22 October 2002 GST/HST Interpretation 35664 - Supply by Agent of On-line Registration

Dear XXXXX:

Thank you for your facsimile to the XXXXX GST/HST Rulings Centre of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your company's supply of on-line registration for your clients' events. Your request was forwarded to us for a response and we apologize for the delay in replying to your enquiry.

We attempted to contact you by e-mail on XXXXX, for further information regarding your request. Given that we have not received any additional information, the following general interpretation is provided to highlight the application of the GST/HST to transactions involving an agent. Although you supplied four scenarios involving resident and non-resident clients who supply event admissions to resident and non-resident attendees, we are unable to address these scenarios without further information, as there are many possibilities with respect to the application of the tax depending on what the event is, who is holding the event and whether that person is registered or required to be registered for GST/HST purposes, and who is attending the event. If you have any questions on whether a particular supply of admission by a client would be subject to the GST/HST, you may contact GST/HST Rulings at 1-800-959-8287.

In addition, you have enquired if XXXXX (XXXXX) needs a provincial sales tax (PST) number. As I advised you in my e-mail, the Canada Customs and Revenue Agency does not have the responsibility to administer the PST and we recommend that your questions be directed to the appropriate provincial authorities.

The following is our understanding of the situation based on the limited information in your facsimile and information taken from XXXXX is a software and Web site hosting company that is registered for the GST/HST and its clients are typically associations and event companies that are organizing and/or holding events such as seminars, conferences, and conventions.

Amongst its supplies, XXXXX provides its clients with on-line registration to a particular event and XXXXX, as an agent (NOTE: Whether or not an agency relationship exists in law is a question of fact. For purposes of our response, we shall assume that there is, in fact, an agency relationship between XXXXX and each of its clients. For more information on determining whether an agency relationship exists, please refer to the enclosed policy statement P-182 - Determining the Meaning of "Agent" and "Agency".), collects the registration fees on behalf of their client. XXXXX's client may be:

•   a resident supplying event admissions to either residents, non-residents, or both; or

•   a non-resident supplying event admissions to either residents, non-residents or both.

In addition to the registration process for the particular event, XXXXX may also provide access to other software programs (e.g., XXXXX, and XXXXX, XXXXX, and XXXXX), thus allowing a client's attendee to pre-purchase services and/or goods that are to be made available at the event. Again, XXXXX, as an agent, may collect on behalf of its client any monies owing in respect of these supplies.

Interpretation Requested

You have requested clarification on who is responsible for remitting the tax in relation to the registration to the event and, when the tax is collected by an agent on behalf of a client, who is liable for remitting it. You would also like confirmation that XXXXX is responsible for collecting the GST/HST on its commission and service fees (i.e., the charge to the client for using e-commerce capabilities to provide the on-line registration on its behalf).

Interpretation Given

Normally, a person who makes a taxable supply of property and services in Canada will be required, pursuant to subsection 221(1) of the Excise Tax Act (ETA), to collect tax on that supply. As stipulated in subsection 225(1) of the ETA, the amount of tax is included in determining the net tax of the person for the reporting period in which the amount became collectible, or in certain cases, was collected.

Where a person acts as an agent in making a taxable supply on behalf of a principal, the principal will be required to account for the tax collectible or any tax collected by the agent in respect of the supply in the principal's return for the particular period unless the amount was accounted for in one of the principal's previous returns.

Therefore, to the extent that XXXXX acts as agent in making a supply on behalf of the principal, it is the principal who is considered to be making a taxable supply to the recipient and XXXXX, as agent, is considered to be making a taxable supply of its service of acting as agent to the principal.

Generally, the agent has the obligation to collect the tax payable for its service of acting as agent supplied to the principal and to account for it in its net tax when that service is, or is to be, performed in whole, or in part, in Canada. A principal who is a registrant at the time is entitled to claim an ITC for the tax payable on the commission/amount paid or payable to the agent for the agent's service, provided that all the conditions for claiming the ITC are met.

Subsection 177(1.1) of the ETA provides an alternative to the above procedure. This subsection permits a GST/HST registrant who, in the course of its commercial activity, acts as an agent in making a supply (otherwise than by auction) on behalf of a principal who is required to collect tax in respect of the supply to elect jointly with the principal to account for the tax collectible in respect of the supply as if the tax were collectible by the agent. Thus, the agent is responsible for accounting for the tax collectible in respect of the supply in its net tax and remitting any resulting positive amount of net tax.

However, the agent and the principal are jointly and severally liable for all obligations that arise upon or as a consequence of the GST/HST becoming collectible or any failure to account for or remit the tax. The election has to be made in prescribed form, i.e., on form GST506 - Election and Revocation of an Election Between Agent and Principal (copy enclosed).

Under subsection 177(1.1) of the ETA, where an election is made, the treatment of the agent's service is still subject to the general rules. The tax in respect of the supply of the agent's service is payable by the principal and accounted for by the agent in its net tax.

Principal who is not required to collect tax in respect of the supply of a good

As an exception to the above general rule, subsection 177(1) of the ETA provides, in part, that where a GST/HST registrant, in the course of its commercial activity, acts as an agent in making a supply of a good (other than a zero-rated or exempt supply) on behalf of a principal who is not required to collect tax in respect of the supply, the supply of the good to the recipient is deemed, for GST/HST purposes, to be a taxable supply made by the agent and not the principal. In this case, the agent is also deemed not to have made a supply to the principal of its services relating to the supply of the good.

For example, XXXXX's client is not required to collect GST/HST in respect of the supply of a good and XXXXX acts as agent in making the supply of the good that is subject to GST at 7% or HST at 15% to an attendee of the client's event. The good is made available to the attendee at the event. In this case, subsection 177(1) of the ETA deems the supply of the good to be made by XXXXX and not the client. As a result, XXXXX is required to collect GST/HST in relation to the supply of the good and to account for it in its net tax.

A zero-rated supply of a service of acting as an agent

When an agent makes a taxable supply of a service of acting as an agent and the recipient of supply is a non-resident, it is necessary to determine whether the supply is zero-rated (i.e., taxed at 0%).

Section 5 of Part V of Schedule VI to the ETA zero-rates a supply made to a non-resident person of a service of acting as an agent of the person or of arranging for, procuring or soliciting orders for supplies by or to the person, where the service is in respect of

a) a zero-rated export made to the non-resident, or

b) a supply made outside Canada by or to the non-resident person.

Paragraphs 8 - 11 of section 4.5.3, Exports - Services and Intellectual Property of the GST/HST Memoranda Series (copy enclosed) provide further information on this zero-rating provision.

It is the supplier's responsibility to verify that the recipient is a non-resident. For your information, we have enclosed GST/HST Memoranda Series section 4.5.1, Exports - Determining Residence Status. Appendix A of this Memoranda describes the documentation that the Canada Customs and Revenue Agency will generally accept as proof that the recipient of the supply is not resident in Canada.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, 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, a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series is enclosed.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8806.

Yours truly,

Marjorie Stevens
Electronic Commerce Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate