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: 225428
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
GST/HST Status of delivery services offered by […][the Platform]
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to delivery services offered by […][the Platform]. 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.
STATEMENT OF FACTS
From your incoming letter of [mm/dd/yyyy], the documents you submitted, and our conversation on [mm/dd/yyyy] we understand the following:
1. […][The Business] is a GST/HST registrant that operates an electronic delivery App known as [the Platform].
2. [The Platform] is available to be used in […][Canada].
[…][(Terms of Service)]
3. The following are key provisions of the Terms of Service:
[…][The Platform facilitates the purchase and sale of goods between consumers and merchants and the delivery of the goods by delivery drivers. The Terms of Service governs the use and access of the Platform]
[…][Merchants and delivery drivers also enter into separate agreements with the Platform]
[…][Information on the access to the Platform]
[…][Legal contract for the purchase of goods is between the consumer and the merchant]
[…][Merchants and delivery drivers are independent of the Platform]
[…][Information on the services the Platform offers consumers]
[…][No changes, cancellation, or refunds once order has been placed]
[…][The Platform may provide customer care. Consumer is to contact the Platform and not the merchant or delivery driver]
[…]
[…][The Platform will provide the consumer with a receipt]
[…][Prices for goods, delivery, and other fees are subject to change at the merchant’s or the Platform’s discretion]
[…][Order options available to the consumer]
[…][Merchant Agreement]
4. The following are key provisions of the [Merchant Agreement]:
[…][Cost of services]
[…][Description of services]
[…][Information on the distribution of funds]
[…][The Platform’s responsibilities]
[…][Driver Terms]
5. The following are key provisions of the [Driver Terms] between […][the Platform] and a delivery driver:
[…][The delivery driver is paid a per delivery rate]
[…][The Platform has the right to determine the delivery driver’s compensation]
[…][The delivery driver is also subject to the Delivery Agreement]
[…][The delivery driver is liable for deliveries, which could include reimbursing the Platform for costs incurred]
[…][The delivery driver is an independent contractor]
[…][Driver Agreement]
6. The following are key provisions of the […][Driver Agreement]:
[…][The delivery driver is a non-exclusive independent contractor]
[…][Information on the termination of Driver Agreement]
[…][The delivery driver may determine when they provide service]
[…][The delivery driver may subcontract the service]
[…][The delivery driver is required to use their business judgement]
[…][The delivery driver is required to obtain, use and maintain their own equipment to provide the service]
[…]
[…][The Platform will pay the delivery driver for the services provided]
7. A copy of a consumer receipt was provided to us, which the customer received by email from [the Platform], for a particular transaction that took place on [mm/dd/yyyy]. The following information is provided on the receipt; order number, name of [the][…][merchant] ordered from […], date of transaction, amount of subtotal, delivery fee, service fee, tip, GST/HST, and total, and [the Platform’s] […][GST/HST registration number]. The delivery fee was $[…] and the service fee(footnote 1) was $[…]. The total was $[…]. The customer was charged GST/HST on the […] order, delivery fee, and the service fee. No GST/HST was charged on the gratuity (tip).
8. You provided us a copy of […][the merchant’s Platform earnings report] for orders received on [mm/dd/yyyy]. The report provides an itemized list of each order with the subtotal, GST/HST collected, and the gross earnings. The report includes the particular transaction for which you provided a copy of a consumer receipt. The report summarizes the total number of orders, the total gross earnings with a […][goods] subtotal and GST/HST collected, lists the commission fee charged by [the Platform] plus GST/HST charged on the commission and shows the [merchant’s] net earnings.
9. You provided us a copy of […][a delivery driver’s Platform earnings report] for orders delivered on [mm/dd/yyyy]. The report provides an itemized list of each order delivered showing the distance travelled and the tips and earnings received for each. The report includes the particular transaction for which you provided a copy of a consumer receipt. For the particular transaction the driver was paid $[…] plus the tip. The report summarizes the total number of deliveries, total distanced traveled, total delivery earnings and total in-app tips. The payout shown is equal to the delivery earnings plus in-app tips. No GST/HST is indicated on the report.
10. You provided us a copy of […][the Platform’s earnings report] for [mm/dd/yyyy]. The report summarizes the number of orders placed on […][the Platform] on [mm/dd/yyyy]. The following are some of the items listed:
[…]
Order Totals $[…]Delivery Fees $[…]
Driver Tips $[…]
GST/HST Collected for [merchants] $[…]
[…]
Transaction Fees $[…]
[…]
[Merchant] Earnings (incl. GST/HST) $[…]
Driver Earnings (incl. tips) $[…]
[…]
Commission Revenue $[…]
[…][(Service Fee)] Revenue $[…]
Delivery Revenue $[…]
GST/HST Owed $[…]
11. The delivery fees is the amount billed by [the Platform] to the consumer for the delivery service, the delivery revenue is the portion of the delivery fees kept by [the Platform] and the driver earnings is the difference between those amount which is paid to the delivery driver. Transaction fees are payment processing fees that have been charged by [the] […][payment processor]. Commission revenue is the fee calculated as a percent of the subtotal on orders placed through the app that [the Platform] retains from [merchants]. The [service fee] revenue is the services fees that were billed directly to the consumers.
12. [Payment processor] payments and payment details for the particular transaction on [mm/dd/yyyy], indicate [the Platform] received the funds of $[…] less a transaction fee of $[…].
13. […]
14. You provided a copy of a consumer receipt for a pick-up order placed on [mm/dd/yyyy]. There is no delivery or service fee on the receipt. […].
15. […].
RULING REQUESTED
You would like to know the tax status of the delivery services provided through [the Platform].
RULING GIVEN
Based on the facts set out above, in respect to the [mm/dd/yyyy], […] transaction we rule that [the Platform] made a taxable supply to the consumer of a domestic freight transportation service subject to GST/HST at the rate of […]%. The delivery service provided by the delivery driver to [the Platform] was zero-rated; subject to GST/HST at the rate of 0%, pursuant to subsection 1(2) and section 11 of Part VII of Schedule VI.
EXPLANATION
The participants in the delivery transaction arranged through [the Platform] include [the Platform], a […] merchant, a delivery driver and a consumer. The consumer is the recipient of two supplies; […][goods] from the [merchant] and a delivery service from [the Platform].
As defined in subsection 1(1) of Part VII of Schedule VI, “freight transportation service” means a particular service of transporting tangible personal property (TPP). While TPP is not defined in the ETA, it is generally viewed as property that may be touched or felt (in other words, property that is perceptive to the senses).
A domestic delivery service of delivering […][goods] (TPP) is a taxable supply of a freight transportation service made in Canada as per paragraph 142(1)(g). The applicable GST/HST will depend on where the TPP is delivered. Section 5 of Part VI of Schedule IX states, subject to Part VII, that a supply of a freight transportation service is made in a province if the destination of the service is in the province. The delivery of [goods] in […][a Province] will be subject to GST/HST at the rate of […]%.
A freight transportation service may be zero-rated (subject to GST/HST at the rate of 0%) under section 11 of Part VII of Schedule VI where interlining occurs between two or more carriers. Interlining occurs where a supply of a freight transportation service made by a carrier of the property being transported is made to a second carrier of the property being transported, where the service is part of a continuous freight movement and the second carrier is neither the shipper nor the consignee of the property being transported.
“Carrier” is defined under subsection 123(1) of the ETA to mean “a person who supplies a freight transportation service…” Various publications, including GST/HST Memorandum 28.2, Freight Transportation Services, elaborate that a person does not have to physically transport tangible personal property in order to be a carrier, but only has to assume liability as a supplier of a freight transportation service.
The term "consignee" is not defined in the ETA but generally means the person to whom a consignment is made. It is normally the person named on the bill of lading to whom or to whose order the bill promises delivery.
[…][The Platform] facilitates the delivery of goods consumers have ordered from [merchants] through […][the Platform]. The consumer is charged a delivery and [service] fee by [the Platform] for the delivery of the [goods]. […], delivery drivers are engaged by [the Platform] as non-exclusive independent contractors to provide delivery services. […][The Driver Terms outline] that [the Platform] will pay the delivery drivers a per delivery rate. [The Platform] lists the delivery fees charged to consumers and delivery driver’s earnings paid on its Earnings Report and recognizes the difference in the fee charged and the expense paid as its income. Although […][the Driver Terms state] that the delivery driver agrees to be solely responsible for the pick up and delivery of the [goods], it appears that [the Platform] would also be responsible as […][the Driver Terms indicate] that the delivery driver’s accountability for incorrect deliveries would include reimbursement to [the Platform] for any incurring costs this might cause. Although [the Platform] may act as a billing agent for a [merchant] when a consumer places an order for [goods], [the Platform] is not acting as an agent for the consumer or [merchant] when it acquires delivery services from the delivery driver. In our view, [the Platform] is a carrier for GST/HST purposes in respect of the [mm/dd/yyyy] transaction as it acquired delivery services for supply to the consumer. The delivery driver is also a carrier.
When a carrier receives payment for a taxable domestic continuous freight movement from a shipper or consignee, that carrier, under subsection 1(2) of Part VII of Schedule VI to the ETA, is considered to have supplied the freight service, even if part of the payment is collected as agent for any other interline carriers involved in the movement. As such, that carrier is required to collect and remit the tax to the Canada Revenue Agency.
As [the Platform] is the carrier that receives payment for the taxable domestic continuous freight movement from the consumer (consignee), it is [the Platform] who is considered to have made the freight transportation service to the consumer and [the Platform] is required to collect and remit the tax.
The interline settlement between the delivery driver and [the Platform] is deemed by subsection 1(2) of Part VII of Schedule VI to the ETA to be a freight transportation service supplied by the delivery driver to [the Platform] and would be zero-rated under section 11 of Part VII of Schedule VI to the ETA. Consequently, the delivery driver is not required to charge [the Platform] any tax on the freight transportation service he or she provided to [the Platform]. It should be noted, however, that the zero-rating only applies to supplies made in one direction (i.e., supplies of freight transportation services made to, or in the direction of, the invoicing carrier).
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-3972. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
David Phoenix, CPA, CGA
Services & Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
FOOTNOTE:
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