1 April 1998 GST/HST Interpretation HQR0000696[1] - Whether a Particular Person is an Agent

Dear XXXXX

This is in reply to your request for information concerning the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) and whether a particular person is an agent. We apologize for the delay in responding to your request and for any inconveniences the delay may have caused.

As discussed in our telephone conversation of April 3, 1998, although a ruling was requested we are unable to provide a ruling at this time as sufficient information was not provided and the requirements outlined in Chapter 1.4 of the GST Memoranda series have not been met. And as further discussed, the Department will not rule on whether an agency relationship exists where the relationship in question is already established or ongoing.

Rather, there must be a representation of fact as to whether agency exists, which will be relied on by the Department in ruling on the application of the GST. Enclosed for your perusal is draft policy statement P-182 for further information on whether agency may exist in a particular situation. However, we would like to provide you an interpretation.

Interpretation Requested

You stated posed or implied from the incoming letter.

Generally, from the letter, the sample costing sheet and sample interim billing, and our telephone conversation, an advertising agency XXXXX performs demonstration services for the producer of a food product. The service is performed in different retail stores throughout the country and consists of preparing the product so that it may be sampled by customers in the retail outlet, as well as promoting the product and distributing coupons. The producer XXXXX of the product provides the product directly to the agency or the agency purchases the product directly from the retail store, in which case it bills the producer for the amount.

As quoted in the letter, you ask if we are in agreement that the advertising agency is "an agent and that GST and, where applicable, HST does not have to be collected on the products which are re-billed?" and is "providing multiple supplies and, therefore, HST should only be collected on the services provided in the participating provinces?"

Interpretation Given

In regards to your first concern, whether agency exists in a particular situation is a question of fact, and each case must be examined in light of its own circumstances. As indicated above, policy statement P-182 contains information to assist in determining whether agency exists in a given situation.

Generally, the policy states that there are three essential qualities of agency: consent of both the principal and agent; authority of the agent to affect the principal's legal position; and, the principal's control of the agent's actions. These qualities and possibly certain indicators, where relevant (i.e. remuneration, ownership of property, liability of contract/for payment, accounting practice, best efforts, assumption of risk, alteration of property acquired, and use of property or service by the agent) assist in determining whether agency exists in a particular situation. It should be noted, however, that an independent contractor for services must be distinguished from an agent. Such persons are generally acting under a contract for specified services rather than an agency agreement, and any reimbursements would form part of the consideration for the supply of the services.

In regards to your second concern, it is a question of fact whether single or multiple supplies are made in a particular situation. Although generally, where a person contracts with another person for the provision of a specific service, even though the service may be performed in different provinces, it is the single supply of a service and not multiple supplies of services. Accordingly, if the supply is considered to be made in a participating province it will be subject to HST.

Section 144.1 of the Excise Tax Act ("the ETA") provides that a supply is deemed to be made in a province if it is made in Canada and is pursuant to the rules in Schedule IX to the ETA made in the province. A supply is deemed to be made outside the province in any other case. Finally, a supply made in Canada is deemed to be made in a non-participating province where the supply is not made in any participating province.

The general rule pursuant to section 2 of Part V of Schedule IX to the ETA is that the supply of a service is considered made in a province if all or substantially all of the service is performed in that province. If that is not the case, then the supply of the service is considered made in the province in which the place of negotiation of the supply is located, provided all or substantially all of the service is not performed outside of that province.

Finally, if the place of supply cannot be determined by the above section of the ETA, then section 3 of Part V of Schedule IX to the ETA provides that if the service is performed primarily in the participating provinces, it is considered made in the participating province in which the greatest proportion of the service is performed.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, 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 Memoranda Series, do not bind the Department with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9213.

Yours truly,

Susan Kissner
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate