GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, Ontario
XXXXX K1A 0L5
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Subject:
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GST/HST APPLICATION RULING
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Dear XXXXX
This is further to our meeting on April 23, 1998 and the letter dated December 8, 1997 requesting a confirmation of the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain transactions made by your client XXXXX[.]
Our understanding of the facts is as follows.
Statement of Facts
1. XXXXX provides services as an agent and auctioneer to sell the vehicles of various principals to purchasers who participate at auctions.
2. Many of the principals that XXXXX represents are new and used automobile dealers or leasing companies all of whom are registered for purposes of the GST/HST.
3. Some of the supplies made by the principals through XXXXX or its subsidiaries at auctions are exported or are made to purchasers who are Indians. Under certain circumstances these supplies are zero-rated or relieved from tax.
4. XXXXX did not collect the GST/HST on the zero-rated supplies or those relieved from tax that it made on behalf of the principals however, in settling its accounts with the principals XXXXX included an amount equal to the GST/HST as if the supplies were taxable at 7% or 15% as the case may be.
5. As well, XXXXX collected 7% GST on behalf of the principals on certain supplies of automobiles however, it provided an amount equal to the 15% HST when settling its account with the principals.
6. The transactions which are the subject of this ruling took place after April 23, 1996, and for those that took place after March 1997, an election under subsection 177(1.3) of the Excise Tax Act (ETA) was in effect.
Ruling Requested
Can XXXXX or the principals (e.g. the automobile dealers who sell the cars through XXXXX obtain a rebate of excess amounts remitted to the Receiver General by the principals as or on account of net tax in situations where XXXXX passed on excess amounts even though the amounts were never collected from taxpayers.
Ruling Given
Based on the facts set out above, we rule that XXXXX is not entitled to a rebate of excess amounts it passed to the principals as agent. It is the principals who would be able to apply for a rebate under section 261 of the ETA to recover excess amounts that they have remitted as or on account of net tax. An example of this is where the principals have accounted for tax in respect of supplies for which they were not required to collect tax and on which they did not collect tax. The payment of the rebate is of course subject to statutory restrictions such as the applicable time limits. Furthermore, the principals must be able to provide sufficient documentary evidence that tax was not required to be collected on the supplies in respect of which they have accounted for tax (e.g. proof of recipient's Indian status and proof of delivery to a reserve or proper export documentation). Where the principals have remitted excess amounts as net tax for a particular reporting period that has already been assessed, the Minister would have to allow for any eligible rebate in reassessing the net tax for that reporting period in accordance with section 296 of 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 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.
Explanation
A rebate is available under section 221 of the ETA where a taxpayer paid an amount as or on account of tax in excess of the tax imposed under section 165 of the ETA or where a person who is required to collect tax under section 221 of the ETA remits an amount as or on account of net tax that exceeds what is required to be remitted for a reporting period.
In calculating funds owing to the principal, an agent may pass on the proceeds of the sales (including tax it collected on behalf of the principal) less any commissions that were applicable. Where an agent makes an error in calculating what it owes to the principal the resolution of the situation is a matter between the two parties.
XXXXX did not charge or collect excess amounts as or on account of tax from the purchasers of the vehicles. As well, it did not pay or remit an excess amount as tax or net tax. In situations where the principals remitted excess amounts of net tax because of the excess amounts provided by XXXXX the principals make seek recovery of these amounts.
Finally, please find attached a summary of this ruling that may be provided to dealers who are customers of XXXXX apprising them of the ramifications of changes to the GST/HST agency rules and their possible entitlement to a rebate under section 261 of the ETA.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0301.
Yours truly,
Dave Caron
Manager
General Operations Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate
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