Section 179 - Non-Resident

Subsection 179(1) - Delivery to Consignee of a Non-Resident

Paragraph 179(1)(d)

Administrative Policy

GST/HST Memorandum 3.3.1 "Drop Shipments" June 2008

Description of a drop shipment

4. ... Generally, for GST/HST purposes, a drop shipment of goods occurs where a registrant makes a supply to an unregistered non-resident of either goods by way of sale in Canada or a commercial service in respect of goods and then transfers physical possession of the goods in Canada either to another person on behalf of the non-resident or to the non-resident.

Main purpose of the drop-shipment rules

5. ...[T]he drop-shipment rules are mainly intended to ensure that tax applies to the fair market value of goods that are drop-shipped in Canada and supplied by unregistered non-residents for final consumption in Canada in the same way that tax would apply to goods acquired from the non-resident outside Canada and imported for that purpose. As a general rule, the drop-shipment rules address this issue by deeming the registrant in a drop-shipment situation to have made a supply of the goods to the non-resident recipient for consideration equal to their fair market value when the registrant transfers physical possession of the goods in Canada to another person on behalf of the non-resident or to the non-resident.

Subsection 179(2) - Exception Where Delivery to Registrant Consignee of a Non-Resident

Administrative Policy

21 October 2004 Headquarter Letter RITS 38435

Where a registrant imports tangible personal property of an unregistered non-resident for the purpose of providing storage services to the non-resident, and physical possession of the tangible personal property is transferred at a place in Canada to the registrant (the "consignee") purchasing the goods from the non-resident, and the consignee gives the registrant storage service provider a drop-shipment certificate, the provision of the storage services to the non-resident is deemed under s. 179(2) to have been made outside of Canada and thereby is not subject to Division II tax.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(2) 33

GST/HST Memorandum 3.3.1 "Drop Shipments" June 2008

Consequences of application of s. 179(2)

23 ....The consignee who issues the drop-shipment certificate to the registrant acknowledges its potential tax obligation as a result of acquiring physical possession of the goods. This tax obligation may occur as a result of the general drop-shipment rule where the consignee is acquiring physical possession of the goods to supply a commercial service to the unregistered non-resident in respect of the goods or a service of manufacturing or producing goods for an unregistered non-resident. It may also occur as a result of an obligation to self-assess tax in respect of the goods where the consignee is a recipient of an imported taxable supply of the goods (explained beginning at paragraph 29)....

29. Division IV imposes tax on an "imported taxable supply". Generally, these are supplies that are made outside Canada and acquired by the recipient for consumption, use or supply in Canada otherwise than exclusively in the course of a commercial activity. The recipient, as opposed to the supplier, is required to account for tax on an imported taxable supply.

P-107R1 "Certificate for Pre-Retail Drop-Shipments" 5 May 1999

94 CPTJ - Q. 2

Where an unregistered non-resident company (A) agrees with a registered Canadian company (B) to install goods manufactured outside Canada by A and imported into Canada by a Canadian registered customer (C) and B has charged GST to A who has included the GST in its invoice to C, there are no provisions in the ETA that would allow an input tax credit to be claimed by C in respect of the installation of the property.

Subsection 179(4) - Retention of Possession