6 April 1998 GST/HST Ruling HQR0000943[1] - Purchase of Telemarketing Services

Dear XXXXX

Thank you for your letter of October 6, 1997, to the XXXXX Office which was forwarded to our office, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.

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

Statement of Facts

XXXXX provides specialized forms of group insurance coverage for members affiliated with a particular organization such as a bank, a large retailer, or an association (referred to hereafter as the XXXXX business). These activities are the same as regular group insurance policies as described in policy statement P-092 "Arranging For" As It Applies to XXXXX[.] In an XXXXX program there are additional "arranging for" efforts required after the initial group insurance policy is issued by XXXXX to the group policyholder. The group policyholder offers access to specialized insurance coverage at volume rates to its members in order to enhance the value of the membership relationship.

For purposes of this ruling, two of the group policyholders are the XXXXX XXXXX and XXXXX. XXXXX was engaged by XXXXX to conduct the telemarketing activities with respect to XXXXX policy with XXXXX and XXXXX were engaged by XXXXX to conduct the telemarketing activities with respect to XXXXX policy with XXXXX[.]

Transactions

1. A group insurance master policy is issued by XXXXX to the group customer (group policyholder) who makes the coverage available to its members (certificateholder) under the terms and conditions of the master policy.

2. The initial selling activities between a broker, a sponsor and insurance carrier that ultimately results in the issuance of an XXXXX group insurance policy are largely the same for both "regular" and XXXXX group insurance, as generally described in policy statement P-092 ("Arranging For" As It Applies to Group Insurance).

3. Telemarketing agencies are contracted by XXXXX to conduct the necessary insurance coverage-placing activities with the XXXXX group members.

4. The marketing process follows a predetermined script jointly prepared by XXXXX and the agency. XXXXX and/or the group policyholder may approve/monitor the marketing process.

5. Members of the XXXXX group are contacted by telephone and are made aware of the availability of the coverage by the telemarketer representative.

6. The telemarketer representative screens the eligibility of the prospective certificateholder for coverage and prepares the prospective certificateholder's insurance application during this process.

7. The completed applications are transmitted to XXXXX for final approval, underwriting and issue.

8. The telemarketing agency is generally compensated on a per-hour basis.

Ruling Requested

You request confirmation that the telemarketing services described in your submission, purchased by XXXXX to actively "arrange for" the issue and underwriting of insurance coverage for its specialized XXXXX insurance policies are exempt from GST/HST. A number of telemarketing firms are typically used across Canada, however only documentation regarding contracts with XXXXX and XXXXX with respect to XXXXX and XXXXX as the group policyholders.

Ruling Given

Based on the facts set out above and a review of the documents provided, we rule that the services provided by XXXXX, XXXXX and XXXXX with respect to XXXXX and XXXXX as the group policyholders, are services of "arranging for" pursuant to paragraph (l) of the definition of "financial service" in subsection 123(1) of the Excise Tax Act (ETA) and, consequently are exempt from GST/HST under Part VII of Schedule V to the ETA.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9577 or Duncan Jones at (613) 952-9210.

Yours truly,

Marilena Guerra
Rulings Officer
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
Policy and Legislation Branch