1 September 1999 GST/HST Interpretation HQR0001810 - Place of Supply - Section 142 of the Excise Tax Act (the "Act")

Dear Sir:

Thank you for your letter of May 20, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of gas compressors under the scenario outlined below.

The following information was provided in your correspondence and our subsequent telephone conversations:

•   ABC Company ("ABC") is a non resident company incorporated and located in the United States. ABC is registered for GST/HST purposes. ABC's primary commercial activities consist of the manufacture and sale of gas compressors.

•   XYZ Company ("XYZ") is a company incorporated and located in XXXXX[.] XYZ is registered for GST/HST purposes. XYZ's primary commercial activities consist of the manufacture and distribution of natural gas.

•   ABC has entered into a contract to supply XYZ with a gas compressor. The gas compressor is to be imported into Canada from the United States. XYZ will act as the "importer of record" for Canada Customs purposes (i.e., XYZ will be responsible for clearing the goods through Canada Customs under its importer number and paying any applicable duties and taxes). The gas compressor is to be used by XYZ at its natural gas distribution facility in XXXXX[.] The gas compressor will be transported by ABC to XXXXX by a common carrier via road or rail transport.

•   Under the terms of the contract, delivery of the gas compressor will be "FOB XYZ's facility XXXXX. Risk of loss associated with the delivery of the gas compressor remains with ABC until commencement of the unloading of the gas compressor at XYZ's facility XXXXX[.] XYZ will reimburse ABC for all transportation costs including insurance. Legal title to the gas compressor passes to XYZ at ABC's warehouse in the United States. The contract will be interpreted according to the laws of the XXXXX[.] Our reproduction of the facts presented in your correspondence does not indicate our acceptance of the method of accounting for duties and taxes outlined in fact point number three.

Interpretation Requested

In your submission you ask the following questions:

1. Is the supply of the gas compressor by ABC to XYZ deemed to be made in Canada under paragraph 142(1)(a) of the Act?

2. Since legal title to the gas compressor passes to XYZ in the United States, will the supply of the gas compressor by ABC to XYZ be deemed to be made outside Canada under paragraph 142(2)(a) of the Act?

3. Assuming the supply of the gas compressor was deemed to be made in Canada, would ABC be required to charge GST/HST under Division II of the Act even though XYZ acted as the importer of record and paid GST under Division III of the Act?

Interpretation Given

The contract outlining the terms of this particular supply was not provided for our consideration. The following interpretations are therefore made based on the facts presented in the incoming correspondence. These facts have been reproduced on pages 1 and 2 of this response.

1. Paragraph 142(1)(a) of the Act deems a supply of tangible personal property ("TPP") to be made in Canada if the TPP is, or is to be delivered or made available in Canada to the recipient of the supply. The terms of delivery of the contract are explicit; the gas compressor is sold on a delivered basis, free on board to the recipient's place of business in XXXXX Canada. The supply will therefore be deemed to be made in Canada pursuant to paragraph 142(1)(a) of the Act.

2. Under the circumstances of the supply, the Department's determination of whether the TPP is, or is to be delivered or made available in Canada to the recipient of the supply will not be affected by the fact that title to the property transferred outside of Canada.

3. ABC, being registered for GST/HST purposes is required to collect Division II tax on all taxable supplies which are not zero-rated, that are made or deemed to be made in Canada.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8532.

Yours truly,

Jeffrey Frobel
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate