[OFFICIAL ENGLISH TRANSLATION]
Date: 20020424
Docket: 2000-528(GST)I
BETWEEN:
134343 CANADA INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the
informal procedure from an assessment made under the Excise
Tax Act (the "Act") for the period from
May 1, 1993, to April 30, 1997.
[2] The point for determination is
whether the appellant made a separate supply of short-term
accommodation or whether that supply was included in a tour
package.
[3] The expression "tour
package" is defined in subsection 163(3) of the
Act. It did not change during the assessment period. It is
defined as follows:
... a combination of two or more services, or of property and
services, that includes transportation services, accommodation, a
right to use a campground or trailer park, or guide or
interpreter services, where the property and services are
supplied together for an all-inclusive price.
[4] The definition of the expression
"short-term accommodation" has changed. However, since
the case does not deal with the meaning of the expression but
rather the inclusion or exclusion of short-term accommodation in
the supplies of tour packages, the definition currently in effect
will suffice for the purposes of these reasons. It appears in
subsection 123(1) of the Act:
... a residential complex or a residential unit that is
supplied to a recipient by way of lease, licence or similar
arrangement for the purpose of its occupancy by an individual as
a place of residence or lodging, where the period throughout
which the individual is given continuous occupancy of the complex
or unit is less than one month and, for the purposes of
sections 252.1, 252.2 and 252.4,
(a) includes
any type of overnight shelter (other than shelter on a train,
trailer, boat or structure that has means of, or is capable of
being readily adapted for, self-propulsion) when supplied as part
of a tour package (within the meaning assigned by
subsection 163(3)) that also includes food and the services
of a guide, and
(b) does not
include a complex or unit when it
(i) is
supplied to the recipient under a timeshare arrangement, or
(ii) is included in
that part of a tour package that is not the taxable portion of
the tour package (within the meaning assigned to those
expressions by subsection 163(3)).
[5] Mairena Castro testified for
the appellant. Carole Boudreau testified for the respondent
party.
[6] Ms. Castro described the
appellant's services as those of a wholesaler that sells
travel services to foreign retailers, which resell them to
travelling customers. According to Ms. Castro, the appellant
sells travel services separately. Those services are provided in
Canada.
[7] Those services include accommodation.
Each service has a price, which is stated on the invoice. At the
end of the invoice, there is a total price but that price is
merely a total. It is not a single price for a number of
services.
[8] Ms. Castro makes
presentations in Spain and South America on the services the
appellant can provide and the hotels with which it does business.
She has a work manual for wholesalers in which information is
provided in accordance with a code understood by tour operators.
Everything offered is included along with prices. At page 88
of the transcript she states:
[TRANSLATION]
. . . and we give the name of the hotel, the
periods, how much that hotel costs during each period. So we make
a list and all the hotels in everything - I just sell Ontario and
Quebec, okay. I include all the hotels I do business with. I
include everything: how much a transfer costs based on the number
of passengers, how much a city tour costs based on the number of
passengers. All that is indicated item by item, okay. So, and
when they ask me, say, "I have two passengers and I want
them to do this, this, this, this and this," their
wholesaler already has my price lists for each service they are
going to ask for. That's how I actually proceed.
[9] At pages 41 and 42 of the
transcript, she explained the context in which she sells
services:
[TRANSLATION]
. . . "Mairena, I have 40,
50 persons - sometimes it's two, four persons - who
would like to spend a week, let's say, between Montreal and
Québec and go see the whales." So I send an itemized
list of all the activities offered by the tourist region they ask
to visit. So they answer me: "The customer wants this, this,
this, this, this, this and this." I put the program
together; it's really the customer himself who will put his
own program together.
Q. Okay.
A. You see. And I
bill what is really requested for the customer. And in those
cases, what I will do, since I'm going to do it separately,
is I tax the separate items based on the principles showed me by
the auditors who came and told me: "Ms. Castro,
you're not going to tax the rooms because they're
rebatable; just note at the bottom of the invoice that the room
tax has already been rebated and that the customer is no longer
entitled to claim a rebate from the government." I do it on
all my invoices - there's a note at the bottom indicating
that. You see; so that's how we go about it at Dominion
Tours.
[10] Ms. Castro filed
Exhibit A-2, which consists of a large number of
invoices. The invoice that was studied at the hearing bore
number 1268 and was dated December 4, 1996. It
described four services, and there was a price for each. That
price was to include taxes payable and the supplier's profit,
since the total price was merely a total of those prices. One
price was for a double room at the Sheraton Hotel in Niagara for
two passengers. On the same invoice, there was the price for
transportation from the airport to the hotel, the price for the
visit to Niagara Falls and the price for transportation from the
hotel to the airport.
[11] Ms. Castro said that she remitted
all of the tax on accommodation and nothing else. Her method of
calculating the tax payable was not clearly explained.
[12] Carole Boudreau, a financial
management officer at Revenu Québec, testified for the
respondent party. She contended that, in the prices stated for
the rooms, there were almost always costs included for other
services.
[13] She filed invoices of the appellant as
Exhibit I-2. Those invoices in fact showed that, in
the item including the cost of the rooms, various other services
were included, in particular, the prices of all meals and the
services of a guide. The Minister's officer also pointed out
that the invoices did not show the tax that had been charged and
rebated.
[14] The appellant's agent argued that
the appellant's billing method was consistent with what is
provided for in Policy Paper P-089, entitled
"Short-Term Accommodation Rebate," and he referred in
particular to the following paragraphs:
A tour package means a combination of two or more travel
services or of property and services provided at an all inclusive
price (i.e. the supplier is not providing the services
separately). These could include transportation, accommodation,
meals, sightseeing excursions or the services of a guide. For the
purpose of section 163, a tour package does not necessarily
have to include accommodation or transportation services.
However, for the purpose of the non-resident rebate, a tour
package must include eligible short-term accommodation.
However, in situations where the short-term accommodation and
the other travel services are not sold at an all inclusive price
(i.e. each of the property and services listed on the invoice can
be purchased separately), it is not a supply of a tour package
and the registered supplier cannot use the 50% rule. He/she may
only credit 7% of the actual value of the accommodation as shown
on the invoice to the non-residents.
[15] He stated that the short-term
accommodation and services are sold separately and therefore they
do not form a tour package.
[16] Counsel for the respondent argued that
the short-term accommodation was always supplied and billed with
other services and that the rebate to which the foreign recipient
was entitled was the one provided for in subsection 252.1(5)
of the Act.
Conclusion
[17] As noted above, the expression
"tour package", as it stands for the purposes of the
rebate by the registrant provided for in subsection
252.1(8) of the Act is defined as follows in
subsection 163(3) of the Act:
... a combination of two or more services, or of property and
services, that includes transportation services, accommodation, a
right to use a campground or trailer park, or guide or
interpreter services, where the property and services are
supplied together for an all-inclusive price.
[18] The concept of "bulk sale"
("vente en bloc") appeared earlier in Quebec civil law
in article 1569a of the Civil Code of Lower Canada.
That article was replaced in the Civil Code of Quebec (the
"Civil Code") by article 1767, which now
contains the expression "sale of an enterprise"
("vente d'entreprise") instead of "bulk
sale" ("vente en bloc"). Article 1767 of the
Civil Code reads as follows:
The sale of an enterprise is a sale which has as its object
the whole or a substantial part of an enterprise and which is
made outside the ordinary course of business of the seller.
[19] The concept of "bulk sale" in
the Civil Code relates to the sale of a set of goods that
constitute the enterprise or to the sale of a substantial portion
of the enterprise.
[20] Therefore this concept cannot be the
one that applies in the instant case. Since there are no other
possible legal meanings, the ordinary meaning of the French
expression "en bloc" must apply. The phrase "en
bloc" is defined in the dictionaries as meaning all
together, as a whole.
[21] The expression "tour package"
must therefore be understood as meaning a set of services
comprising of certain services such as transportation,
accommodation, the right to use a campground or the services of a
guide or interpreter, where those various services are sold
together for a single price. The French version uses the
following terms: ". . . si les biens et les
services sont fournis en bloc pour un prix forfaitaire."
[22] This entire argument is based on
section 252.1 of the Act, which provides for a
rebate to a non-resident person who is the recipient of a supply
made by a registrant of the tax in respect of short-term
accommodation or of a tour package that includes such short-term
accommodation. In the case of short-term accommodation, the
Minister allows a rebate of the total tax paid by the person in
respect of the accommodation. In the case of the supply of a tour
package that includes the supply of short-term accommodation, the
refundable amount is one-half of the tax payable in respect of
the tour package if all nights are spent in Canada. The rebate
calculation is provided for in subsection 252.1(5) of the
Act.
[23] For explanatory purposes, I refer to
paragraph 15 of GST Memorandum
500-4-1-2:
15. Unregistered non-resident tour operators who apply for the
rebate and registered tour operators who credit the rebate
calculate the GST rebate for short-term accommodation as
follows:
(a) Accommodation
only: The rebate is equal to the actual tax on short-term
accommodation.
(b) Tour
packages: The rebate is equal to 50% of the actual tax on a
tour package regardless of the actual value of the accommodation
in the tour package. The rebate will be adjusted if the total
number of nights of eligible accommodation provided in Canada is
less than the total number of nights in the package. For example,
if only two nights of eligible accommodation are provided in a
six day/five night package, the rebate would be 2/5ths of 50% of
the tax paid on the package.
[24] On the one hand, the appellant filed
invoices showing, among other services, separate hotel service.
The invoice produced in evidence clearly reflected the price
invoiced for the short-term accommodation. This would also appear
to be the case in a few other invoices in Exhibit
A-2. On the other hand, the Minister's agent adduced
invoices on which that service was not billed separately. No
price on the invoice related exclusively to short-term
accommodation. The item including short-term accommodation also
included other services.
[25] The onus was on the appellant to
compile invoices on which short-term accommodation service was
shown separately. If porter service is included in the price of
the hotel room or the price of breakfast, that does not alter the
nature of the short-term accommodation service. If the price that
was billed moreover includes other services such as meals, bus
and guides, it is no longer a price for accommodation. It
constitutes a tour package. I am not referring here to the total
amount of the invoice but to the price stated for each item on
the invoice.
[26] This is not a matter of the internal
calculation of the accommodation cost but of the price that is
billed to the recipient. If the appellant wishes to be granted a
rebate of all tax relating to short-term accommodation, the
invoice must show the price of that service separately on the
invoice. If the price of short-term accommodation does not appear
separately on the invoice but includes other services, then what
we are dealing with is a tour package within the meaning of that
expression under section 163 of the Act.
[27] The appeal is allowed in order that the
appellant obtain a rebate of tax payable in respect of short-term
accommodation in those cases where that service was billed
separately to the recipient. The onus is on the appellant to
compile relevant invoices. In those cases where the price billed
to the recipient in respect of short-term accommodation also
included other services, the appellant was correctly
assessed.
Signed at Ottawa, Canada, this 24th day of April 2002.
J.T.C.C.
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