26 March 2001 GST/HST Interpretation 30107 - Place of Supply of Boat Brokerage Services

Dear XXXXX:

Thank you for your letters dated January 11th, and April 18th, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of boat brokerage services.

Your letters have been transferred from the XXXXX Technical Interpretation Services Centre to the Border Issues Unit of the General Operations and Border Issues Division of the Excise and GST/HST Rulings Directorate for response.

The following information was taken from your letter and your web site (XXXXX):

•   XXXXX (CANCO), a division of XXXXX is registered for GST/HST purposes with business number: XXXXX.

•   CANCO operates a boat brokerage business and is situated in the participating province of XXXXX.

•   CANCO enters into agreements with boat vendors to locate buyers for their boats. In all cases title to the boat remains with the vendor until it is sold to the purchaser. Pursuant to the agreement, the vendor pays a commission to CANCO upon the sale of the boat.

Interpretation Requested

You request an interpretation regarding the GST/HST status of the following supplies:

1. Brokerage services supplied by CANCO where CANCO brokers a boat for a person who is a resident of a participating province?

2. Brokerage services supplied by CANCO where CANCO brokers a boat for a person who is resident in a non-participating province?

3. Brokerage services supplied by CANCO where CANCO brokers a boat for a client who is not resident in Canada?

4. Brokerage services supplied by CANCO where CANCO brokers a Canadian owned sailboat to a person who is not resident in Canada?

5. Brokerage services supplied by CANCO where CANCO brokers a boat owned by a person who is not resident in Canada to a Canadian resident buyer.

6. Brokerage services supplied by CANCO where CANCO brokers a boat owned by a person resident in a non-participating province.

Interpretation Given

General Information

Based on the information provided, CANCO performs the brokerage services at least in part in Canada. Subsection 142(1)(g) of the Excise Tax Act (the "Act") deems a supply of a service to be made in Canada if the service is performed in whole or in part in Canada.

A taxable supply of a service made in Canada is generally subject to GST/HST at the rate of 7% (15% when made in a participating province: Nova Scotia, New Brunswick or Newfoundland) on the value of the consideration for the supply unless the supply is zero-rated (taxed at 0%).

Section 5 of Part V of Schedule VI to the Act is the only relevant zero-rating provision for the supply of services of the nature described above. The brokerage services are only zero rated by virtue of section 5 of Part V of Schedule VI to the Act where the services are supplied to a non-resident person and are in respect of a supply that is made outside Canada.

Section 144.1 and Schedule IX to the Act contain the provisions of the Act that are used to determine whether the supply of the boat brokerage service is made in a participating or non-participating province. Section 144.1 of the Act provides that a supply is deemed to be made in a province if it is made in Canada, and is, under the rules set out in Schedule IX to the Act, made in the province. Section 144.1 also states that a supply made in Canada that is not made in a participating province is deemed to be made in a non-participating province. Paragraph 2(a) of Part V of Schedule IX to the Act deems a supply of a service to be made in a province if all or substantially all (90% or greater) of the Canadian element of the service is performed in that province. Where 90% or more of the services performed by CANCO in relation to a particular brokerage service are performed in a participating province, the service is deemed to be made in that province and subject to HST at 15% if not zero-rated.

Where the application of paragraph 2(a) of Part V of Schedule IX is inconclusive, paragraph 2(b) of Part V of Schedule IX to the Act deems a supply to be made in a province if the place of negotiation of the supply is in the province and it is not the case that all or substantially all of the service is performed outside the province. Section 1 of Part I of Schedule IX to the Act defines the "place of negotiation" of a supply to be "... the location of the supplier's permanent establishment at which the individual principally involved in negotiating for the supplier the agreement for the supply ordinarily works ...". Based on the information provided, the place of negotiation for supplies made by CANCO is in the province of XXXXX. Therefore, where greater than 10% of the service is performed in the province of XXXXX, the supply of brokerage services are subject to HST at 15% provided the services are not zero-rated.

It should be noted that where the supply of a brokerage service made by CANCO to a Canadian resident recipient is subject to HST at 15%, the recipient may be entitled to a rebate of the 8% provincial component of the HST provided the criteria in section 261.3 of the Act are met.

Interpretation 1

Where greater than 10% of the services are performed by CANCO in XXXXX, the supply of boat brokerage services to the resident of a participating province by CANCO are subject to HST at a rate of 15%.

Interpretation 2

Interpretation 2 is the same as interpretation 1. The determination of the place of supply of a service is based on where the service is performed. Whether the Canadian resident vendor is resident in a participating province or a non-participating province does not impact the place of supply of a service or the determination of the relevant rate of GST/HST on the supply of the services.

Interpretation 3

The supply of a boat brokerage service is zero-rated when supplied to a non-resident person provided the service is in respect of a supply that is made outside Canada.

The relevant provisions that may deem the supply of the property to be made outside Canada are paragraph 142(2)(a), and subsection 143(1) of the Act.

Paragraph 142(2)(a) of the Act deems a supply by way of sale of tangible personal property (a boat) to be made outside Canada in circumstances where the property is delivered or made available to the recipient of the supply at a place outside Canada.

Subsection 143(1) of the Act, which overrides section 142 of the Act deems a supply of tangible personal property made in Canada by a non-resident person to be made outside Canada unless:

1. the supply is made in the course of a business carried on in Canada by the non-resident; or,

2. the non-resident is registered for GST/HST purposes at the time the supply is made.

Where the supply to the non-resident is not zero-rated under the provisions of section 5 of Part V of Schedule VI to the Act and greater than 10% of the services are performed by CANCO in XXXXX, the supply of boat brokerage services to the non-resident is subject to HST at a rate of 15%.

Interpretation 4

Interpretation 4 is the same as interpretation 1.

Interpretation 5

Interpretation 5 is the same as interpretation 3.

Interpretation 6

Question 2 and 6 are the same. Interpretation 6 is therefore the same as interpretation 2.

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 Canada Customs and Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8812.

Yours truly,

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