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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 132635
June 7, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Place of supply of tangible personal property by way of sale
Thank you for your letter of February 9, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your client's operations.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Based on the information provided, we understand that:
1. Your client, [...] ("[the Company]"), is a resident of Canada and is registered for GST/HST purposes.
2. [The Company] is a manufacturer of commercial pumps used for the oil and gas industry and is headquartered in [...] [City 1, Participating Province X].
3. [The Company] supplies the pumps it manufactures by way of sale.
4. The pumps originate at [the Company's] location in [Participating Province X] and are sold to customers in other provinces.
5. The following are scenarios that you have indicated describe situations [the Company] is involved in and you have provided what you have indicated are examples of some documentation for scenarios 1 to 4.
Scenario 1
A customer, who is the recipient of the supply of goods ("the Recipient"), issues a purchase order with [the Company]. The Recipient issues a purchase order indicating the goods are for shipment to [...] [Province Y]. The terms of the purchase order are "FOB [the Company] warehouse in [Participating Province X]", "FOB [City 1, Participating Province X]", or "FCA [City1, Participating Province X]". The Recipient contracts and pays a common carrier to deliver the goods to [Province Y]. [The Company] contacts the carrier when the goods are ready for pick-up at its warehouse in [City 1, Participating Province X]. [The Company] confirms with the carrier, at that time, that the goods are to be delivered to a specific address in [Province Y].
Scenario 2
The Recipient issues a purchase order with [the Company] and indicates on the purchase order that the goods are for shipment to [Province Y]. The terms of the purchase order are "FOB [the Company] warehouse in [Participating Province X]", "FOB [City 1 Participating Province X]", or "CPT [...] [City 2, Province Y]". [The Company] contracts and pays the carrier to pick up the goods at [the Company] warehouse in [Participating Province X] and deliver the goods to [Province Y]. [The Company] contacts the carrier when the goods are ready for pick-up at its warehouse in [Participating Province X]. [The Company] confirms with the carrier, at that time, that the goods are to be delivered to a specific address in [Province Y].
Scenario 3
The Recipient issues a purchase order with [the Company] and indicates on the purchase order that the goods are for delivery to [Province Y]. The terms of the purchase order are "FOB destination [Province Y]" or "CPT [...][City 3, Province Y]". [The Company] contracts and pays the carrier to pick up the goods at [the Company] warehouse in [Participating Province X] for delivery to [Province Y]. [The Company] contacts the carrier when the goods are ready for pick-up at its warehouse in [Participating Province X]. [The Company] confirms with the carrier, at that time, that the goods are to be delivered to a specific address in [Province Y].
Scenario 4
The Recipient issues a purchase order with [the Company] and indicates on the purchase order that the goods are to be shipped to [Province Y]. The terms of the purchase order are "FOB destination". The Recipient contracts and pays the carrier to pick up the goods at [the Company] warehouse in [Participating Province X] for delivery to [Province Y]. [The Company] contacts the carrier when the goods are ready for pick-up at its warehouse in [Participating Province X]. [The Company] confirms with the carrier, at that time, that the goods are to be delivered to a specific address in [Province Y].
Scenario 5
The Recipient issues a purchase order with [the Company] and indicates on the purchase order that the goods are to be picked up by the Recipient. The Recipient sends their own truck to pick up the goods at [the Company] warehouse in [Participating Province X]. The shipping terms are "FOB destination".
Scenario 6
The Recipient issues a purchase order with [the Company] and indicates on the purchase order that the goods are for delivery to [Province Y]. [The Company] uses their truck to deliver the goods to the Recipient's address in [Province Y]. The shipping terms are "FOB [the Company] warehouse in [Participating Province X]".
Interpretation Requested
You would like to know the province in which the goods would be considered supplied in the scenarios described above pursuant to the rules in Part II of Schedule IX to the ETA.
Interpretation Given
A taxable (other than zero-rated) supply of property or a service is made in Canada is subject to GST at 5% if made in a non-participating province and is subject to HST at the applicable rate if made in a participating province.
Pursuant to paragraph 142(1)(a), a supply by way of sale of tangible personal property (TPP) is deemed to be made in Canada (subject to sections 143, 144 and 179) if the TPP is, or is to be, delivered or made available in Canada to the recipient of the supply. Alternatively, a supply by way of sale of TPP is deemed to be made outside Canada, pursuant to paragraph 142(2)(a), if the TPP is, or is to be, delivered or made available outside Canada to the recipient of the supply.
Whether a supply made in Canada is made in a participating province or non-participating province is determined by section 144.1 and Schedule IX. Section 144.1 of the ETA provides that a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Further, under section 144.1, a supply made in Canada that is not made in a participating province is deemed to be made in a non-participating province.
As indicated in your letter, under section 1 of Part II of Schedule IX and subject to section 3 of Part II, a supply of TPP by way of sale is made in a particular province if the supplier delivers the property, or makes it available, in that province to the recipient of the supply.
For purposes of section 1 of Part II of Schedule IX (and paragraphs 142(1)(a) and 142(2)(a)) , the phrase "delivered or made available" has the same meaning as that assigned to the concept of "delivery" under the general law of the sale of goods. It is not based on the place where title to the goods transfers, although in some cases it may happen to also correspond to that place. The legal delivery of the goods can be affected by the actual delivery of the goods or affected by the constructive delivery of the goods depending on the facts.
Generally, the place where legal delivery of the goods occurs may be determined by reference to the delivery terms that the parties have agreed to. If an Incoterm is used in an agreement of sale in accordance with its intended circumstances then generally, subject to any evidence to the contrary, the place where legal delivery of the goods occurs can be determined by reference to the where delivery is considered to occur under that Incoterm.
Paragraph 3(a) of Part II of Schedule IX provides in part that for the purposes of Part II of Schedule IX, TPP is deemed to be delivered in a particular province by a supplier, and is deemed not to be delivered in any other province by the supplier, if the supplier ships the property to a destination in the particular province that is specified in the contract for carriage of the property, or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to a destination in that province.
For purposes of paragraph 3(a) of Part II of Schedule IX, a supplier is considered to have "retained" a common carrier or consignee on behalf of the recipient if the supplier enters into a contractual arrangement (verbal or written) with the carrier or consignee to secure their transportation services on behalf of the recipient. A supplier that only informs a carrier or consignee of when and where the property is to be picked up and shipped does not thereby retain that carrier or consignee. In addition, for purposes of paragraph 3(a) of Part II of Schedule IX, a supplier would only be considered to retain the services of a carrier or consignee "on behalf of the recipient" of the supply if the supplier were acting as an agent of the recipient in retaining those services.
With respect to Scenario 1, based on the information provided, we agree that the supply of the goods in a situation such as this would be made in [Participating Province X] pursuant to section 1 of Part II of Schedule IX to the ETA on the basis that legal delivery of the goods to the recipient would be considered to occur in [Participating Province X]. The supply in this case would therefore be subject to HST at a rate of [...]%. Section 3 of Part II of Schedule IX to the ETA would not apply in a situation such as Scenario 1.
With respect to Scenario 2 and Scenario 3, based on the information provided, we agree that the supply of the goods in a situation such as this would be made in [Province Y] pursuant to sections 1 and 3 of Part II of Schedule IX to the ETA and would be subject to GST at a rate of 5%.
With respect to Scenario 4, based on the information provided, delivery of the goods to the Recipient would only be considered to occur in [Province Y] if it were to be established that the carrier who is hired and paid by the Recipient does not pick up and take possession of the goods on behalf of the Recipient when the carrier picks up the goods at the supplier's premises in [Participating Province X]. If not, then delivery of the goods to the Recipient would be considered to occur in [Participating Province X] when the carrier picks up the goods at the premises of the supplier and the supply would be made in [Participating Province X] and subject to HST at a rate of [...]%.
With respect to scenarios 5 and 6, you have indicated that you have confirmed that there do not appear to be any recent examples of these scenarios and you are consequently unable to provide us with any relevant documentation used by the parties in relation to these scenarios. To determine the province in which the goods are considered to be delivered to the Recipient in both of these scenarios would require consideration of all relevant facts and documentation. As a general comment with respect to Scenario 5, we note that it is unclear how delivery of the goods to the Recipient would not be considered to occur in [Participating Province X] at the supplier's premises when the Recipient picks up the goods using its own truck and obtains physical possession of the goods.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-4294. 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,
Donato Licursi
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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