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Attention: XXXXX
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February 28, 1994
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This is in response to your letters of October 12, 1993, and November 12, 1993, wherein you request an accommodation to allow your current practice in which the listing and selling brokers only account for the GST on 50% of the commission due on the sale of the real property. I apologize for the delay in responding.
As we understand it, when a vendor lists residential real property with a real estate firm (listing broker) under a multiple listing agreement (MLS), the vendor authorizes member agents of the XXXXX to act as agents of the listing broker to offer the property in accordance with the MLS agreement and to divide a commission between the listing broker and the broker selling the property. If a property is sold by a selling agent rather than the listing agent then, as per the agreement between the listing broker and the vendor, the selling agent was acting as an agent for the listing agent.
As an addendum to the XXXXX, there is provision for the vendor to direct its solicitor to pay a specified commission to the broker. According to the information that you have provided, it appears that the XXXXX wants both the name of the listing broker and the name of the broker with whom the selling agent is associated to be designated as "broker" for purposes of this direction.
The XXXXX is the only document that concludes the sale of the property.
The listing broker and the selling broker are registrants for purposes of the tax. Depending on each individual situation, the salespersons for each broker may or may not be registrants.
Based on the above information, it is the Department's position that the interpretation previously provided by the XXXXX to the XXXXX on June 30, 1993, is correct. It is the Department's position that when a vendor of residential real estate lists property with a real estate firm (the listing broker), the vendor is receiving a taxable supply of services from the listing broker. As such, the listing broker is required to account for the full amount of the commission and the GST payable by the vendor. It may, however, deduct all eligible ITCs from that amount relating to the GST payable on the taxable supplies received from the selling broker. A taxable supply will also have occurred between the selling broker and the listing broker.
Please note that this interpretation would not restrict the apportionment of the consideration and tax amounts directly to the parties involved in the manner in which you propose. However, for GST purposes, we would require that the invoicing documentation accurately reflect the supplies that occur and that the GST collected or collectible be accurately reflected in the net tax calculation of all parties.
This interpretation is based on our current understanding of the Excise Tax Act and regulations thereunder in their present form and does not take into account the effects of any proposed or future amendments thereto or future changes in interpretation.
Further, while we trust that our comments are of assistance to you, we would advise that they do not constitute a GST ruling and are, therefore, not binding upon the Department in respect of any particular fact situation.
Should you require further information, please contact the XXXXX at: XXXXX XXXXX[.]
Yours truly,
H.L. Jones
Director
General Tax Policy
Policy and Legislation
Excise/GST Branch
GTP: XXXXX
c.c.: M. Bloom
A. Trattner
XXXXX
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