12 November 1999 GST/HST Interpretation HQR0002001 - Sale by Auction of Motor Vehicles to Non-Residents

Dear XXXXX

Thank you for your facsimile of November 10, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply by auction of motor vehicles to non-resident purchasers.

In accordance with GST/HST Memoranda Series Section 1.4, an application ruling can only be issued with reference to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and where the taxpayer has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. We are pleased to issue you an interpretation which will elaborate on how the GST/HST applies to the questions raised in your letter.

The following information was provided in your letter:

1. XXXXX XXXXX are registrants for purposes of the Excise Tax Act (the "ETA"). The XXXXX carry on business in Canada as XXXXX, selling automobiles as agents on behalf of the automobile owners XXXXX[.]

2. Some of the automobiles sold at the auctions are purchased by non-residents of Canada, purportedly for export to the United States.

3. The XXXXX have executed elections as provided for in subsection 177(1.3) of the ETA.

4. At the time of sale, the only documents which the XXXXX (or the XXXXX have is an invoice and a purchase agreement for the automobiles. The XXXXX may also obtain a copy of the purchaser's Official Business Certificate from a state in the U.S. indicating that the purchaser is carrying on business in the U.S., an exemption certificate under the Motor Vehicle Dealers Act indicating that the purchaser is an "Out-of-Province" dealer and a certificate issued by the U.S. Department of Transportation indicating that the purchaser is a Registered Importer of motor vehicles into the U.S.

5. The XXXXX do not have at the time of sale other documents referred to in Appendix A of GST/HST Memoranda Series 4.5.2 Exports - Tangible Personal Property such as the importation documents required by the United States, copies from the U.S. regulatory authorities showing the automobiles have been licensed in the United States, an embossed copy of U.S. Entry Summary, Form 7501, U.S. Customs entry documents or U.S. Certificates of Disposition of Imported Merchandise (Form 3227).

Interpretation Requested

1. Subsection 165(3) of the ETA provides that the tax rate in respect of a taxable supply that is zero-rated is 0%. Would you please confirm that the time for determining if a supply is zero-rated is no later than at the time of sale.

2. At the time of sale the documents in the XXXXX possession will be the documents referred to in paragraph 4 above. Will you confirm whether those documents will be "evidence satisfactory to the Minister of the exportation of the property" within the meaning of section 1 of Part V of Schedule VI to the ETA.

3. If it is your view that the documents referred to in paragraph 2 above are insufficient to have the supply zero-rated, will you confirm that the XXXXX are required to charge and collect the 7% GST with respect thereto at the time of the sale.

Interpretation Given

The following interpretations will address the questions in the order in which they were presented. Each interpretation is based on the information provided in your incoming correspondence as reproduced on pages 1 and 2 of this letter.

Interpretation 1

Pursuant to subsection 168(1) of the ETA, tax in respect of a taxable supply is payable by the recipient of the supply on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due. Pursuant to the general rules in subsection 152(1) of the ETA the consideration for a supply becomes due on the earliest of:

•   the day of issuance of the supplier's invoice or the date of that invoice, whichever is the earlier;

•   the day on which, but for an undue delay in the issuance of the invoice by the supplier, the invoice would have been issued; and

•   the day on which, under a written agreement, the recipient is required to pay the consideration or part thereof to the supplier for the supply.

A supply is zero-rated at the time that tax is payable, provided that the conditions in section 1 of Part V of Schedule VI to the ETA are satisfied.

Interpretation 2

The documents outlined in paragraph 4 of the information provided would not, on their own, be considered evidence satisfactory to the Minister of the exportation of the property by the recipient for purposes of paragraph 1(d) of Part V of Schedule VI to the ETA. Appendix A of GST/HST Memoranda Series 4.5.2 Exports - Tangible Personal Property provides a non-exhaustive summary of documentary evidence of exportation.

Interpretation 3

The supply of motor vehicles is zero-rated at the time that tax is payable in respect of the supply where all the conditions in section 1 of Part V of Schedule VI to the ETA are met. Where the conditions in section 1 of Part V of Schedule VI to the ETA are not met, for example, where there is not sufficient evidence satisfactory to the Minister of the exportation of the property, the supply is not a zero-rated supply. If the supply is not zero-rated, subsection 165(1) imposes GST at a rate of 7% on taxable supplies made in Canada, subsection 165(2) imposes an additional tax with a resulting combined HST rate of 15% on taxable supplies made in a participating province.

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 Adrien Venne at (613) 954-7959.

Yours truly,

E.H. Gauthier
Director General
GST/HST Rulings and Interpretations Directorate
Policy and Legislation Branch