Selling goods for others

You may be in a situation where you are selling goods for others. Special rules apply depending on the relationship you have with the owner of the goods and whether the owner is a GST/HST registrant.

The goods could be sold by:

Consignment sales

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A consignment sale is a transaction in which one party, the consignor, delivers goods to a second party, the consignee, who tries to sell the goods for the consignor.

If you, as a consignee, sell taxable goods on consignment, the consignor still owns the goods until you sell them. Therefore, even though the consigned goods are in your possession, you do not include these items in your inventory.

Consignment arrangements consist of two types:

• agency; and
• buy and resell.

If you are not buying and reselling goods, then it is likely that you are acting as the consignor's agent. See Agents if you are conducting a transaction as an agent.

Where you are buying then reselling goods, we consider two transactions to take place at the time you sell the goods:

• you buy the goods from the consignor; and
• you sell the goods to your customer.

If the consignor is a GST/HST registrant, you pay GST/HST to the consignor on the price he or she charges you and collect GST/HST from your customer on your selling price. If the consignor is not a registrant, you do not pay GST/HST to the consignor, and you collect GST/HST from your customer on your selling price.

Direct sellers

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Businesses in the direct selling industry sell their products to consumers through independent sales contractors or sales representatives. Their business structure is usually based on one of the two following models:

• direct sellers who sell their products to independent sales contractors who, in turn, sell them to consumers; or
• network sellers who sell their products directly to consumers through sales representatives who receive commissions for arranging the sales.

Direct sellers may apply for approval to use the Alternate Collection Method (ACM), a simplified method for accounting for the GST/HST on the sales of products. Under the changes for fiscal years beginning after 2009, network sellers may also apply for approval to use the new network seller's rules.

Alternative collection method (ACM)

Direct sellers are organizations that sell their products to distributors or independent sales contractors who solicit orders and sell the products to consumers.

Under the ACM, direct sellers charge and account for the GST/HST on the suggested retail price of the products as if they had made the sales directly to consumers.

Under the ACM, most independent sales contractors do not have to register for GST/HST because they do not include revenues from their sales of products in their calculation to determine if they are small suppliers.

Network sellers rules

Network sellers who meet certain conditions may apply for approval to use the network sellers rules for fiscal years beginning after 2009: as a result, the commissions and bonuses paid to sales representatives for arranging for the sale of the network seller's products would not be subject to GST/HST and would not be used for determining whether sales representatives are small suppliers.

A registered network seller may apply to the Canada Revenue Agency for approval to use the new network sellers rules if, throughout the fiscal year, the network seller reasonably expects that:

• it will be engaged exclusively in commercial activities;
• all or substantially all of its total revenues for the fiscal year for sales made in Canada are for sales of products arranged for by sales representatives, or if it is an approved direct seller for the purposes of the ACM, for sales of products made by independent sales contractors;
• all or substantially all of its revenues for sales of products arranged by sales representatives for the fiscal year are for sales of products to consumers; and
• all or substantially all of its sales representatives to whom it pays network commissions during the fiscal year do not receive more than $30,000 in commissions.

In addition, the network seller must have jointly elected with each of its sales representatives before applying to use the network sellers rules.

For more information, including how to apply for approval to use the special alternate GST/HST collection method, see GST/HST Memoranda Series Chapter 14-1, Direct Sellers.

Auctioneers

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If you are a registrant auctioneer selling goods for a person (who may be referred to as a vendor, owner or principal), you are considered to have made a sale of taxable goods. This means that whether the vendor is registered for GST/HST or not, it is you as the auctioneer who must charge and remit GST/HST on the sale of the vendor's goods. However, you do not charge or remit GST/HST on your commission or other services provided to the vendor that relate to the sale of the goods, such as storage and advertising.

Auctioneers' election

Sometimes a registered vendor (who may also be referred to as an owner or principal) and an auctioneer make a joint election to have the vendor remit GST/HST on the sale of auctioned goods. Certain conditions must be met in order to make an election:

• both the vendor and auctioneer are GST/HST registrants;
• the supply of the goods would be taxable if made by the vendor;
• the goods are prescribed in the Property Supplied by Auction (GST/HST Regulations); and
• at least 90% of the value of the goods sold at auction for the vendor is attributable to sales of prescribed goods.

Prescribed goods include:

• cars and trucks designed for highway use;
• flowers, potted plants, plant bulbs;
• horses; and
• machinery and equipment designed for use in certain industries.

Once the vendor and auctioneer have made a joint election, the auctioneer collects GST/HST on the sale of the goods and gives it to the vendor. The vendor remits the GST/HST. The auctioneer charges the vendor GST/HST on his or her commission and on any services provided to the vendor, such as storage and advertising.

To make this election, complete Form GST502, Election and Revocation of an Election Between Auctioneer and Principal. Both the vendor and auctioneer must keep a signed copy of the election in their records.

Agents

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If you are acting as an agent (other than an auctioneer) in making taxable supplies of goods and services on behalf of another person (who may also be referred to as the vendor, owner or principal), different rules apply to determine who has to charge GST/HST on the sale. These rules depend, in part, on whether the vendor would have had to charge GST/HST if he or she sold the goods or services directly to the purchaser.

To determine who has to charge GST/HST, see:

When the vendor has to charge GST/HST

If a vendor would have had to charge GST/HST if he or she had sold taxable goods and services directly to the purchaser, then it is the vendor who must charge and remit the GST/HST on the taxable goods and services sold through you as the agent (other than an auctioneer).

If you are a registrant, you have to charge and remit GST/HST on your commission and on any other services provided to the vendor that relate to the sale of the goods or services. Vendors who are registrants may be eligible to claim an ITC to recover the GST/HST they pay for your services.

Joint election

A joint election can be made between a vendor (who may also be referred to as an owner or principal) and an agent when a vendor is required to collect tax, but would prefer that the agent do so. By making this joint election, the agent becomes responsible for collecting, reporting, and remitting the tax on the supply of taxable goods or services made by the vendor.

To make the joint election, complete Form GST506, Election and Revocation of an Election Between Agent and Principal. Both the vendor and the agent must keep a copy of the Form GST506 in their records. If this election is made, the agent is still required to charge and pay GST/HST on the commission and other services provided to the vendor that relate to the supply.

When the vendor does not have to charge GST/HST

If a vendor would not have had to charge the GST/HST if he or she had sold goods (other than zero-rated or exempt goods) directly to the purchaser, then it is you, the registrant agent, who must charge and remit the GST/HST on the sale of the goods. However, you do not charge or remit the GST/HST on your commission or any other services provided to the vendor that relate to the sale of the goods.

Exception

Generally, agents would have to charge and remit GST/HST on goods sold for registrant vendors that were not used in commercial activities. However, sometimes registrant vendors may want to charge and remit the tax. In these situations, vendors and agents may jointly elect in writing to make the sale of those goods taxable. When the goods are sold, the vendors charge tax and include it in their net tax. The vendors also pays GST/HST on the services provided by the agents and may be able to claim an input tax credit (ITC) for this tax. However, vendors cannot claim an ITC for other expenses related to the supply.

Real estate agents (services)

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Generally, services from a real estate agent who is registered for the GST/HST related to the selling or renting of real property will be taxable even when the real property in question is exempt from GST/HST.

The real estate agent who is registered for the GST/HST has to charge and remit GST/HST on his/her commission and other services (other than financial services) provided to their clients. In turn, the clients may be able to claim an input tax credit to recover the GST/HST they paid for the agent's services if the real property is used in commercial activities.

Forms and publications

• Form GST502, Election and Revocation of Election Between Auctioneer and Principal
• Form GST506, Election and Revocation of an Election Between Agent and Principal
• GST/HST Info Sheet GI-009, Consigned Goods
• GST/HST Info Sheet GI-010, Auctioneers
• GST/HST Info Sheet GI-012, Agents
• GST/HST Info Sheet GI-023, Direct Sellers' Sales Aids
• GST/HST Info Sheet GI-052, Direct Selling Industry - The Network Sellers Method for Network Sellers and Sales Representatives
• GST/HST Memoranda Series Chapter 14-1, Direct Sellers

Date modified:

2016-07-07