11 February 1997 GST/HST Interpretation HQR0000436 - Export of Used Vehicles

Dear XXXXX

This refers to your facsimile of November 26, 1996, addressed to Mr. Randy Nanner, in which you request a GST interpretation concerning the application of the GST to the supply of used motor vehicles destined for export, and whether the recipient qualifies for an export certificate.

The facts supplied are as follows:

1. An individual, who is not a consumer, intends to export used vehicles to XXXXX[.]

2. This individual may give the vehicles new paint jobs or tune ups before exporting.

3. This individual intends to drive the vehicles personally from XXXXX (the point of acquisition) to XXXXX (the point of export) within a reasonable time after the purchase. (perhaps 2 weeks)

Schedule VI, Part V, section 1 to the ETA zero-rates the supply of tangible personal property made to a recipient who intends to export the property, as long as all of the requirements pursuant to paragraphs 1(a) to 1(d) are met.

Paragraph 1(b) of Part V of Schedule VI requires that the property not be acquired by the recipient for consumption, use or supply in Canada before the exportation of the property by the recipient. A supply of a vehicle will be considered to have met that criteria even where a particular recipient transports the vehicle to the point of export by driving the vehicle himself from the supplier's premises to that point. However, if after the supply of the vehicle to the recipient, the vehicle is driven for any other purpose, then the supply will not be considered to have met those criteria and therefore cannot be zero-rated pursuant to section 1 of Part V of Schedule VI.

Moreover, paragraph 1(c) of Part V, provides that after the supply is made and before the recipient exports the property, the property is not further processed, transformed or altered in Canada except to the extent reasonably necessary or incidental to its transportation. Processing refers to a technique of preparation, handling or other activity which causes a physical change in the property. In your particular case, painting a used vehicle is considered a transformation or alteration which changes the physical appearance of the property.

Testing of the property does not constitute further processing, transformation or alteration providing the nature of the property is not in any way transformed or altered as a result. However, repairs necessary as a result of testing would be considered further processing.

According to fact 2, the individual may paint and or service the used motor vehicles before their exportation. Should this be the case, painting or servicing vehicles would constitute either further processing or alteration of the property before the individual exports the property. Consequently, paragraph 1(c) would apply to exclude the supply of the used motor vehicles. Therefore, these vehicles would be subject to the GST at the rate of 7 %.

Subsection 221.1(3) refers to an application for authority to use an export certificate to be made in prescribed form containing prescribed information and be filed with the Minister in a prescribed manner. Per subsection 123(1) "prescribed" means (a) in the case of a form or the manner of filing a form, authorized by the Minister, (b) in the case of the information to be given on a form, specified by the Minister. As the supply made to the individual can not be zero-rated pursuant to section 1 of Part V, the Export Certificate can not be made available.

The Export Certificate is not in any particular form. Once a written request for an export certificate is received at the local TSO, it is up to Audit to decide whether an export certificate can be issued. If Audit decides to issue such a certificate, it is in the form of an authorization letter.

Should you require further information concerning the above, please feel free to contact me at (613)952-0419.

Michèle Routhier
Policy Officer
Border Issues
General Operations and Border Issues Division
GST Rulings and Interpretations
Policy and Legislation Branch