13 March 2008 GST/HST Ruling 94585 - Sales of used books

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:

We are writing to you with respect to the alternative collection method (ACM) used by many direct sellers in the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST).

Effective January 1, 2008, the rate of the GST has been reduced from 6% to 5% and the rate of HST from 14% to 13%. The new rates apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

As you may know, publishers of Canadian daily newspapers (Publishers) may use the ACM to charge and account for the GST/HST on their sales of newspapers to independent carriers who resell the newspapers to consumers. However, in order to do so, all direct sellers, including Publishers, must apply to, and have approval from, the Minister to use the ACM. Please find enclosed, GST/HST Memorandum 14.1, Direct Sellers, which provides additional information on the ACM.

We understand there have been many ownership changes of Canadian newspapers over the past decade, and take this opportunity to advise you that if a registrant acquires ownership of a Canadian newspaper from another registrant that had been approved and used the ACM for that newspaper, the new owner is required to apply to, and obtain approval from, the Minister to use the ACM if the new owner is not already approved to use the method.

It is our understanding that XXXXX through its newspapers, currently uses the ACM to charge and account for GST/HST when newspapers are sold to newspaper carriers for resale to consumers. XXXXX.

If XXXXX is using the ACM when selling newspapers to its carriers who then resell to consumers, in order to assist your carriers to comply with the ETA, we ask that XXXXX apply to the Minister for approval to use the ACM for their sales of newspapers to independent carriers as prescribed under subsection 178.2(1).

If a distributor of XXXXX is a registrant and the distributor is using the ACM, we ask that XXXXX and the distributor apply jointly to the Minister for approval to use the ACM as prescribed under subsection 178.2(2).

XXXXX. Please include a list of all the newspapers that will be under the ACM.

Please forward the requested applications above to:

Canada Revenue Agency
Assistant Director Audit
XXXXX
XXXXX

In closing, if XXXXX or its distributors chooses to apply to, and obtain approval from, the Minister to use the ACM to charge and account for GST/HST, we provide the following additional points to assist XXXXX and its carriers to comply with the ETA:

•   XXXXX and its distributors should provide a copy of their approval to use the ACM to its independent carriers for their records.

•   When a change of ownership of a newspaper occurs, XXXXX should advise CRA of the fact that the newspaper is under new ownership, and ensure approval to use the ACM is in place.

•   Some of the business activities newspaper carriers undertake might fall under the ACM, while other business activities are beyond the scope of the ACM. We have enclosed GST/HST Info Sheet GI-019, Newspaper Carriers, for more detailed information on what business activities fall under the ACM.

The foregoing comments represent our general views with respect to the subject matter. 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 Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-2826. 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,

Shane Byrnes
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2008/02/29 — RITS 99615 — GST Treatment of XXXXX Cards as Coupon