27 June 2007 GST/HST Ruling 94831 - Application of GST/HST to the XXXXX Levy

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.

Dear XXXXX:

Reference is made to our telephone conversation XXXXX. It is our understanding that you represent several clients XXXXX who are sole proprietors involved in the XXXXX industry. In particular, your clients who are registered for GST/HST are engaged in the commercial activity of XXXXX, a zero-rated supply under the legislation (the Excise Tax Act). As a result of their supplies being zero-rated, your clients are in a net tax refund position. It is our further understanding that your clients have either quarterly or annual filing frequencies. Your clients are often unable to file their returns on the required due date given the nature of their business where they are often absent for long periods of time.

Under section 283 of the Excise Tax Act, a $250 penalty is imposed on registrants who fail to respond to a demand issued by the Canada Revenue Agency (the CRA) requesting that the registrant file an outstanding return. You have expressed concerns that this penalty should not be applied to registrants such as your clients who are in a net tax refund position. This penalty is applicable in those situations where the registrant does not respond to the request within the specified time frame. Under the legislation, the penalty is exigible regardless of whether the registrant is in a net tax or net tax refund position. As we explained, the CRA is responsible for the administration of the Excise Tax Act as it is written, and all matters of tax policy or changes to the Excise Tax Act would need to be addressed to the Minister of Finance.

Several options, however, were discussed during our conversation as a means of addressing the concerns of your clients and facilitating compliance with the legislation.

One option to consider is that your clients who are quarterly filers can elect to file a GST return on an annual basis. This would result in your clients who are sole proprietors filing a GST return once a year on June 15 of the following year. No quarterly instalment payments would be required since your clients are in a net tax refund position. Input tax credits could only be claimed, however, when the return is filed.

Another option would be for your clients to file nil returns by the due dates and to claim input tax credits in a return within the four years allowed for the claiming of input tax credits in accordance with the legislation.

As discussed, if any of your clients receive a demand from the CRA to file returns, it is suggested that your client, or the person authorized by your client, communicate with the CRA at the telephone number indicated on the demand within the time frame specified on the demand. Through this process, the client or the person authorized by the client, would have the opportunity to provide reasons why the return is late and to discuss with the CRA, based on the particular situation, as to when a return could be filed, if it couldn't be filed within the time period specified in the demand.

In response to your request for a contact person within the CRA responsible for the issuance of the demands, you may wish to contact Ms. Lynn Livingston, Director, Trust Accounts Division, Tower C, Place Vanier, 25 McArthur Road, Ottawa, ON K1A 0L5. Ms. Livingston may be reached at (613) 954-1294.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-0301.

Yours truly,

Owen Newell, CGA
Manager
General Operations Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

2007/07/13 — RITS 95253 — Application of the GST/HST to Cemetery Products and Services - Supply of Interment Rights