Schedule IX

Determination of ordinary location by agreement

17. The place of supply rules for intangible personal property that relate to tangible personal property rely on the ordinary location of that tangible personal property.

18. For purposes of the place of supply rules, the ordinary location of property is deemed by section 4 of Part I of Schedule IX to be the location where the supplier and the recipient mutually agree that the ordinary location of the property is to be at a particular time.

19. In other words, the mutual agreement of the supplier and recipient is determinative even where the property is actually located at a different place at the relevant time from what had been agreed upon.

20. The mutual agreement of the parties may change from time to time. As a result, even if the original written agreement for a supply of property specified that the property would be located in a particular province, the parties may mutually agree subsequent to the signing of the contract that the property is to be moved at a particular time to a location in another province.

21. … The expression not ordinarily located primarily means ordinarily located 50% or less.

Where Manitoba supplier personally delivers good to consignee in Ontario, who sells the goods to Quebec purchaser and has it couriered there, there are 2 supplies: in Ontario, and Quebec

Example 9 – Delivery of goods sold on purchase/resale consignment basis

A consignment sale under a purchase and resale arrangement is treated as two separate supplies that occur at the time the consignee sells the good to the final purchaser.

A GST/HST registered supplier in Manitoba delivers a good using its own vehicle to an Ontario consignment company (consignee) for sale by the consignee. The consignee is GST/HST registered and under its agreement with the Manitoba supplier, when the good is sold to the final purchaser, two transactions will occur: a sale by the Manitoba company to the consignee and a sale by the consignee to the final purchaser. The consignee sells the good to a purchaser in Quebec and sends the good by courier to the purchaser in Quebec. Legal delivery of the good from the supplier to the consignee occurs in Ontario, as does the supply from the consignee to the purchaser.

Supply 1 – Sale by the Manitoba company to the consignee

The sale of the good from the Manitoba company to the consignee is made in Ontario and is subject to the HST at a rate of 13% because the Manitoba company delivered the good to the consignee in Ontario.

Supply 2 – Sale by the consignee to the final purchaser

The second supply is the sale of the good from the consignee to the final purchaser. Although legal delivery occurs in Ontario, deemed delivery occurs in Quebec because the consignee sent the good by courier to the purchaser in Quebec.

The supply is therefore made in Quebec, which is a non-participating province, and is subject to the GST at a rate of 5%.

The Supplier, a GST/HST registrant and a provider of total document management and marketing solutions. Has a Product A business which, pursuant to a service level agreement (SLA), includes the production or processing of printed matter for a customer (the Recipient), which the Supplier then mails to addresses provided by the Recipient, and the provision of invoice management services to the Recipient.

The Supplier receives an order from a Recipient to produce printed matter which contains descriptions, templates and a proofing system, together with the related printing and delivery service requirements. The Recipient can then order, either by phone or online, pre-printed and/or print-on-demand materials such as stationary, forms, labels and marketing materials, and customized print-on-demand documents to the Recipient’s specific needs by allowing changes to product items in line with the Recipient’s approved template guidelines, such as replacing text, logos and images. Once the proof of a product item is approved by the Recipient, it is sent to the production site for printing by the Supplier.

The Supplier delivers the printed matter either by using a Canada Post mail drop, where the printed matter will then be delivered by Canada Post to the Recipient’s customers or proposed customers, or directly to an address (typically a customer’s address) specified by the Recipient.

CRA stated:

The CRA’s position has been that where a registered supplier supplies goods on a delivered at destination basis and the terms for the sale of the goods dictate that the supplier must deliver the goods to a destination specified by the recipient, the delivery of the goods will generally be considered to be part of a single supply.

We note that […][you suggest] it would be easier for the Supplier to apply the place of supply rules for mail delivery under Part VII of Schedule IX where the Supplier uses Canada Post to send TPP to a Recipient’s customers, instead of having to track where each mail drop is being sent.

… [I]f TPP is supplied on a delivered basis, it would be inappropriate to artificially split the supply into two separate components, for the reasons indicated in P-077R2.

In finding that a supply of goods shipped by a non-resident supplier to a GST/HST registrant at an address in a participating province was a supply made in Canada and in that province , CRA stated:

...the phrase "delivered or made available" has the same meaning as that assigned to the concept of "delivery" under the general law of the sale of goods. It is not based on the place where title to the goods transfers....If an Incoterm is used...the place where legal delivery of the goods occurs can be determined by reference to the place where delivery is considered to occur under that Incoterm.

Company A purchase products from manufacturers and supplies an ownership interest in the products by way of sale or lease to recipients. CRA stated:

Section 2 of Part II of Schedule IX deems a supply of TPP that is supplied otherwise than by way of sale (other than TPP that is supplied for no more than three months or TPP that is a specified motor vehicle) to be made in a province if the ordinary location of the property as determined when the supply is made is in the province. In essence, if the parties to an agreement have determined that the ordinary location of a property that is supplied otherwise than by way of sale is in a particular province at the time of the supply, the place of supply of the property is in that province.

In this particular case, if [Company A] and each lessee mutually agree that for purposes of the lease of the [product] by [Company A] the ordinarily location of the [product] is [Province X], then the supply of the [product] is deemed to be made in [Province X] and tax is applicable to the supply based on the tax rate for that province.

Where Manitoba purchaser itself retains the common carrier and PEI vendor merely contacts the carrier when ready, the place of supply is that of legal delivery in PEI

Example 3 – Delivery of a good by a common carrier retained by the purchaser

A manufacturer in Prince Edward Island sells a good to a wholesaler in Manitoba. Legal delivery of the good occurs in Prince Edward Island at the manufacturer’s premises. The wholesaler regularly purchases goods from the manufacturer and establishes freight terms with a common carrier for the regular transportation of goods from the manufacturer’s premises to Manitoba whenever required. The wholesaler instructs the manufacturer to contact the carrier directly to advise the carrier whenever goods are ready for pick-up. The carrier invoices the wholesaler for any transportation service that is provided pursuant to their arrangement.

The good is delivered to the purchaser in Prince Edward Island. In this case, the purchaser entered into an agreement with the carrier for the transport of the good. Since the supplier simply contacts the common carrier to inform them that the good is ready for pick up, the supplier is not considered to have retained the carrier on behalf of the recipient.

The supply of the good is therefore made in Prince Edward Island and is subject to the HST at a rate of 15%.

CRA noted that s. 1 rather than s. 3 applied where the Ontario customer rather than the Quebec vendor arranged for the common carrier to ship the goods in question. As the legal delivery occurred in Quebec, that was where the supply occurred.

Assimilation to same place of supply of cancellation of ticket (para. 70)

Example 18

A supply of a passenger transportation service from Gander, Newfoundland and Labrador to Toronto, Ontario would be considered to be made in Newfoundland and Labrador. A supply of a service of cancelling the ticket for that trip would therefore also be considered to be made in Newfoundland and Labrador and subject to the HST at a rate of 15%.