Section 142

Customers would purchase watches or jewellery at Vancouver stores of the appellant in order to take them as gifts on their regular trips to China. The appellant’s staff would personally take the items to the airport (shortly before the flight departure) where they were inspected by a CBSA officer who would stamp a completed E15 form (a Canadian customs form evidencing exportation of the listed items) and then essentially ensure or monitor that the items were not handed over to the customer until shortly before boarding.

After finding that the sales were not zero-rated, Lyons J went on to find that the supplies of the items (the “Jewellery”) were made in Canada as they were delivered in Canada. After quoting with approval the position in Memorandum 3.3 as to the meaning of "delivery" and "made available" (signifying constructive delivery) and quoting with approval the statement in Marshall and Van Allen v Crown Assets Disposal Corporation, [1956] OR 930 (Ont CA) that “Delivery is accomplished by the purchaser obtaining the actual physical possession of the goods or, if certain conditions are present, there may be a symbolical delivery which divests the seller's possession,” she stated (at paras. 99, 104):

… [T]he focus in section 142 is on “delivered”. Generally, that equates to delivery of a full voluntary transfer of possession of the property to the buyer immediately upon physical possession by the buyer without restriction. …

Clearly, Customers were given full possession of the Jewellery at the time these were hand delivered, before or after airport security. Full possession enabled Customers to derive the full benefit of the Jewellery immediately upon physical delivery of the Jewellery. The appellant had done everything that needed to be done to enable the Customers to use the Jewellery and derive the benefits without any restrictions on use or possession. Customers then also assumed risks inherent in the Jewellery; for example, if Jewellery was lost the risk was the Customers’.

The appellant (Jayco – which was registered for GST/HST purposes) would arrange for a wholly-owned freight transportation company (“JET”) to deliver recreational vehicles, that Jayco had manufactured at its facility in Indiana, to Canadian dealers, with those dealers being the importers of record. The freight transportation service was included on the Jayco invoice to a Canadian dealer and was based on an approximate estimate of the transportation cost. Jayco also sold parts to the Canadian dealers, as to which it retained a customs broker and logistics firm (“Frontier”) to consolidated the parts’ orders into one master load and used a freight transportation company to transport the load to Frontier’s facility in Winnipeg under one bill of lading for the entire shipment. Frontier then contracted with third party carriers to deliver the parts to the Canadian dealers.

After noting (at para. 91) that under the Uniform Commercial Code, “absent an agreement between the seller and the buyer, delivery occurs at the seller’s place of business,” D’Auray J went on to conclude that although “None of the above documents contain any explicit mention as to where the delivery of the RV would take place” (para. 102), “there was an agreement between Jayco and the Canadian dealers that the delivery of the RVs would take place at the business premises of Jayco in the USA at the time the RVs were turned over to the common carrier” (para. 97) – so that the place of supply of the RVs was outside Canada under ETA s. 142(2)(a). Indicative factors in this regard included:

• Under the manufacturer’s financing agreements with inventory financing companies, Jayco had the right to be paid at the point of shipment (para. 104).
• “Once the RV was turned over to JET, JET became the agent of the Canadian dealer and became responsible for any damages occurring to the RV while in its possession pursuant to the provisions of the US Transportation Code dealing with the Bill of Lading” (para. 105). In this regard, D’Auray J referenced (at para. 108) the statement in Marshall v Crown Assets Disposal Corp., [1956] O.J. No. 572, that:

… [I]f certain conditions are present, there may be a symbolical delivery which divests the seller’s possession … . The transfer to the buyer of a bill of lading, as representing the goods, forms a good delivery in performance of the contract.

• [T]he certificate of origin was always issued and dated on or before the RV was turned over to the common carrier for shipment to the dealer (para. 107).
• A statement in the Dealership Sale Service Agreements that neither party was “the agent … of the other for any reason” had “to be interpreted in its context” (para. 116) and, in fact, Jayco acted on the dealers’ behalf in arranging delivery.

However, the parts were delivered to Canadian dealers by Frontier as Jayco’s agent given an express statement “that Frontier would act as an agent of Jayco” (para. 128), and the fact that “Frontier would consolidate all material bound for Canada … under one Bill of Lading” indicated “that the bill of lading could not serve as a title and delivery document for individual parts orders going to different dealers,” nor “could the consolidated bill of lading be used to illustrate a ‘symbolical delivery’ of the parts” (para. 130). Thus, “the parts were delivered or made available in Canada,” so that Jayco was required to collect HST on their sale.

While the medium which carries software may be tangible property, the actual software itself is not. Because software is not tangible property, it did not qualify as depreciable property under the Tax Administration Act 1994 (New Zealand).

The two appellants, who were U.S.-resident GST registrants, sold goods under mail orders which had been solicited in Canada through bulk mail and Canadian-magazine advertising. The Canadian customers sent their orders to a Windsor address. The appellants delivered the goods to an unconnected U.S. cartage company (“Hunt”), which delivered them in Detroit to a U.S. courier (PDQ”), which cleared the packages through Canadian Customs at Windsor and then mailed them at a Windsor Canada Post facility for delivery to the customers. The appellants were assessed for uncollected GST on the sales.

The appellants relied on s. 31(1) of the Sale of Goods Act (Ontario), which provided:

Where in pursuance of a contract of sale the seller is authorized or required to send the goods to the buyer, the delivery of the goods to a carrier whether named by the buyer or not, for the purpose of transmission to the buyer, is, in the absence of evidence to the contrary, delivery of the goods to the buyer.

Bowie J found (at p. 60-5):

[I]t is clear that the carrier referred to in subsec. (1) is the agent of the buyer, even though it may be selected and instructed by the seller. It cannot be said…that either Hunt or PDQ is the agent of the buyer for delivery to the buyer. Each of these companies has a specific mandate…to effect a delivery, but not to the buyer.

In concluding that GST was exigible in light of s. 142(1)(a), he stated (at p. 60-7):

Delivery of the goods…is at the time of delivery of the parcels to Canada Post, and therefore takes place in Windsor, Ontario.

The members of the Appellant (which was a non-share Delaware corporation resident in Canada) included Canadian and U.S.-resident individuals who had been sold “Resort Points,” which could be periodically applied under a booking system to obtain access to particular resort condo units ("Vacation Homes") beneficially owned by the Appellant in Canada, the U.S. and Mexico. The Appellant paid various expenses respecting the Vacation Home operations which it recovered through “Annual Resort Fees” charged to its members. D’Arcy J found that the Annual Resort Fees were consideration for a service rather than intangible personal property, stating (paras. 237-8):

The Appellant does not provide any rights in consideration of the Annual Resort Fee. … What it supplies is the agreement to use the Annual Resort Fees to fund its operations. … This…is the supply of something other than property.

In rejecting the Appellant’s submission that it “made, in consideration of the Annual Resort Fee, separate single supplies of services in respect of each Vacation Home,” he stated (at para. 259):

It made a single supply by agreeing to use the Annual Resort Fee to fund its operations…with the consideration being based upon the Appellant’s total estimated costs. The Appellant could only continue to operate the Intrawest Program if it incurred all of the costs…; it could not cherry-pick certain costs.

Although "'in relation to'...should be given a wide scope" (para. 265), he found (at para. 265) that in order for there to be “a supply…of a service in relation to real property” under s. 142(1)(d) or 142(2)(d):

The service must be performed directly on the real property or relate directly to the real property. This would include services such as repairs to the real property, maintenance of the real property, architectural services relating to a specific building or legal services performed in respect of the sale or rental of the real property.

After noting (at para. 213) that where a service relates both to real property inside and outside Canada, ss. 142(1)(d) and 142(2)(d) “deem two mutually exclusive events to occur” i.e., that supply occurs inside and outside Canada, and (at para. 272) that “the supply of the Annual Services relates in part to real property in Canada and real property outside of Canada,” and finding (at para. 288) that “the GST Act…contemplates a single supply which is either subject to tax on the whole consideration paid for the supply or not subject to tax at all,” he found (at para. 318) that this inconsistency should be resolved on the basis that:

[P]aragraphs 142(1)(d) and 142(2)(d)…only apply if the single supply of a service relates solely to real property. The paragraphs do not apply if only a portion of the single supply of the service relates to real property. In such a situation, the supply is subject to the general deeming rules set out in paragraphs 142(1)(g) and 142(2)(g).

On this basis (paras. 321-2):

Paragraph 142(1)(g) deems the supply to be made in Canada since the Appellant performed the Annual Services partially in Canada.

Therefore the GST applied to all of the Annual Resort Fee paid by the Members... .

The CRA administrative position, which was "to allocate the Annual Resort Fee between taxable supplies made in Canada and taxable supplies made outside of Canada, basing the allocation on the ratio of total resort points issued in respect of properties located in Canada to the total resort points issued in respect of all properties" (para. 198), did not comply with the Act (para. 323). However, his judgment could not increase the tax assessed (para. 323).

MELP was found to be performing its services to Canadian patients who underwent bariatric surgery at the surgical unit in Mexico of a Mexican company (“LIMARP”) as agent for LIMARP given that their conduct implied an agency arrangement.

However, its own fees (collected by deduction from the fees collected by it from the patients before remittance to LIMARP) were not zero-rated under s. VI-V-5 given that that the services which MELP performed on behalf of LIMARP (including a wide range of various pre-operation and post-operation services) were in significant part performed in Canada. Thus, services performed by LIMARP through its agent were performed in part in Canada, so that their place of supply was deemed under s. 142(1)(g) to be in Canada, contrary to the requirements of s. VI-V-5(b) that the zero-rated agency services be in respect of supplies made outside Canada.

The appellant (“Three-W”), which carried on the business of recruiting foreign students abroad for private schools in Canada and the United States, was assessed for not having collected and remitted GST or HST on the services it provided to Canadian schools.

Three-W maintained an office in the London, Ontario home of its shareholder, Jason Wang’s London, Ontario home. All of the Canadian schools became clients through dealing with Mr. Jason Wang at their Canadian schools. The Canadian schools signed written agreements with Three-W to appoint it as recruitment agent for students from China and certain other countries. Three-W earned all of its income from the per student commissions paid by the schools. In finding that Three-W was required to charge GST or HST on its fees charged to the Canadian schools, Boyle J stated (at paras. 11-13):

While the taxpayer may take the position that much or even most of its revenue-generating activities takes place in China, the evidence is clear that its student recruitment services were carried on in part in Canada. This is the case even after allowing for the fact that, although issuing bills and receiving payment may be an integral part of carrying on business in Canada, it does not necessarily constitute part of the activities of performing the service sold to the Canadian schools being that of student recruitment. …

I can not accept the taxpayer’s submission that the only service which Three-W was paid to provide was that of recruiting students and it was entitled to its commissions once the students were registered regardless. …

The service is not provided wholly outside Canada for purposes of paragraph 142(1)(g).

The taxpayer, which used its trucks, and independent contractors as drivers (a.k.a., contract truckers), to transport freight in Canada and the U.S, paid the « trip fee » specified in its agreements with the drivers for each trip. DTI was found by Russell J to bear the costs of the diesel fuel for the trips through the use by the drivers on its behalf of « T-Chek » cards (enabling the participating Shell or other station to receive payment out of a prepaid balance made by DTI) and to bear the costs of maintenance of the trucks. He further found that charges made by DTI at the end of each trip to the drivers of $0.76 per mile for fuel and $0.08 per mile for vehicular maintenance were consideration for an on-supply by DTI to the drivers of fuel and maintenance services.

Russell J found that, given that 69% of the fuel purchases were acquired by DTI at service stations outside Canada and immediately on-supplied to the drivers, it followed (under s. 142(2)(a)) that there was no GST/HST on 69% of the fuel supplies by DTI to the drivers, as their place of supply was outside Canada. In this regard, Russell J stated (at paras. 52-55):

The logic seems clear that possession of the refuelled diesel was given to contract truckers at the point the refuelling diesel being pumped by fuel suppliers, freshly acquired by DTI, flowed into the fuel tanks of the contract trucker operated vehicles. Specifically, such possession was given at the various fuel suppliers’ premises both in Canada and in the U.S., closely followed by commencement of usage, i.e. consumption, of the (re)supplied diesel.

These (re)supplies of diesel from DTI to the contract truckers cannot sensibly be said to have occurred at any later time, such as hours or days later, when back in Ontario at the conclusion of the haulage trips. After all, by then the diesel, substantially if not completely, would no longer even exist – having in the meantime been expended through operation of the contract truckers’ vehicles.

Thus, the respondent Crown is mistaken that the taxable supplies of diesel that DTI made to the contract truckers occurred in Canada, at the end of the respective haulage trips, when the consideration for such supplies, being the chargebacks, were calculated and paid at DTI’s Ontario location

These (re)supplies of diesel from DTI to the contract truckers cannot sensibly be said to have occurred at any later time… .

The taxpayer (DTI) used its trucks, and independent contractors as drivers (to whom it paid a per-trip fee), to transport freight in Canada and the U.S. DTI was found by Russell J to bear the costs of the diesel fuel for the trips through the use by the drivers on its behalf of cards (enabling the participating Shell or other station to receive payment out of a prepaid balance made by DTI) and to bear the costs of maintenance of the trucks. He further found that charges made by DTI at the end of each trip to the drivers of $0.76 per mile for fuel, and $0.08 per mile for vehicular maintenance, were consideration for an on-supply by DTI to the drivers of fuel and maintenance services.

Regarding the application of s. 142(2)(g) to the maintenance services supplied by DTI to the drivers, Russell J stated (at para. 78):

Based on Mr. Dickson’s evidence that 95% of DTI’s maintenance/repair expenses was for maintenance/repair provided, i.e., supplied in the U.S., I conclude that 95% of such services were not “made in Canada”.

Accordingly, 95% of the maintenance on-supplies of DTI were made by it outside Canada, and were not subject to GST/HST.