30 December 1998 GST/HST Interpretation HQR0000037 - Paragraph 3(c) of Part VII of Schedule VI to the Excise Tax Act

Dear Sir/Madam:

Thank you for XXXXX August 15, 1996, letter (with attachments) to this Directorate concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of air transportation service pursuant to paragraph 3(c) of Part VII of Schedule VI to the Excise Tax Act (the "Act"). We apologize for the delay in replying to your request.

Provisions for Interpretation

Paragraph 3(c) of Part VII of Schedule VI to the Act zero-rates the following supply:

"A supply of a passenger transportation service that is provided to an individual or a group of individuals and that is part of a continuous journey of the individual or group that includes transportation by air, where ...

(c) the origin of the continuous journey is within the taxation area, but outside Canada, and the recipient of the supply tenders the consideration for the supply at a place outside Canada".

Interpretation Requested

1. You enclosed an interpretation and a ruling issued to XXXXX[.] The letters to XXXXX concern the application of paragraph 3(c) of Part VII of Schedule VI to the Act. You are requesting that the ruling issued to XXXXX be rescinded.

2. You also enclosed a XXXXX letter issued to XXXXX. This letter also concerns the application of paragraph 3(c) of Part VII of Schedule VI to the Act. You are not satisfied with the XXXXX examples outlined in the letter. You state that any requirement which places XXXXX outside the direct control of the air carriers is unacceptable. It is your opinion that the XXXXX coupon should contain all the evidence required to support the conditions outlined in paragraph 3(c) of Part VII of Schedule VI to the Act. (The XXXXX coupon is the copy of the ticket that is retained by the carrier when the ticket is issued to the passenger.)

3. You request that "first enplanement in the United States" be the sole test to determine the tax status of the air transportation service described in paragraph 3(c) of Part VII of Schedule VI to the Act.

Interpretation Given

1. In regards to your request concerning a ruling, it should be noted that a ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. For your convenience, we have enclosed a copy of this section of the GST/HST Memoranda Series.

A GST/HST ruling applies only to the person who requests it or on whose behalf it is requested, and applies only to the specific activities described in the ruling. If the laws, regulations or policies that affect a ruling are changed, and these changes are publicly announced, for example in press releases from the Department of Finance, the GST/HST Memoranda Series or the GST/HST NEWS, the GST/HST ruling will no longer be binding on Revenue Canada effective from the date of the change.

The position of Revenue Canada concerning paragraph 3(c) of Part VII of Schedule VI to the Act continues to be that payment received by a Canadian travel agent from a client who has ordered the ticket from outside Canada, and paid for it by cheque, money order, or American credit card, mailed or supplied from outside Canada, will be considered as payment made outside Canada.

2. The Department has not changed its position with respect to documentation that is acceptable to support "tendered outside of Canada". Acceptable documentation includes:

(a) in the case of a cheque which has been mailed, a U.S. postmark;

(b) in the case of a money order, bank records to indicate that the money order was drawn from a U.S. account;

(c) in the case of a credit card, an unsigned U.S. credit card voucher would probably be an indication that the passenger initiated the transaction at a location other than the location of the travel agent residing in Canada. However, a signed credit card receipt would probably indicate that the individual was present at the time of purchase in Canada and that consideration was tendered in Canada.

Furthermore, this list is not all inclusive as Revenue Canada will accept any evidence that is reasonable and would provide some assurances that consideration was tendered outside Canada.

The Department considers that its present position is in accordance with paragraph 3(c) of Part VII of Schedule VI to the Act. It is our understanding that you have been discussing the modification of paragraph 3(c) of Part VII of Schedule VI to the Act with the Department of Finance.

3. Your request that "first enplanement in the United States" be the sole test to determine the tax status of the air transportation service described in paragraph 3(c) of Part VII of Schedule VI to the Act is a request for a modification of law. Modification of the law is the responsibility of the Department of Finance. It is our understanding that you have been in contact with the Department of Finance concerning this issue.

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 Cheryl Leyton at 613-954-5124.

Yours truly,

Victoria Szabo
Goods Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate
Policy and Legislation Branch
Enclosure