18 January 1995 GST/HST Interpretation 11645-3-4[1] - Importation of Mail Order Goods by Individual Consumers, Where the Amount of Customs Duties and Taxes have Been Pre-collected by the Non-resident Mail Order Company

                                                                        Telephone: (613) 954-8585
Facsimile: (613) 990-1233
File: 11645-3-4 (sjm)
S. 212, Ss. 240(3)

Dear XXXXX :

This is in reply to a facsimile transmission, dated December 12, 1994, and received from XXXXX of your division, regarding the importation of mail order goods by individual consumers, where the amount of customs duties and taxes have been pre-collected by the non-resident mail order company.

In a letter you received from a XXXXX , dated November 25, 1994, XXXXX comments on the incorrect amount of customs duty that he was overcharged on a recent importation from the XXXXX catalogue. He also states that the company does not appear to be a GST registrant, even though they are collecting GST from him.

The facts, as they are know to us, are:

1. The mail order company is XXXXX (also known as XXXXX ). It is a unregistered non-resident business, operating out of XXXXX .

2. XXXXX offers the Canadian customer (the "consumer") the service of pre-collecting the customs duties and taxes, which are then remitted to Canada Customs in advance of the package being delivered to the consumer.

3. XXXXX .

4. In pre-collecting duties and taxes, XXXXX uses a XXXXX flat duty rate for all orders paid by cheque. For credit card orders, XXXXX will calculate the duties based on rates obtained from an independent customs broker.

 XXXXX has contacted XXXXX directly on the matter related to the incorrect amount of customs duty collected (a copy of which is attached for your reference). Accordingly, it appears that it will not be necessary to respond to this portion of the incoming, save to reference his call with Customs.

In the matter relating to GST registration and the collection of GST, we offer the following comments:

Only non-residents who are carrying on business in Canada and who make taxable supplies in Canada, are required to be registered for the GST. Our general understanding of the U.S. mail order business is that they are not generally considered to be carrying on business in Canada, nor do they make taxable supplies in Canada. However, if, in the ordinary course of carrying on business outside Canada, the non-resident regularly solicit orders for goods to be delivered in Canada, this non-resident may be eligible to register voluntarily.

In designing the GST, it was recognized that there may be occasions where non-resident persons engaged in commercial activities outside Canada would incur GST on purchases and imports related to their taxable sales or sales made outside Canada. Persons electing to register on a voluntary basis are generally eligible to claim input tax credits (ITCs) for tax paid on inputs that are used in the course of a commercial activity. For example, a non-resident GST registrant may pay GST at time of importation for catalogues they import to solicit orders, GST on advertising they do in Canada and Canadian postage. If those costs are incurred in the course of their commercial activity, the GST may be recoverable.

It is our understanding that the majority of foreign mail order goods are delivered or made available outside Canada. Regardless of whether a non-resident mail order company has registered, GST is not to be charged on goods delivered or made available outside Canada. In this scenario, it is the Canadian recipient who is liable to pay the GST at time of importation. This amount is collected by Canada Customs.

 XXXXX is not a GST registrant. Further, while their advertising is somewhat vague in nature, they nonetheless are clear in stating that customs duties and taxes "remain the responsibility of the consumer". The inserts in XXXXX catalogues seem to suggest that they are simply providing the service of expediting clearance through Canada Customs on the consumers' behalf. By placing an order with this company, the consumer is accepting that service.

As was indicated in a subsequent note from XXXXX , the Department has offered to work with XXXXX to revise the way that XXXXX represents the amount of GST that they collect. You may wish to assure XXXXX of this fact in any reply to him.

Should you have further questions in this regard, please contact Susan Mailer at (613) 952-9579.

Yours truly,

H. L. Jones
Director
General Tax Policy
Policy and Legislation
Goods and Services Tax

Attachment (1)

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