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: 219794
Business Number: […]
[Dear Client]:
Subject: GST/HST ruling
Delivery services provided through […][the Platform]
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to delivery services provided through […][the Platform]
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
We understand the following:
1. The relevant provisions of the […][Consumer Terms] between […][a consumer] and […][the Platform] version last updated [mm/dd/yyyy], include:
[…][The Consumer Terms govern a consumer’s access and use of the Platform]
[…][Description of services]
[…][The Consumer pays for goods or services they receive from a third party provider with the Platform acting as a collection agent for the third party]
[…][The Platform will email the consumer a receipt]
2. The relevant provisions of the […][Agreement] between an individual and […][the Platform] version last update: [mm/dd/yyyy], include:
[…][A Legal agreement between a delivery driver and the Platform. The Platform provides a service to the delivery driver that allows the driver to receive and accept requests for delivery services].
[…][Definitions]:
[…]
[…]:
[…][The delivery driver has a direct business relationship with the recipient of its delivery services, to which the Platform is not a party. The Platform assumes no liability]
[…]:
[…][Information about payment of delivery fee to the delivery driver. The Platform acts as a collection agent for the delivery driver]
[…]:
[…][Information about the service fee the delivery driver pays the Platform]
[…]:
[…][The Platform prepares and sends the recipient of the delivery service a receipt on behalf of the delivery driver]
3. The relevant provisions of the […][Annex] version last update: [mm/dd/yyyy], include:
[…][A delivery driver may receive multiple requests from a single merchant for delivery to multiple consumers]
[…][A delivery driver may receive requests from multiple merchants for delivery to one or more consumers]
[…][A delivery driver may receive additional requests after accepting a request]
4. […][Information from the Platform’s webpage](Footnote 1) :
[…][The merchant is required to remit the applicable GST/HST]
[…][Information on the merchant receiving the applicable GST/HST on the delivery fee]
[…][The Platform facilitates the payment from consumers and the payment to delivery drivers. The merchant provides the delivery service]
[…][The merchant charges the consumer for the good, the delivery service, and the applicable GST/HST]
5. You provided us a copy of an invoice, dated [mm/dd/yyyy], that was issued by [the Platform] on your behalf to a […][merchant]. The invoice number is […]. The description on the invoice is for a delivery service and the amount charged was $[…]. Your GST/HST number is provided on the invoice, but no GST/HST amount is indicated.
6. You indicated in your incoming letter that because the Platform required you to work as a contractor and requested a GST/HST business number you registered for GST/HST effective [mm/dd/yyyy].
RULING REQUESTED
You would like to know the tax status of your delivery service provided through [the Platform].
RULING GIVEN
Based on the facts set out above, we rule that:
[…], you are making a taxable supply of a delivery service subject to GST/HST at the applicable rate based on the province in which the supply is made.
EXPLANATION
There are four participants in a supply of an electronically-arranged [good] delivery service on […][the Platform]:
* [the Platform];
* a [merchant];
* a […][delivery driver]; and
* a consumer.
The […][Consumer Terms], between [a consumer] and [the Platform], is [an agreement] that applies to individuals who wish to use the [Platform][…].
[…][The Platform is not a merchant or transportation carrier]
[…]
[…][The Platform does not assume liability for the delivery of goods]
Apart from acting as a facilitator amongst the various parties to a transaction, the Platform is identified as a […][collection agent that is authorized] to collect payments on behalf of [delivery drivers] and [merchants]:
[…]
[…][A delivery driver provides delivery services to a recipient]. Based on the invoice that [the Platform] issued on your behalf and the[Annex] that you provided, the [merchant] would generally be the person who obtains such services and be the […][recipient] for the purposes of the Agreement. The [delivery driver] invoices the [merchant], through the Platform, and the [merchant] pays the delivery driver for the delivery service through the Platform.
[…][The Platform’s webpage] confirms that [the Platform] facilitates the collections of applicable taxes on [goods] sold and on delivery fees, as well as the payment to [delivery drivers]. […][The Platform’s webpage] states that it is the [merchants] that provide both the [good] and the delivery to consumers. This means it is the [merchant] that charges the consumer for the [good], the delivery fee, and any applicable taxes.
The [delivery driver] is making a supply of a delivery service to the [merchant], which the [merchant] uses as an input into the supply that it makes to the consumer.
Delivery Service
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). A […] service of delivering a [good] (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. A [good] delivered in [a province] will be subject to […][GST/HST at the applicable rate].
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 (Memo 28.2), elaborate that a person does not have to physically transport TPP in order to be a carrier, but only has to assume liability as a supplier of a freight transportation service; in other words, the person must commit to transporting TPP for another person.
Based on the facts, however, only the [delivery driver] is a carrier for GST/HST purposes. The only other party that could be a carrier would be a [merchant] from whom a [good] is ordered using the Platform. However, “shipper” is defined under subsection 1(1) of Part VII of Schedule VI to mean “…the person who, in respect of a continuous freight movement or a continuous outbound freight movement, transfers possession of the property being shipped to a carrier at the origin of the freight movement and, for greater certainty, does not include a person who is a carrier of the property to which the freight movement relates. As explained in Memo 28.2, where a carrier hires another carrier to transport the first carrier’s property, the first carrier is the shipper of the property. As a [merchant] would generally be the shipper of the [good] it cannot be a carrier.
ADDITIONAL INFORMATION
Registration Requirement
In general, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for GST/HST purposes pursuant to subsection 240(1).
One exception to the registration requirement is for a person who is a small supplier. Generally, a small supplier refers to a person whose total revenue (along with the revenue of all persons associated with that person) from worldwide taxable supplies is equal to or less than $30,000 ($50,000 for public service bodies) in a calendar quarter and over the four previous calendar quarters.
A small supplier engaged in a commercial activity in Canada can choose to register voluntarily as permitted by subsection 240(3). If a person registers voluntarily, their effective date of registration is usually the date they applied to be registered.
Once a person is registered, they have to charge and remit the GST/HST on their taxable supplies of property and services, and they can generally claim input tax credits (ITCs) for the GST/HST paid or payable on purchases related to those supplies.
You are required to remain registered for one year. After one year, if you are still a small supplier, you can request the cancellation of your GST/HST registration.
In some cases other businesses request a contractor provide a GST/HST number as a condition of doing business. In all cases a person must either be required, or meet the eligibility requirements, to register for GST/HST. Additional information is available in GST/HST Memoranda 2.1, Required Registration, 2.2, Small Suppliers, 2.3, Voluntary Registration, and 2.7, Cancellation of Registration.
Tax Extra or Tax Included
Subsection 223(1) imposes disclosure requirements on a registrant who makes a taxable supply. Essentially, where the tax is charged on a tax-extra basis, the registrant must indicate the total amount of tax payable in respect of the supply. Where the tax is included in the amount charged for the supply, the registrant must indicate that the amount charged includes the tax payable in respect of the supply.
As per section 165, GST/HST is calculated on the value of the consideration for the supply. It is a question of fact whether tax has been added to the value of consideration or if the GST/HST is extra.
GST/HST Policy Statement P-118R (P-118R), Assessments on a Tax Extra or Tax Included Basis, may provide you with some guidance as to whether GST/HST should apply to your delivery service on a tax-included or tax-extra basis. P-118R provides that the determination of whether a tax-extra or tax-included assessment should be made is a question of fact to be resolved by the auditor based on the facts and the circumstances of the particular situation. Factors such as the invoicing practices, industry practices and supporting documentation will be pertinent and used in the determination.
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 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. 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.
CONTACT
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 the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
David Phoenix, CPA, CGA
Industry Sector Specialist
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
FOOTNOTES
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