (Florist 1);

2. Florist 1 ordering the flowers from a wire service;

3. the wire service placing an order for the flowers with a florist located in the other location (Florist 2); and

4. Florist 2 making a supply of the flowers to the wire service and delivering the flowers to the consignee at the other location.

Generally, Florist 1 will indicate the following charges on the invoice to its customer:

1. the charge for the flowers;

2. the charge for the delivery service;

3. the GST and the provincial sales tax, where applicable, or the HST.

A determination must first be made as to the nature of the supply is there a single supply of flowers or are there two supplies, a supply of flowers and a supply of a delivery (wire) service?

Policy Statement P-077 (Single and Multiple Supplies) issued August 8, 1993, outlines three questions which can be asked, as follows:

1. If the customer did not receive all of the elements would each, in itself, be in the context of this transaction, of any use to the customer? [if yes, likely multiple supplies, if no, a single supply]

2. Is the provision of a particular element contingent on the provision of another element? [if yes, likely a single supply, if no, multiple supply]

3. Is the customer made aware of the specific elements (in detail) that are part of the package? [if yes, likely multiple supplies, if no, single supply]

The flowers would not be of any use to the customer without the delivery service. Therefore, the answer to question 1 is "no". The customer would not be purchasing the flowers unless there was a delivery service. The answer to question 2 is, therefore, "yes". As the customer is made aware of the specific elements (in detail) that are part of the package (the elements are listed on the invoice), the answer to question 3 is "yes".

The answers to questions 1 and 2 indicate a single supply while the answer to question 3 indicates multiple supplies. Taken as a whole, there is a single supply of flowers being made by Florist 1, the wire service and Florist 2.

The "place of supply" of the flowers must now be determined. As there are various scenarios possible, I will deal with each of the scenarios separately.

1. Customer orders flowers, for delivery to another location in Canada, from Florist 1

The supply of the flowers is deemed to be made in Canada under the provisions of paragraph 142(1)(a) of the Excise Tax Act (Act). Under the provisions of section 144.1 of the Act and Schedule IX, Part II, section 1 to the Act, the supply of the flowers will be deemed to be made in the province where the supplier makes the flowers available to its customer. For example, a customer orders flowers from Florist 1 (located in Saskatoon, Saskatchewan) and instructs Florist 1 to have the flowers delivered to a person in Halifax. As the flowers are made available in a participating province (Nova Scotia) to the customer, the supply of the flowers is subject to the HST at 15%.On the other hand, if a customer orders flowers from Florist 1 and instructs Florist 1 to have the flowers delivered to a person in Edmonton, the supply will be subject to the GST at 7% because the flowers are being made available in a non-participating province (Alberta) to the customer.

2. Customer orders flowers, for delivery to a location outside Canada, from Florist 1

The supply of the flowers is deemed to be made outside Canada under the provisions of paragraph 142(2)(a) and, as a result, is not subject to the taxes under Division II of the Act.

3. Florist 1 orders the flowers from a wire service

Provided the wire service is, or is required to be, registered for GST/HST purposes (whether resident or non-resident), the wire service is required to charge and collect the GST at 7% if the supply of the flowers is deemed, under paragraph 142(1)(a), to be made in Canada and the flowers are made available in a non-participating province (section 144.1 and Schedule IX, Part II, section 1). However, if the supply of the flowers is deemed, under paragraph 142(1)(a), to be made in Canada and the flowers are made available in a participating province (section 144.1 and Schedule IX, Part II, section 1), the wire service will be required to charge and collect the HST at 15%. If the supply of the flowers is deemed to be made outside Canada under the provisions of paragraph 142(2)(a), the wire service (whether registered or not) is not required to charge and collect Division II taxes. In situations where the wire service is an unregistered non-resident, is not carrying on business in Canada, and the supply of the flowers is deemed to be made in Canada under paragraph 142(1)(a), the supply will be deemed to be made outside Canada under the provisions of subsection 143(1) of the Act. As a result, the unregistered non-resident wire service is not required to charge and collect Division II taxes.

4. Florist 2 making a supply of the flowers to the wire service (and delivering the flowers to a consignee in Canada)

5. Florist 2 is a registered resident and the wire service is a registered resident

The supply of the flowers is deemed to be made in Canada under the provisions of paragraph 142(1)(a). In addition, the supply is deemed to be made in a province pursuant to section 144.1 and Schedule IX, Part II, section 1. If the flowers are made available in a non-participating province, the supply is subject to the GST at 7%. If the flowers are made available in a participating province, the supply is subject to the HST at 15%.

6. Florist 2 is a registered resident and the wire service is a registered non-resident

The answer is the same as in a) above.

7. Florist 2 is a registered resident and the wire service is an unregistered non-resident

In this situation, a registrant (Florist 2), under an agreement between the registrant and an unregistered non-resident (wire service), is making a supply of tangible personal property (i.e., flowers) by way of sale to the wire service. Florist 2 is causing physical possession of the flowers to be transferred to a consignee in Canada. The flowers are being supplied to the consignee for no consideration. The supply of the flowers by Florist 2 to the wire service is, therefore, deemed to be made for "nil" consideration under the provisions of subparagraph 179(1)(c.2)(i) of the Act.

8. Florist 2 making a supply of the flowers to the wire service (and delivering the flowers to a consignee outside Canada)

The supply of the flowers is deemed to be made outside Canada under the provisions of paragraph 142(2)(a) and, as a result, is not subject to the taxes under Division II of the Act.

A new Question and Answer containing the above information is being inserted in both the GST and HST databases.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6743.

Garry L. Ryhorchuk
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Legislative References:           Sections 142, 143, 144.1, 165 and 179 of the Act
Schedule IX, Part II, section 1 to the Act
Policy Statement P-077 issued August 8, 1993
Policy Statement P-078 issued July 23, 1993
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GST Q&As Nos. 5a.97, 6a.50, 6a.176 and 3i.56