27 April 1999 GST/HST Ruling HQR0001489 - Application of the GST/HST to Business and Financial Transactions for the Hiring of Temporary Workers

Dear XXXXX

Thank you for your letter of December 2, 1998, received by facsimile, and your subsequent letter dated December 22, 1998, together with the relevant agreements, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts and Transaction(s)

From the written material we received from you as well as from our various telephone conversations, our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. XXXXX  is a resident Canadian corporation which is registered for GST/HST purposes by number XXXXX[;]

2. XXXXX  is also a resident Canadian corporation which is registered for GST/HST purposes by number XXXXX[;]

3. XXXXX  XXXXX has assumed all of the assets and liabilities of XXXXX. All references to XXXXX  will henceforth be to XXXXX[;]

4. XXXXX is a corporation incorporated and XXXXX  XXXXX[;]

5. XXXXX  is a corporation incorporated in the XXXXX  XXXXX  is resident in the XXXXX, and is a wholly owned subsidiary of XXXXX[;]

6. XXXXX  is a related corporation of XXXXX[;]

7. XXXXX  is issuing purchase orders to XXXXX  for temporary personnel services;

8. XXXXX (the "Agreement"), is a legally binding agreement executed between XXXXX pursuant to the laws of the XXXXX  XXXXX  as amended from time to time. Both XXXXX  XXXXX have agreed and continue to agree to be legally bound by the XXXXX  and for it to govern their business and financial transactions for the hiring of temporary workers, even though neither XXXXX[;]

9. XXXXX  is not acting in the capacity of agent for XXXXX or any other XXXXX  as defined in the XXXXX[;]

10. XXXXX  is acting in the capacity of agent for XXXXX and has the express and unlimited power and authority, pursuant to the Agreement, to bind XXXXX  which power and authority has not been revoked XXXXX[;]

11. In response to the issuing by XXXXX of purchase orders, individuals have been hired by XXXXX their capacity as agent for XXXXX and assigned to XXXXX on a temporary basis for work to be performed entirely XXXXX n XXXXX[;]

12. The XXXXX  administrative and management support of this project, including human resource management was and continues to be substantially performed at XXXXX  XXXXX[;]

13. The actual purchase order(s) for the temporary personnel services for the XXXXX  project have been issued by XXXXX, which is located in XXXXX  on behalf of XXXXX  XXXXX  is responsible for the management of the work performed in XXXXX  and staff located at XXXXX have responsibility for the management of this project including the temporary personnel supplied by XXXXX[;]

14. XXXXX of business of XXXXX consisting of a place of management with offices and a manufacturing facility, so as to constitute a permanent establishment as defined by subsection 123(1) of the Excise Tax Act (the "ETA");

15. The invoice(s) for the temporary personnel services, which have been and may continue to be issued in response to the XXXXX purchase order(s), are sent by XXXXX  to XXXXX rather than to XXXXX in XXXXX  for payment. The XXXXX payment system is not set up to capture the GST in order to capture input tax credits. Therefore XXXXX  pays the full amount of the invoice including the applicable GST and the GST portion is billed intercompany to XXXXX in XXXXX, where it is placed in the account set up to capture the GST input tax credits.

Ruling Requested

1. Whether the supply of personnel services by XXXXX  to XXXXX  pursuant to the XXXXX which commenced by the issuing of purchase orders by XXXXX to XXXXX or work performed by temporary personnel entirely in XXXXX, is subject to GST; and

2. If so, whether the method used by XXXXX to recover the input tax credits, as described above, is suitable to Revenue Canada.

Ruling Given

Based on the facts, the transaction(s), and the purpose of the transaction(s) set out above, we rule as follows:

1. The supply of personnel services by XXXXX to XXXXX  pursuant to the XXXXX  which commenced by the issuing of purchase orders by XXXXX XXXXX for work performed by temporary personnel entirely in XXXXX is subject to GST at the rate of zero percent on the value of the consideration for this supply by virtue of section 7 of Part V of Schedule VI to the ETA.

Comments

2. It is not the responsibility of the GST/HST Rulings and Interpretations Directorate to make a determination as to whether a given method of internal corporate accounting used by XXXXX to recover the input tax credits is suitable to Revenue Canada. This is the responsibility of the Audit Directorate of Revenue Canada.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-2560.

Yours truly,

Richard Aronoff
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

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