26 June 2000 GST/HST Interpretation 3014 - Tax Status of

Thank you for your letter of August 6, 1999, sent to the XXXXX XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of XXXXX sold by third party retail locations (retailers). The XXXXX has asked us to respond directly to you.

It is our understanding that the XXXXX ("the Committee") is a charity that is registered for GST/HST purposes. The Committee sells XXXXX from its sales outlets and via retailers during XXXXX.

Letters issued to the Committee in October 1997 and December 1998 by Revenue Canada (which is now the Canada Customs and Revenue Agency) indicated that XXXXX sold by a charity during XXXXX will be exempt from GST/HST. More specifically, the letters advised that property XXXXX or services sold by a charity in the course of a fund-raising activity are exempt of GST/HST pursuant to the provisions of section 3 of Part V.1 of Schedule V of the Excise Tax Act (i.e., the ETA), provided that:

•   the charity does not make supplies of such property or services on a regular or continuous basis throughout the year, or for a significant portion of the year, and

•   the recipient is not entitled to receive the property or services on a regular or continuous basis throughout the year or for a significant portion of the year.

Furthermore the previously mentioned letters advised that, generally, property XXXXX or services sold by a charity, that is a GST/HST registrant, on a regular or continuous basis throughout the year would be subject to tax.

Interpretation Requested

You stated in your letter that XXXXX (tangible personal property) sold by retailers are not purchased from the Committee; rather they are sold on a consignment basis and you have enquired as to whether retailers are required to charge GST/HST on the Committee's XXXXX sold to customers during XXXXX XXXXX.

Interpretation Given

Based on the limited information provided, there appear to be two possibilities: a retailer purchases the XXXXX from the Committee and resells them on their own account, or alternatively, a retailer does not purchase the XXXXX from the Committee but rather sells them on behalf of and as agent of the Committee.

It is our position that a person will be considered and treated for GST/HST purposes as an agent based on fact and principles of law. Therefore, we cannot rule on whether an agency relationship exists, particularly where the relationship in question is already established or ongoing. For this reason, we are providing this interpretation describing the two possibilities. In addition, Policy Statement P-182 Determining the Meaning of the Terms "Agent" and "Agency" as Used In Relevant Sections of the Excise Tax Act and Identifying Those Factors That May Be Used To Determine the Likelihood of Agency is included for your reference.

At law, a supply made by a person to a customer as agent of another person (i.e., the principal), is treated as a supply by the principal. Accordingly, if a retailer did not purchase the XXXXX from the Committee, but rather, sold them to customers as agent of the Committee, than the Committee would be viewed as the supplier and the exempting provision described above (section 3 of Part V.1 of Schedule V) might apply to the sale to the customers.

However, if a retailer was not acting as agent of the Committee but rather purchased the XXXXX from the Committee and sold them on its own account, the retailer would be viewed as the supplier of the property, and if registered for GST/HST purposes, would be required to charge tax whether the property was sold to customers throughout the year or only during XXXXX.

Pursuant to section 168 of the ETA, if the agreement between the Committee and the retailer sets out that the retailer did not take ownership of the XXXXX until the time that they were sold to the customer, tax would not be due on the supply from the Committee to the retailer (if it were a taxable supply) until the time the retailer makes a supply to the customer. It should be noted, however, that section 3 of Part V.1 of Schedule V may apply to exempt the sale by the Committee to the retailer provided the requirements of that provision as described above are met.

In summary, the supply from the Committee to the retailer may be exempt if the provisions of section 3 apply, whereas the sales by the retailer, unless it is acting as agent of the Committee, will be taxable.

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) 952-0420.

Yours truly,

Lorrie Grannary
Charities, NPO's and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate