Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 244796
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
Sale of vintage goods [through distribution platforms]
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to sale of vintage goods. We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Based on the information provided in your letter of [mm/dd/yyyy], we understand the following:
1. You are a sole proprietor (Sole Proprietor), and were not registered for GST/HST purposes as of the time of your letter. However, it was noted that you are now registered for GST/HST purposes effective [mm/dd/yyyy] […].
2. You sell vintage goods (the Product) through […][Platform X] and at a local shop, […] ([…][the Company]), located […][in Canada].
3. You indicated that [the Company] is acting as an agent for the Sole Proprietor. [The Company] collects and remits the GST and PST on the Product on behalf of the Sole Proprietor.
4. You stated that [Platform X] advised its sellers (also referred to as vendors) that […], [Platform X] will collect and remit the GST/HST on behalf of the vendors who did not provide their GST/HST registration number (non-registered vendors).
5. You expressed your concerns that if you are required to register, [Platform X] will no longer collect the GST/HST on behalf of the registered vendors. Instead, [Platform X] has suggested that vendors increase their sales prices to include the GST/HST. You stated that this approach is problematic for a number of reasons. In particular, you cannot accurately determine a tax-included sales price, because the platform does not allow you to set different prices for different provinces to reflect the GST/HST rates in Canada, which can vary from 5% to 15%. In addition, the provincial tax is calculated on the tax-included sales price. Further, it places registered vendors at a competitive disadvantage compared to non-registered vendors. [Platform X] also will financially benefit from the tax-included pricing approach by charging seller fees or commission fees on the tax-included sales price.
6. You also provide […] services which will be discontinued at the end of [yyyy].
7. Annual revenues generated from the […] services amounted to approximately $[…] for [yyyy].
8. As of [mm/yyyy], the only income will be from selling the Product on [Platform X] platform and through the Company.
RULING REQUESTED
You would like to know the registration requirement, tax collection and remittance requirements on the sales of vintage goods.
As noted in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency’s (CRA) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented in writing. As we are not in possession of all of the pertinent facts, we are unable to provide a ruling. However, we are pleased to provide an interpretation of the relevant ETA provisions for your assistance.
INTERPRETATION GIVEN
The CRA is responsible for administering the ETA, which governs the application of the GST/HST. The ETA generally requires every registrant making a taxable supply in Canada to collect the GST/HST from the purchaser and remit it to the CRA. The ETA was amended, effective July 1, 2021, to include new GST/HST provisions that generally apply to non-resident vendors and distribution platform operators that participate in the digital economy.
Under the new digital economy provisions and more specifically pursuant to subsection 211.23(1), if a distribution platform operator (Footnote 1) is registered for GST/HST purposes, […] the distribution platform operator is considered to be the supplier in respect of the supply of goods (Footnote 2) made by non-registered vendors that are facilitated through their platform (Footnote 3) . In such circumstances, the registered distribution platform operator is required to charge, collect and remit the GST/HST on those supplies. Where the distribution platform operator is required to charge, collect and remit tax on those supplies, these new measures also provide that the supply of services, made by the distribution platform operator to a non-registered vendor in relation to the vendor’s supply of goods, is not subject to tax. An example of this may be where a distribution platform operator charges seller fees or commission fees to vendors that are using the operator’s distribution platform to sell their products. Non-registered vendors would generally include small suppliers (suppliers with sales that do not exceed the threshold amount of $30,000) and non-resident vendors that are not carrying on business in Canada.
However, registered vendors who make sales of goods through a distribution platform still remain responsible for charging, collecting and remitting the GST/HST on their sales [under the regular GST/HST rules]. For all other supplies made by registered distribution platform operators, including, for example, supplies of seller fees or commission fees made to registered vendors, the ETA generally requires every registrant making a taxable supply in Canada to collect the GST/HST on those supplies.
Registered vendors who make supplies of goods that are facilitated by distribution platform operators should ensure that they have communicated their GST/HST registration status to such distribution platform operators. This will ensure proper collection and remittance of GST/HST pursuant to regular GST/HST rules discussed below in the ‘Collection of GST/HST’ section.
Despite these new […][digital economy provisions discussed above], if certain conditions are met, a person other than the […][supplier/vendor (such as a distribution platform operator)] may agree with the vendor to collect and remit the GST/HST on the vendor’s behalf, such as through a third-party remittance arrangement. Whether such arrangements can be used under the ETA depends on specific facts, and these arrangements are private business decisions made by the vendor and the other person. For more information on this subject, please see GST/HST Policy Statement P-131R, Remittance of tax collected by a person other than the supplier in limited circumstances, which you can find at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p-131r
For more information on the new digital economy rules, please visit our website at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy.html
To some of the concerns you have expressed in your incoming letter, please note that the CRA is responsible for administering the tax legislation as enacted by Parliament. The Department of Finance Canada is responsible for developing federal tax policy and amending the legislation. Any proposal to change the legislation, including the rules related to digital platforms collecting the GST/HST on behalf of the vendors using the platform, must be considered by the Minister of Finance and approved by Parliament.
Registration
Generally, pursuant to subsection 240(1), every person who makes a taxable supply in Canada is required to be registered for GST/HST, except where the person is a small supplier.
A person is a small supplier when the total revenues of the person from worldwide taxable supplies (other than supplies of financial services, sales of capital property and goodwill attributable to the sale of a business) in any single calendar quarter and in the last four consecutive calendar quarters, and those of associated persons, do not exceed $30,000.
Once a person's total taxable revenue exceeds $30,000 in the previous four consecutive calendar quarters, or in a particular calendar quarter, the person is no longer considered to be a small supplier and is then required to register for GST/HST purposes. As a GST/HST registrant (Footnote 4) , you are responsible for collecting the GST/HST when you make taxable supplies (other than zero-rated supplies) of property and services in Canada.
For more information on small suppliers and required registration please refer to GST/HST Guide RC4022, General Information for GST/HST Registrants, GST/HST Memorandum 2.2, Small suppliers, and GST/HST Memorandum 2.1, Required registration.
Collection of GST/HST
Generally supplies made in Canada are either taxable supplies or exempt supplies. Taxable supplies are all supplies made in the course of a commercial activity and may be taxable at 5%, 13%, 15%, or 0% (zero-rated supplies). Zero-rated supplies are those supplies specifically listed in Schedule VI. Exempt supplies are supplies that are not subject to the GST/HST and are listed in Schedule V.
Pursuant to subsection 221(1), every person who makes a taxable supply in Canada is required to collect the GST/HST that is imposed under section 165 calculated on the value of consideration for that supply from the recipient. Please refer to GST/HST Memorandum 3.1, Liability for Tax, for more information.
Place of supply – in Canada
Section 142 provides the general place of supply rules for deeming a supply to be made in or outside Canada. Generally, tax is payable only in respect of supplies made or deemed to be made in Canada.
Pursuant to paragraph 142(1)(a), a supply by way of sale of tangible personal property (TPP) (e.g., goods) is deemed to be made in Canada if the TPP is, or is to be, delivered or made available in Canada to the recipient of the supply. Conversely, under paragraph 142(2)(a), a supply by way of sale of TPP is deemed to be made outside Canada if the TPP is, or is to be, delivered or made available outside Canada to the recipient of the supply.
For further information concerning supplies of goods by way of sale deemed to be made in Canada or outside Canada, please refer to GST/HST Memorandum 3.3, Place of Supply.
Place of supply – in a province
When a supplier makes a taxable (other than zero-rated) supply in Canada, the place of supply rules determines in which province the supply is deemed to be made. This will determine whether the supplier is required to collect the GST at the rate of 5% or the HST at the applicable rate for that particular province.
Under section 144.1 and section 1 of Part II of Schedule IX, a supply by way of sale of TPP is made in a province if the supplier delivers the property or makes it available in the province to the recipient of the supply.
Where the supplier delivers the TPP or makes it available to a recipient in a participating province, and the supply is taxable and not zero-rated, the supply will be subject to HST at the rate applicable to the particular participating province. Alternatively, where the supplier delivers the TPP or makes it available to a recipient in a non-participating province, and the supply is taxable and not zero-rated, the supply is subject to GST at the rate of 5%.
The place of supply for TPP is generally based on the province in which legal delivery of the goods to the recipient occurs. However, for the purposes of the rule, property is also deemed to be delivered in a particular province, and not in any other province, if the supplier either:
- ships the property to a destination in the particular province that is specified in the contract for carriage of the property;
- transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination; or
- sends the property by mail or courier to an address in the particular province.
Further information on the place of supply rules are provided in draft GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-706-8742. Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Teresa Lau
Senior Rulings Officer
Digital Economy Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
FOOTNOTES
1 Under subsection 211.1(1), a “Distribution Platform Operator” is defined as a person (other than the supplier of the goods) that controls or sets the essential elements of the transaction between a third-party vendor and the purchaser, or if no such person exists, it would be a person that is involved, directly or through arrangements with third parties, in collecting, receiving or charging payment for the sale and transmitting payment to the third-party vendor.
2 Specifically known as Qualifying Tangible Personal Property Supply. In accordance with subsection 211.1(1), a “Qualifying Tangible Personal Property Supply” is defined as a supply of tangible personal property made by way of sale to be delivered or made available to the recipient in Canada, but generally excludes exempt (e.g., financial services, health care services, etc.) or zero-rated supply (e.g., basic groceries, etc.).
3 Specifically known as Specified Distribution Platform. Pursuant to subsection 211.1(1), a “Specified Distribution Platform” is defined as a digital platform through which a person facilitates the making of Qualifying Tangible Personal Property Supplies by another person not registered under GST/HST.
4 A “registrant” is defined as a person who is registered or is required to be registered for GST/HST purposes.
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