Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 16th Floor
320 Queen Street
Ottawa ON K1A 0L5
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Case Number: 6991
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January 28, 2005
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Subject:
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GST/HST APPLICATION RULING
Supply of Recreational Vehicles on Behalf of Private Owners
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Dear XXXXX:
We are writing to revoke the Application Ruling sent to XXXXX (the Dealer) XXXXX (copy attached for your reference) in response to your request XXXXX and attachment, concerning the application of the Goods and Services Tax on your proposed sales of used recreational vehicles (the unit) on behalf of owners (the Owner).
On XXXXX, we ruled that:
"... XXXXX, would be required to charge and collect GST from the owner of the unit for the earned service fee it receives in respect of the sale of the unit as well as the storage charges XXXXX may receive as a result of a breach of the Service Agreement. XXXXX would report this GST as tax collected/collectible on its GST return.
Where the owner of the unit is a GST registrant and the supply of the unit is made in the course of a commercial activity, the owner would be required to collect and remit GST from the buyer based on the value for consideration for the supply pursuant to subsection 165(1) of the Excise Tax Act. Where the owner of the unit is not a GST registrant there would be no GST collected and remitted on the value for consideration for the supply."
In accordance with GST/HST Memorandum Series Chapter 1.4, copy enclosed, the application ruling letter sent to you XXXXX is hereby revoked, effective thirty (30) days from the date of this letter.
Statement of Facts
Our understanding of the facts is as follows:
1. The Dealer is registered for GST purposes XXXXX and is engaged in the business of buying, selling, trading, consigning and storing vehicles and RV's.
2. The Owner will deliver possession of the unit to the Dealer and authorize the Dealer to negotiate a bill of sale on the Owner's behalf.
3. The contract (Service Agreement) indicates that the Dealer will, for a pre-arranged fee, and as authorized by the Owner, provide the following:
(a) display the Owner's unit;
(b) confirm with the Owner a fixed price;
(c) demonstrate the unit to prospective third party recipients;
(d) negotiate a bill of sale (copy of Sales Agreement provided) on the Owner's behalf;
(e) any amount owing over a fixed amount shall be deemed to be the Dealer's earned service fee;
(f) the Dealer shall advise the Owner of all offers received;
(g) secure a deposit and full payment on behalf of the Owner, which proceeds are to be deposited in the Dealer's trust account;
(h) provide lien searches;
(i) maintain the unit in presentable condition.
4. The Owner shall maintain fire, theft and comprehensive insurance while the unit is in the Dealer's possession. The unit is left with the Dealer "at the risk of the Owner".
5. Upon the bill of sale being signed by the third party recipient and the Owner, the Owner authorizes the Dealer to deduct its earned service fee from the trust proceeds, where the balance due shall be paid to the Owner, forthwith.
6. The sales agreement is in the name of the Dealer with the word "agent" following the Dealer's name. There is space for the signature of the buyer and the Owner
Ruling Requested
Is the Dealer responsible for collecting and accounting for the GST (if any) payable on the sale of the unit?
Ruling Given
In our view, the facts of this particular case and the terms of the Service Agreement indicate that the Dealer is acting as agent in making the supply of the unit on behalf of the Owner. Accordingly, we rule that:
1. Where the Owner is a registrant and it would have been required to account for tax had it made the supply of the unit in its own right, the Owner (and not the Dealer) is required to collect and remit the GST/HST payable by the buyer on the supply of the unit. The Dealer is required to collect and account for the GST/HST on supplies of services made to the Owner relating to the supply of the unit to the Purchaser.
2. Where the Owner is not a registrant, it is not required to collect and remit the GST/HST on the supply of the unit to the Purchaser. However, as the Dealer acts as agent in making the supply of the unit on behalf of the non-registrant Owner, the Dealer (and not the Owner) is required to collect and account for the GST/HST on the supply of the unit. The Dealer is not required to collect or account for the GST/HST on supplies of services made to the Owner relating to the supply of the unit to the Purchaser.
This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.
Explanation
Supplies by agents on behalf of principals
Subsection 221(1) of the Excise Tax Act (ETA) requires every person who makes a taxable supply in Canada to collect the GST/HST payable by the recipient in respect of the supply. Generally, where a person makes a taxable supply through another person acting as its agent, the person, if a registrant, is liable to account for GST/HST on the taxable supply.
In turn, the other person acting as agent, if a registrant, is liable to account for GST/HST on any taxable supplies made to the person. Consequently, where the Owner is a registrant and it makes a taxable supply of a unit through the Dealer acting as its agent, the Owner is required to collect and account for the GST/HST on the supply of the unit. The Dealer, as agent and a registrant, is required to collect and account for the GST/HST on the supply of the service made to the Owner (i.e., tax is payable on the service of carrying out the sale of the unit, which in this instance is described as an earned service fee).
However, subsection 177(1) of the ETA provides special rules for collecting tax in situations where a registrant acts as agent in making a supply on behalf of another person not required to collect tax on that supply. Specifically, subsection 177(1) of the ETA relates to supplies (other than supplies by auction) made on behalf of a person who is not required to collect tax, and provides that where
• a person (i.e., the principal) makes a supply (other than an exempt or zero-rated supply) of tangible personal property to a recipient,
• the principal is not required to collect tax in respect of the supply, and
• a registrant (i.e., the agent), in the course of a commercial activity of the agent, acts as agent in making the supply on behalf of the principal, the supply of the property to the recipient is deemed, for GST/HST purposes, to be a taxable supply made by the agent and not by the principal. The agent is deemed, for GST/HST purposes (other than for input tax credit entitlements for certain supplies made by non-residents), not to have made a supply to the principal of services relating to the supply of the property to the recipient.
Where the Dealer acts as agent in making a supply (other than an exempt or zero-rated supply) of a unit on behalf of the Owner, and the Owner is not required to collect tax on the supply, then the Dealer will be required to account for the GST/HST on the supply of the unit. However, the Dealer is not required to account for the GST/HST on the supply of the service made to the Owner relating to the supply of the unit to the buyer (i.e., the service of carrying out the sale of the unit).
Please note that paragraph 177(1)(d) of the ETA provides that, in certain situations, a registrant principal and a registrant agent may make a joint election to treat an otherwise non-taxable supply of tangible personal property as a taxable supply so that the principal, and not the agent, can account for tax. Similarly, subsection 177(1.1) of the ETA provides that a registrant principal and a registrant agent may make a joint election to have the agent account for tax that would otherwise have been accountable for by the principal. Please contact your local Tax Services Office if you are interested in more details about these elections.
Services relating to the supply of the Unit to the recipient
As mentioned previously, in certain situations, subsection 177(1) of the ETA deems an agent not to have made a supply of services to the principal relating to the supply of the tangible personal property to the recipient.
The determination of whether a service is relating to the supply of the tangible personal property to the recipient is a question of fact and must be determined on a case-by-case basis.
Generally, supplies of services for which an agent charges a commission are considered to be relating to the supply of tangible personal property to the recipient. Consequently, where the Dealer is acting as agent of the Owner and is required to collect tax on the supply of the unit because of subsection 177(1) of the ETA, the Dealer is not required to collect the GST/HST on the earned service fee for the supply of the service made to the Owner of carrying out the sale of the unit.
However, supplies of services not included in the agent's commission must be examined on a case-by-case basis to determine whether the service is relating to the supply of the tangible personal property to the recipient. Generally, the CRA does not consider supplies of repair and restoration services to be relating to the supply of the tangible personal property to the recipient.
Agency relationships
Whether there is an agency relationship between two parties with respect to a particular transaction is a question of fact; however, the following are considered to be essential qualities of an agency relationship:
1. Consent of both the principal and the agent - The intention of the parties is an important factor when deciding the nature of the relationship. Generally, in an agency relationship, the principal will authorize the agent to do something on the principal's behalf. Consequently, in considering whether a relationship is an agency relationship, it should be evident that the person who is supposedly an agent is arranging transactions for the principal and not for itself. Agency is generally evident from the conduct of the parties.
2. Authority of the agent to affect the principal's legal position.
3. The principal's control of the agent's actions.
In this particular case, the facts and the terms of the agreement indicate that each of the essential qualities exist and that there is an agency relationship between the Dealer and the Owner.
For your information, we are enclosing a copy of an Info Sheet entitled "Consigned Goods" (G1-009), which has recently been published by the Canada Revenue Agency.
Should you have any further questions or require clarification on the above or any other GST/HST matter, please do not hesitate to contact me at (613) 957-8220.
Yours truly,
Daniel Chamaillard
Senior Rulings Officer
Services and Intangibles unit
General Operations and Border issues Division
Excise and GST/HST Directorate
[i] 1. XXXXX the Act defines a nursing home as, XXXXX, other than premises falling under the various provincial legislation set out in the definition.
[ii] 2. The provisions of the Service Agreement are detailed at various points in the remainder of this letter. At this point, we note that the Ministry and the Corporation entered into a Service Agreement on XXXXX. XXXXX that agreement provides that the Program Provider (whom we understand to be the Corporation) provide Services at the Facility in accordance with the Act, the Regulation and the provisions of the Service Agreement.
[iii] 3. We note that there are certain exceptions to the provisions of XXXXX. For example, XXXXX the Regulation will, in some cases, allow the spouse or partner of a person, who is currently a resident of a home or who has been determined to be eligible for admission to a home, to be eligible for admission to the home.
[iv] 4. This manual contains standards and criteria for resident care and services, policies, and directives of the Ministry.
[v] 5. ["]Basic accommodation" is defined in XXXXX the Regulation to mean XXXXX. A standard room in the context of the Facility would be a room with three or more beds or a room with less than three beds that has been designated by the Corporation as a standard room.
[vi] 6. Semi-private accommodation" is defined in XXXXX the Regulation to mean XXXXX. A semi-private room in the context of the Facility would be a room with two beds other than a room that has been designated by the Corporation as a standard room.
[vii] 7. "Private accommodation" is defined in XXXXX the Regulation to mean XXXXX. A private room in the context of the Facility is a room with one bed other than a room that has been designated by the Corporation as a standard room.
[viii] 8. XXXXX Service Agreement
[ix] 1. The resident who currently lives at Facility pays $XXXXX per month, an all-inclusive amount for all property and services provided under the Lease.
[x] 1. There is an entry in the GST/HST mainframe that indicates the account was cancelled on the request of the client and that all figures are being reported under XXXXX. We understand the XXXXX is also a public institution for GST/HST purposes.
[xi] 2. We were not provided with a copy of XXXXX to the Agreement, but assume that it sets out the specific real property (e.g., a legal description or a part thereof) that is the subject of the Agreement.
[xii] 3. To be eligible to file the election, the Property would have to be described in subsection 211(1).
[xiii] 4. See Metro-Matic Services Ltd. v Hulmann (1974) 4 O.R. (2d) 462. In that case, the court found that the presence of the words "demise" and "lease", as well as a reference to the quiet enjoyment of the property, were, in the absence of a clear statement of the parties intention to the contrary, conclusive of the intention to grant a lease of the land.
[xiv] 5. Certainly other restrictions exist, e.g., to comply with federal, provincial and municipal law, to keep the Property in good repair and to not alter or change traffic flow patterns within the Property. However, there is some latitude in how the Auxiliary can operate the parking lot.
[xvi] 7. XXXXX the XXXXX provides that a lease of a registered parcel may be evidenced by recording a lease or notice of lease on title. XXXXX provides that a lease for a period of three years or less need not be recorded.
[xvii] 1. Subsection 254(1) defines "relation" of a particular individual to mean another individual who is related to the particular individual by blood, marriage or adoption within the meaning of subsection 251(6) of the Income Tax Act and includes a former spouse or common-law partner of the particular individual.
[xviii] 2. Note that CRA's interpretive policy on the quantum of real property used for calculating the "extent of use" for GST/HST purposes (e.g., ITCs, change in use, the election under section 211 and various exempting provisions) is the real property included in a single legal description or, in the case of real property interests other than the fee simple, the entire interest acquired in a single agreement.
[xix] 3. GST/HST Memorandum Series Chapter 19.5 - Land and Associated Real Property - Appendix A - Guidelines for determining if capital real property is used primarily in a business.
[xx] 4. Navaho Inn v The Queen [1995] 2851 ETC
[xxi] 5. The exclusionary condition in the definition of RC uses "less than 60 days" of continuous occupancy as a threshold. Therefore in using P-053 for determining "extent of use" for ITC or change-in-use purposes, the threshold should be "less than 30 days" of continuous occupancy
[xxii] 1. In GST/HST Policy Statement P-165R - Fair Market Value for Purposes of Part IX the Excise Tax Act, the CRA states that the fair market value represents the highest price, expressed in terms of money or money's worth, obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties acting at arm's length, neither party being under any compulsion to transact.
[xxiii] 1. The Harmonized Sales Tax is the tax that applies to taxable supplies (other than zero-rated supplies) made in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador at a rate of 15%.
[xxiv] 1. $800 maximum lease cost per month for 2005 taxation year multiplied by 12 months multiplied by 7%.
[xxv] 1. A "charity" means a registered charity or registered Canadian amateur athletic association within the meaning assigned to those expressions by subsection 248(1) of the Income Tax Act, but does not include a public institution.
[xxvi] 1. RRAP funding is used to bring homes to acceptable levels of health and safety for occupancy by low-income households. RRAP is also used to make homes accessible for persons with disabilities. (www.cmhc-schl.gc.ca)
[xxviii] 1. Details about the product would include the product's ingredients, the percentage by volume of fruit juice (where applicable), how the product is promoted and labelled, where the product is placed in retail stores, what, if any, other products does the product compete with, the sizes of the product's container and the packaging formats.
[xxix] 1. The Repayment of Receipts Regulation was repealed and replaced with the Repayments of Receipts Regulation, 1997 (SOR/98-127)
[xxx] 1. The letter dated XXXXX referred to subparagraph 2(d)(iv) of the former Medical Devices (GST) Regulations made pursuant to the ETA, which described a communication device for use by an individual with a hearing, speech or vision impairment that is a property specially designed to assist an individual in coping with or treating a chronic abnormal physical state of the individual. These Regulations were subsequently repealed. However, this subparagraph was included in section 2 of Part II of Schedule VI to the ETA, effective April 23, 1996.
[xxxi] 1. The term is defined in subsection 123(1) of the ETA. A municipality is a "public service body".
[xxxii] 2. The term is defined in subsection 123(1) of the ETA.
[xxxiii] 3. A person designated to be a municipality for the purposes of section 259 of the ETA.
[xxxiv] 1. This ruling applies to sales of XXXXX lots in addition to XXXXX where the transactions between XXXXX and the applicable lessee for those XXXXX lots have the same terms as the Lease Agreement and XXXXX provided for this ruling.
[xxxv] 1. Please note that the definition of "residential complex" in subsection 123(1) excludes a building that is a hotel, a motel, an inn, a boarding house, a lodging house or other similar premises that provides all or substantially all of its accommodation for periods of less than sixty consecutive days.
[xxxvi] 2. In general, section 2 exempts the sale of a residential complex by a person who is not the builder of the complex unless the person has claimed an input tax credit in respect of the complex. Section 3 exempts the sale of a self-built home by an individual who has used the dwelling primarily as a residence. Section 4 addresses the situation where a builder of a condominium unit is taxed under the self-supply rules in section 191, and subsequently sells the property.
[xxxvii] 3. Even if the Condominium had not been a "residential complex" when the Subsidiary acquired it, the Subsidiary would not be required to self-assess on the FMV of the Condominium. Subsection 190(1) would have applied immediately after the acquisition and the Subsidiary would have been deemed to have substantially renovated the complex and to be the "builder" of the complex. However, subsection 191(1) would not apply because the Condominium is never occupied as a place of residence; it is always occupied as a place of lodging. Subsection 191(2) would also not apply in this case. Therefore, the Subsidiary would not be deemed to have received a supply under either of subsection 191(1) or subsection 191(2).
[xxxviii] 4. The sale of the Condominium by the Subsidiary would be taxable if the Condominium was not a "residential complex" when the Subsidiary acquired it. As stated in footnote #3 above, the Subsidiary would be deemed to be the "builder" of the complex if the Condominium was not a "residential complex" when the Subsidiary acquired it. Where the supplier is the "builder" of the complex, the relevant exempting provisions are sections 3 and 4 of Part I of Schedule V. Section 3 would not apply because the supplier (i.e. the Subsidiary) is not an individual. Section 4 would not apply either: paragraph 4(a) does not apply in this case, and the conditions in paragraph 4(b) would not be met because:
• If the Condominium was not a "residential complex" when it was sold to the Subsidiary, the Subsidiary would have received a taxable supply of real property.
• As described in footnote #3 above, the Subsidiary would not be deemed to have received a supply under subsection 191(1) or subsection 191(2).
[xxxix] 1. A "trailer park" of a person is defined in subsection 123(1) as a piece of land that is owned by or leased to the person and that is exclusively composed of (a) one or more sites each of which is, or is intended to be, supplied by the person by way of lease, licence or similar arrangement to the owner, lessee or person in occupation or possession of a mobile home, or a travel trailer, motor home or similar vehicle or trailer, situated or to be situated on the site, and (b) other land that is reasonably necessary for (i) the use and enjoyment of the sites by individuals residing in or occupying mobile homes, or travel trailers, motor homes or similar vehicles or trailers, situated or to be situated on those sites, or (ii) the purpose of engaging in the business of supplying the sites by way of lease, licence or similar arrangement. All XXXXX sites in the Park are described by paragraph (a) of that definition. Generally speaking, we would view the land encompassing any common facilities and buildings as being reasonably necessary for the purposes described in subparagraphs (b)(i) and b(ii). The Park would therefore qualify as a "trailer park".
[xl] 1. A "non-profit organization" means a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada.
[xli] 2. For example, under section 17 of Part VI of Schedule V, a supply of a membership in a public sector body (other than a membership in a club the main purpose of which is to provide dining, recreational or sporting facilities or in a registered party) where each member does not receive a benefit by reason of the membership, other than certain specified benefits, is exempt.
[xlii] 1. In Quebec, it is part of the Civil Code
[xliv] 2. Section 23 of the CHA.
[xlv] 3. The definition of "practitioner" in section 1 of Part II of Schedule V to the ETA is reproduced in the Appendix.
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