30 March 2001 GST/HST Ruling 26702 - Carrying on a Business in Canada

Dear XXXXX

Thank you for the letter, from your firm, of July 13, 1999 (with attachments), and May 1, 2000 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) as it applies to the registration of XXXXX[.]

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) are as follows:

•   XXXXX an XXXXX, XXXXX, USA, is not registered for purposes of the GST.

•   The head office, management and control of the XXXXX are located in the USA.

•   XXXXX is an elected body of officials (similar to a mayor, treasurer, and council of a town or city), that represents the members of the XXXXX.

•   The band members own everything on the Reservation; the XXXXX acts for those band members.

•   The XXXXX owns XXXXX, situated in XXXXX XXXXX, USA.

•   XXXXX and XXXXX are separately incorporated, but only for payroll tax purposes.

•   The XXXXX supplies overnight accommodations, restaurant services, casino gaming activities, etc. Revenues from these operations exceed $30,000 per year.

•   XXXXX has a permanent establishment (sub-office) in XXXXX. The purpose of this office is to coordinate the Canadian advertising and marketing for XXXXX and to arrange free shuttle transportation for customers of the XXXXX.

•   XXXXX maintains a bank account in XXXXX. This account is used to pay their Canadian suppliers.

•   XXXXX offers a free shuttle service for its customers, between XXXXX and the Casino. Two return shuttle trips per day are provided. Customers using the shuttle service generally do not stay overnight at the casino. There is no contract or agreement between the XXXXX and the customer. Upon making a reservation with XXXXX, customers arrive at a pre-arranged pick-up point. They are provided with a "ticket" or "voucher", and must provide information, which the driver then presents to the Customs officer upon entry into the U.S.

•   XXXXX provides the transportation services to XXXXX collecting tax on the supply.

Ruling Requested

You would like confirmation that XXXXX is required to register, pursuant to subsection 240(1) or that XXXXX may voluntary register pursuant to subsection 240(3).

If a registrant, you would like to confirm that XXXXX would be entitled to claim ITCs in respect of:

1. GST paid to the supplier of transportation services that are provided free of charge by XXXXX to casino patrons; and

2. GST paid to other suppliers.

Ruling Given

Based on the facts set out above, we rule that XXXXX is not carrying on a business in Canada. XXXXX is purchasing transportation services and advertising services in Canada for its business outside of Canada. Therefore XXXXX is not required to register under subsection 240(1) of the Act. Also, since XXXXX is not engaged in any of the activities described in paragraphs 240(3)(a) and (b) of the Act, XXXXX is not entitled to register voluntarily.

Explanation

Subsection 240(1) of the Excise Tax Act (the Act) is the provision that requires every person who makes a taxable supply in the course of a commercial activity engaged in by the person in Canada, to register. With respect to the issue of mandatory registration for the GST/HST, only a person who is carrying on business in Canada, and who makes a taxable supply in Canada, is required to register. Based on the facts outlined above XXXXX is not considered to be carrying on business in Canada and is not, therefore, required to register.

On the issue of voluntary registration, paragraphs 240(3)(a) and (b) of the (aEA(Act contains the following relevant categories of persons who, while not required to register, may voluntarily register. They are:

1. Any person engaged in a commercial activity in Canada. This would include small suppliers or a non-resident who, while not carrying on business in Canada, is engaged in an adventure or concern in the nature of trade in Canada.

2. [(]a) A non-resident person who in the ordinary course of carrying on a business outside Canada regularly solicits orders for the supply by the person of goods for export to or delivery in Canada even though those activities may not constitute the carrying on of business in Canada,

(b) a non-resident who has entered into an agreement for the supply by the person of services to be performed in Canada,

(c) a non-resident who has entered into an agreement for the supply by the person of intangible personal property that is to be used in Canada, or that relates to real property situated in Canada or tangible personal property ordinarily situated in Canada or services to be performed in Canada.

XXXXX is not engaged in a "commercial activity" in Canada as per the definition of that term in subsection 123(1) of the Act. XXXXX doesn't solicit orders for the supply of goods for export.

XXXXX doesn't supply a service to be performed in Canada or intangible personal property that is to be used in Canada. Consequently, XXXXX is not entitled to register under paragraphs 240(3)(a) and (b) of the Act.

As to whether or not XXXXX would be able to claim input tax credits (ITC's) in respect of the GST paid to the suppliers, XXXXX is not a registrant and therefore cannot claim ITC's.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4294.

Yours truly,

Francine Ménard
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate