30 August 1999 GST/HST Interpretation HQR0001737 - Proof of Export of Used Motor Vehicles

Dear XXXXX

Thank you for your fax transmission of March 11, 1999 sent to XXXXX concerning the tax treatment of your members' supplies of used motor vehicles to unregistered non-residents used car dealers. More particularly, you wish to confirm what documents constitute proof of export of used motor vehicles to the U.S, under the Excise Tax Act. R.S., c. E-13, s. 1 (the Act)[.] I have been asked to respond accordingly.

The facts as I understand them are as follows[:]

•   A Canadian registered motor vehicle dealer (Canco) sold a motor vehicle to a (unregistered) U.S. motor vehicle dealer (USco);

•   The USco takes delivery of the motor vehicle in Canada;

•   USco transports it (drives it) into the United States;

•   Upon entry into the United States, USco obtains the necessary import documentation from U.S. Customs;

•   USco then registers and "titles" the vehicle in the State where the vehicle has been brought into.

Interpretation Requested

Specifically you requested answers to the following three questions:

1. Is GST required to be charged by the Canadian dealer on the sale (to U.S. dealers)?

2. If not, are U.S. Customs Form 7501, confirming the vehicle's proper importation into the United States and a copy of the State title registration for the vehicle, evidence acceptable to Revenue Canada of the export of the vehicle, so that GST need not to (be) collected and remitted on the sale?

3. In the event that # 2's documentation is insufficient, is there other documentation that would be acceptable as proof that the vehicle was exported and thereby not require the GST registrant Canadian dealer to charge GST on the sale?

Interpretation Given

Based on the information provided above, I shall respond to each of your questions as posed:

1. Is GST required to be charged by the Canadian dealer on the sale (to U.S. dealers)?

Before determining if the Goods and Services/Harmonized Sales Tax (GST/HST) applies to a particular transaction, it is necessary to determine the place where the supply was made, e.g., were the goods delivered or made available outside Canada or in Canada.

According to the facts, the supply of the motor vehicle made by Canco to USco is made in Canada.

Supply made in Canada

Subsection 142(1) of the Act deems certain supplies of tangible personal property to be made in Canada. Pursuant to paragraph 142(1)(a), a supply of goods by way of sale is deemed to be made in Canada if the property is, or is to be, delivered or made available in Canada to the recipient of the supply. Although the goods are delivered or made available in Canada to the recipient and subject to the GST/HST, the supply may nonetheless qualify for zero-rating (i.e., subject to the GST/HST at 0%) under the provisions of Schedule VI, Part V, section 1 to the Act.

Zero-rated supplies

Under Schedule VI, Part V, section 1, a supply of tangible personal property (other than alcohol, beer/wine and tobacco products) made by a supplier to a recipient (other than a consumer) who intends to export the property may be zero-rated if all of the following conditions are met:

•   the recipient exports the property as soon after the property is delivered by the supplier to the recipient, as is reasonable having regard to the circumstances surrounding the exportation, and where applicable, to the normal business practice of the recipient;

•   the property is not acquired by the recipient for consumption, use or supply in Canada before the exportation of the property by the recipient;

•   after the supply is made and before the recipient exports the property, the property is not further processed, transformed or altered in Canada, except to the extent reasonably necessary or incidental to its transportation, and

•   the supplier maintains evidence satisfactory to the Minister of the exportation of the property by the recipient.

Therefore, in consideration of the above information, the supply of the motor vehicle made by Canco to USco may be zero-rated by virtue of Section 1 of Part V of Schedule VI to the Act if all of the conditions set out above have been met.

Your two other questions are as follows:

2. If not, are U.S. Customs Form 7501, confirming the vehicle's proper importation into the United States and a copy of the State title registration for the vehicle, evidence acceptable to Revenue Canada of the export of the vehicle, so that GST need not to (be) collected and remitted on the sale?

3. In the event that # 2's documentation is insufficient, is there other documentation that would be acceptable as proof that the vehicle was exported and thereby not require the GST registrant Canadian dealer to charge GST on the sale?

The following response combines both questions 2 and 3.

Documentary proof of export

As mentioned above, in order for the supply of the motor vehicle to be zero-rated, the supplier must maintain satisfactory evidence of the exportation of the property by the recipient.

For this purpose, there are several documents that the Minister may consider as proof of export of the property. A list of such documentation, although not exhaustive, enumerates different documentation which serve as evidence of exportation of property. This list is included in appendix "A" to the GST/HST Memoranda Series 4.5.2, copy enclosed, and includes U.S. Customs Form 7501, that must be filled out at the moment of exportation from Canada. The additional documentation such as a copy of the registration of the motor vehicle in a particular State, although useful to the supplier, is not a requirement for GST/HST purposes.

I trust that the above information adequately responds to your request.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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, I have also 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) 957-8220.

Yours truly,

Daniel E.B. Chamaillard,
Senior Technical Analyst
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate