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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XXXXX
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
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XXXXX
XXXXX
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Case Number: 86862
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June 20, 2007
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Subject:
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GST/HST INTERPRETATION
Tax Refund or Credit from Direct Seller
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Dear XXXXX:
Thank you for your letter XXXXX concerning your eligibility to obtain a Goods and Services Tax (GST)/Harmonized Sales Tax (HST) refund or credit from your direct seller. We regret the delay in responding.
Statement of Facts
We understand that your client, XXXXX is not registered for GST/HST purposes. XXXXX
XXXXX.
• XXXXX.
• XXXXX, ...
• XXXXX:
– XXXXX ...
– XXXXX.
XXXXX:
XXXXX
XXXXX
1. XXXXX.
4. XXXXX.
XXXXX
XXXXX
XXXXX:
XXXXX:
• XXXXX;
• XXXXX;
• XXXXX.
• XXXXX.
XXXXX has purchased some XXXXX products for use in XXXXX business and for XXXXX personal use. Occasionally, XXXXX resells a product to a customer or to another Consultant. These sales are made at the same price XXXXX paid to purchase the products. XXXXX.
XXXXX.
Ruling Requested
You would like to know if XXXXX is entitled to a refund or credit under the ACM on XXXXX purchases of exclusive products that were:
• taken for personal use;
• used in XXXXX business for demonstration purposes;
• resold to a person other than another independent sales contractor (ISC) or
• resold to another ISC .
If XXXXX is entitled to a refund or credit under the ACM, what documentary evidence would be acceptable to XXXXX?
If XXXXX provides XXXXX satisfactory evidence that the exclusive products that XXXXX is purchasing are for XXXXX own use at the time XXXXX orders the products, would XXXXX be permitted to charge GST/HST on the selling price rather than having to charge tax on the suggested retail price and then later pay or credit the difference in tax?
Lastly, you would like confirmation that transportation charges on zero-rated goods are also zero-rated.
Interpretation Given
In accordance with section 1.4 of the GST/HST Memoranda Series, a ruling can only be issued with reference to a clearly defined fact situation of a particular person. We are aware that you have given us everything that you could but from our perspective there is missing information. XXXXX. Therefore, we cannot provide you with a ruling. However, we are pleased to provide you with the following interpretation.
If XXXXX:
• meets the definition of an ISC (described in paragraph 8 of GST/HST Memorandum 14.1, Direct Sellers (the Memorandum)) and
• sells exclusive products (described in paragraph 7 of the Memorandum) and
• is an ISC of XXXXX,
then XXXXX may ask XXXXX for a tax refund or a credit on XXXXX purchases of exclusive products taken for XXXXX own use or used in XXXXX business for demonstration purposes (described in paragraph 34 of the Memorandum). Similarly, XXXXX may ask XXXXX for a tax refund or a credit on XXXXX sales to a person other than another ISC (described in paragraph 33 of the Memorandum). Whether or not XXXXX refunds or credits the tax to XXXXX is a private matter between XXXXX and XXXXX direct seller.
When a supply of an exclusive product is made from one ISC to another ISC of the direct seller, the supply is deemed not to have been made by the first ISC and not to have been received by the other ISC provided that the tax has been accounted for by the direct seller when the product was supplied to the first ISC. In effect, supplies from one ISC of a direct seller to another ISC are ignored for GST/HST purposes. This is described in paragraph 28 of the Memorandum.
As to the issue of the documentary evidence to be provided by XXXXX to XXXXX when XXXXX requests a refund or credit, this is a matter between XXXXX and XXXXX direct seller. Paragraph 35 in the Memorandum specifies that in order to take a deduction in determining net tax, the direct seller must maintain evidence that the ISC has, for instance, appropriated the exclusive product for the ISC's own use or made a supply for less than the suggested retail price. The Canada Revenue Agency (CRA) may accept a variety of documents as evidence provided that the document(s) contain enough information about the transaction in question.
You have also asked if XXXXX provides XXXXX with satisfactory evidence that the exclusive products that XXXXX is purchasing are for XXXXX own use at the time XXXXX orders the products, would XXXXX be permitted to charge GST/HST on the selling price rather than having to charge tax on the suggested retail price and then later pay or credit the difference in tax? The answer to this question is no because the ACM does not permit this.
Lastly, you have asked if transportation charges on zero-rated goods are also zero-rated. This depends on the terms of sale. If you sell goods and deliver them directly to your customer at a price that includes delivery, and the terms of sale are FOB the customer's premises (i.e., title to the goods passes when the customer receives them), GST or HST applies to the full price charged for the goods at the appropriate tax rate:
• 14% in Nova Scotia, New Brunswick, and Newfoundland (the "participating provinces");
• 6% elsewhere in Canada; or
• 0% for zero-rated goods, regardless of where the supply is made.
This is not a separate supply of a freight transportation service in these circumstances, even where a delivery charge is itemized separately on an invoice.
If the goods are sold FOB the vendor (i.e., title to the goods passes when the goods are given to the carrier), the delivery service is a separate supply, and GST or HST applies to the service. This means that, even if the goods are zero-rated, such as basic groceries, the delivery charge is taxable at 6% (or 14% if the goods are delivered to a participating province), unless the freight transportation service itself is zero-rated.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the Excise Tax Act, regulations, or our interpretative policy could affect this interpretation.
At your request, we have searched our database for previous rulings written by our office that dealt with the issues discussed in this letter and did not find one that is similar to your case. If you require clarification with respect to any of the topics covered in this letter, please call me directly at 613-954-9700.
Yours truly,
Michèle Routhier
GST/HST Rulings Officer
Services and Intangibles Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate
2007/06/13 — RITS 88506 — Tax Status of Maple Sap
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