25 July 2000 GST/HST Interpretation 8177 - Review of GST/HST APPLICATION RULING "Arranging For Services" Issued

Dear XXXXX:

Thank you for your letter of April 3, 2000 (with attachments), requesting a review of the above noted application ruling, our case HQR00001783/8177.

We apologize for any misunderstanding that may have arisen as a result of that letter. We have revisited the issue and reviewed the ruling in detail. Notwithstanding that there may be some disagreement as to whether the services performed by XXXXX on your company's behalf should be labeled as marketing and promotional services or otherwise, the ruling issued is correct as it stands. This is to confirm that the services performed by XXXXX are not financial services and therefore constitute a taxable supply on which GST is payable on the amount of the consideration as calculated.

There are essentially two main criteria, both of which must be met before any service falls within the scope of "arranging for" per paragraph (l) of definition of "financial service". One is that the service of "arranging for" must be carried out in respect of a "financial service" listed in paragraphs (a) through (i) of the definition of "financial service". The key elements of the other criteria, the meaning of the term "arranging for", are enunciated in the draft policy paper dealing with that subject and are; intermediary helps both supplier and recipient in an active manner, supplier and recipient count on intermediary for assistance in the supply of the financial service and the intermediary is fully and directly involved in the supply of the financial service.

In our letter of XXXXX, we advised that while a few of the activities performed by XXXXX might have some elements of "arranging for" a financial service, as per paragraphs (b) and (d) of the definition of "financial service", these are incidental to the non-financial services performed and therefore XXXXX's services are taxable. We did not comment on whether the key elements of the meaning of the term "arranging for" were met or not met by XXXXX as this was not necessary because the other criteria i.e. must be services performed in respect of paragraphs (a) through (i), had not been met.

Further, we do not agree with the contention in your current letter that paragraph (i) of the definition of financial services is applicable in this case. The Canada Customs and Revenue Agency maintains that paragraph (i) pertains to agreements for services between credit card holders and credit card issuers, or credit card holders and merchants who accept these credit cards. XXXXX's services clearly do not fall within paragraph (i).

I trust this reply clarifies our position.

Yours truly,

John Sitka
Director
Financial Institutions & Real Property Division
GST/HST Rulings and Interpretations Directorate