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: 247869
Business Number: […]
Dear [Client]:
Subject: GST/HST ruling
[…][genetic] improvement services
Thank you for your correspondence of [mm/dd/yyyy] concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][genetic] improvement services provided by […] (CanCo) to certain genetic suppliers. 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
Based on your correspondence and our telephone conversations, we understand the following:
1. CanCo is a Canadian corporation based in […][province X] and registered for the GST/HST.
2. CanCo provides [genetic] improvement services and genetic products, programs, information and expertise, as described below, to genetic suppliers.
3. [Genetic] improvement is the production and improvement of genetics […]. The improvement of [animal] genetics is a process whereby breeders select specific […][male animals] and […][female animals] to breed based on their physical attributes. Research into […][animal] genetics is completed in order to identify traits and attributes that will further improve [animal] stocks. For instance, if the desired outcome is […][animals] that are born larger and grow quickly, then specific [male animals] and [female animals] will be selected to breed together to achieve those attributes.
4. […] (Owner) is a Canadian corporation based in […][city], [province X] and registered for the GST/HST.
5. Owner is a genetic supplier that owns [male animals] for the purpose of having the semen extracted from the [male animals] (“dosages”) and supplying the dosages to their customers […] (“customers”).
6. Under the terms of a […] (Agreement) between CanCo and Owner signed [mm/dd/yyyy], Owner agrees to place its [male animals] with CanCo in order to receive their [genetic] improvement services.
7. Pursuant to the Agreement, CanCo provides the following [genetic] improvement services to the Owner (collectively referred to as “Services”):
- Semen collection services
- Collection of dosages from Owner’s [male animals]
- Storage of collected dosages
- Modification of dosages (where necessary)
- Shipping of dosages directly to Owner’s customers
- Housing of Owner’s [male animals]
- Care of Owner’s [male animals]
- Feeding
- Medical care
- Vaccinations
8. The Agreement further provides, in part:
[…]
9. Owner has asked CanCo to modify its invoicing practices such that separate invoices for the shipping and handling of dosages delivered outside Canada are sent to […] (OwnersUSBranch) at its address outside Canada. However, CanCo continues to invoice Owner for all of the remaining Services, including shipping and handling charges for dosages delivered in Canada. All of the dosage orders continue to be fulfilled using Owner’s [male animals] and the dosages continue to be sent by CanCo directly to Owner’s customers on Owner’s behalf.
10. No Agreement has been signed between CanCo and OwnersUSBranch.
RULING REQUESTED
You would like to know if the portion of CanCo’s supply of Services that is invoiced to OwnersUSBranch is subject to the GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that the portion of CanCo’s supply of Services invoiced to OwnersUSBranch is subject to the GST/HST at the applicable rate.
EXPLANATION
CanCo provides to Owner a service of manufacturing dosages, a process that involves housing and caring for Owner’s [male animals] and collecting, processing, storing and shipping dosages directly to Owner’s customers on Owner’s behalf. CanCo charges Owner for its Services based on the number of [male animals] housed at their facilities and sends separate monthly invoices to Owner. In addition, it sends monthly invoices to OwnersUSBranch, but only with respect to the shipping and handling charges for dosages sent to customers with a shipping address outside Canada.
Pursuant to paragraph 142(1)(g), a supply of a service is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Since CanCo performs the Services entirely at their location in Canada, the supply is deemed to be made in Canada.
A supply made in Canada is subject to the GST/HST unless the supply is exempt or zero-rated (taxable at 0%). There are currently no exempting or zero-rating provisions that apply to CanCo’s supply of Services. In the absence of any applicable exempting or zero-rating provisions, the supply is subject to the GST/HST at the applicable rate, regardless of whether some of the monthly invoices issued by CanCo for a portion of the Services are sent to OwnersUSBranch.
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 given in this letter provided that: none of the issues discussed in the ruling 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 819-271-7136.
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,
Megan MacDonald
Rulings Officer
Border Issues Unit 2
General Operations and Border Issues Division
GST/HST Rulings Directorate
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