24 March 2003 GST/HST Interpretation 44104 - Application of GST/HST to Supplies Made by Way of Monoselectors

Dear XXXXX

This is in response to your letter XXXXX (with attachments) addressed to XXXXX of the XXXXX Tax Services Office. In your letter you requested clarification regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to coin-operated supplies.

Our understanding of the facts is as follows:

Your client XXXXX (Vending Company) is a non-resident registrant XXXXX and is in the business of making supplies by way of coin-operated vending devices. The Vending Company does business throughout Canada. XXXXX is the Vending Company's authorized representative.

The Vending Company makes some of its supplies through coin-operated devices that are designed to only accept a single coin greater than 25 cents. The Vending Company has not reported any tax related to the supplies made from these devices based on your advice.

You have stated that in your view, it is impossible to fulfill the obligation as supplier under the Excise Tax Act (ETA) for sales over 25 cents every time you do business through single coin-operated devices.

In support of your position, you quoted Judge Tremblay's comment in Distribution Lévesque Vending (1986) Ltée. v. The Queen,

"The objectives of the Act are not met because the GST was never passed on to the consumer and it is not the agent's role to pay the tax, but rather to remit what he has collected."

XXXXX

Interpretation

All legislative references refer to the ETA.

Distribution Lévesque Vending (1986) Ltée. v. The Queen dealt with coin-operated devices that only accepted single coins of 25 cents or less. Judge Tremblay's decision has been legislatively addressed and is currently reflected in subsection 165.1(2).

Subsection 165.1(2) provides that where the consideration for a supply of tangible personal property or a service is paid by depositing a single coin in a mechanical coin-operated device that is designed to accept only a single coin of twenty-five cents or less as the total consideration for the supply and the tangible personal property is dispensed from the device or the service is rendered through the operation of the device, the tax payable in respect of the supply is equal to zero.

For a coin-operated device that only accepts a single coin greater than 25 cents in relation to the supply dispensed from the device, suppliers are required to charge and account for the tax on this supply in accordance with the normal GST/HST rules. Suppliers should therefore take this requirement into account when determining the consideration for supplies made through such devices.

Subsections 165(1) and (2) require that every recipient of a taxable supply made in Canada shall pay tax at the rate of 7% (or 15% where applicable) calculated on the value of the consideration for the supply unless specific provisions allow for relief from tax. There is no relieving provision for supplies made from a coin-operated device that only accepts a single coin greater than 25 cents (Except where unbottled water is dispensed through a vending device and the conditions in section 2 of Part III of Schedule VI to the ETA are met. Such a supply is zero-rated.).

Subsection 221(1) provides that where a supplier makes a taxable supply in Canada, it shall collect the tax payable in respect of the supply as agent of the Crown.

Subsection 225(1) requires, in part, that the supplier include all tax amounts that were collected or were collectible in a reporting period in its net tax calculation for that period.

Section 160 sets out the timing rules related to supplies made by coin-operated devices. It provides in part that the supplier is deemed to have made the supply, received the consideration for the supply, and collected any tax payable in respect of the supply, on the day when the consideration for the supply is removed from the coin-operated device.

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) 954-9700.

Yours truly,

Donato Licursi
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate