Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Client Address]
Case Number: 237569
Dear [Client]:
Subject: GST/HST ruling and interpretation
GST/HST registration requirement
This letter is further to the correspondence of [dd/mm/yyyy] […], concerning […][Company]’s requirement to register for the goods and services tax/harmonized sales tax (GST/HST). […].
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on the correspondence and the website […][Company’s website], we understand the following:
1. [Company] (NonResCo) is located in […][city outside Canada], and it produces […] (Products).
2. […].
3. […].
4. The Products are offered in preselected designs or can be custom made. […].
5. NonResCo sells its Products in Canada exclusively online through its website or […][a marketplace platform], without any physical presence in Canada.
6. Once an order is received, NonResCo manufactures the item(s) […][outside Canada] and ships the Product directly to the customer in Canada. NonResCo does not have an inventory or a warehouse in Canada.
7. NonResCo has exceeded $30,000 in worldwide taxable supplies over a 12 month period for sales made through its website.
RULING REQUESTED
You would like to know whether NonResCo must register for the GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that
1. NonResCo is not required to register for GST/HST purposes under subsection 240(1); and
2. As explained in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency's (CRA's) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person. Since all the pertinent facts relevant to a determination under subsection 211.22(2) cannot be established at this time, we are unable to rule on NonResCo’s requirement to register under subsection 211.22(2). Instead, we are providing general information which we trust will be of assistance.
EXPLANATION
Subsection 240(1)
Under paragraph 240(1)(c), every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to register for GST/HST purposes except where the person is a non-resident who does not carry on any business in Canada.
Generally, a non-resident person will be considered to be carrying on business in Canada where they have a significant presence in Canada. GST/HST Policy Statement P-051R2, Carrying on Business in Canada (P-051R2), sets out a series of factors and principles that assist in determining whether a non-resident person is carrying on business in Canada for GST/HST purposes. For a business involved in the manufacture and sale of tangible personal property, some of the relevant factors to consider in making this determination include the location of:
- employees or agents
- delivery of goods
- inventory
- a branch, an office or a warehouse
- manufacture or production
The determination of whether a non-resident is carrying on business in Canada for GST/HST purposes is not based on a mechanical application of a specific number of factors. Rather, the determination requires judgment in establishing the importance of each factor in light of the type of supply that is being made in the context of the relevant facts.
Since the only factor connecting NonResCo’s business to Canada is the shipment of the Products to online customers in Canada, NonResCo does not have a significant presence in Canada and would not be considered to be carrying on business in Canada. Accordingly, it would not be required to register for GST/HST purposes under subsection 240(1).
INTERPRETATION GIVEN
Subsection 211.22(2)
With the addition of the new digital economy provisions, suppliers of tangible personal property into Canada, including non-resident suppliers, may have new GST/HST obligations. Specifically, suppliers may be required to register for the GST/HST under the new digital economy rules in subsections 211.22(2) and 240(1.5). Accordingly, a non-resident person who does not carry on any business in Canada should consider whether the following registration provisions apply to them.
Pursuant to subsection 211.22(2), every person that is a non-resident person that does not at any time make supplies in the course of a business carried on in Canada is required at that time to be registered for GST/HST purposes if, for any period of 12 months (other than a period that begins before July 2021) that includes that time, the person’s threshold amount exceeds CAN$30,000. Generally, the threshold amount is the total of all amounts, each of which is an amount that is, or that could reasonably be expected to be, the value of the consideration for a taxable supply that is, or that could reasonably be expected to be, a qualifying tangible personal property supply made during that period by the person to a specified recipient, excluding the value of consideration for a qualifying tangible personal property supply made by the person through a specified distribution platform during the period.
Subsection 211.1(1) defines qualifying tangible personal property supply as
“a supply made by way of sale of tangible personal property that is, under the agreement for the supply, to be delivered or made available to the recipient in Canada, other than
…
(b) a supply of tangible personal property sent by mail or courier to the recipient at an address in Canada from an address outside Canada by the supplier or by another person acting on behalf of the supplier, if the supplier maintains evidence satisfactory to the Minister that the property was so sent;
…”
Subsection 211.22(1) defines a specified recipient as “a person that is the recipient of a supply of property (other than a non-resident person that is not a consumer of the property) and that is not registered under Subdivision D of Division V.”
Subsection 211.1(1) defines a specified distribution platform as “a digital platform through which a person facilitates the making of specified supplies by another person that is a specified non-resident supplier or facilitates the making of qualifying tangible personal property supplies by another person that is not registered under Subdivision D of Division V.”
In summary, where a non-resident person that does not make taxable supplies in the course of a business carried on in Canada makes qualifying tangible personal property supplies to specified recipients, they will be required to register for GST/HST purposes under subsection 240(1.5) if they exceed the CAN$30,000 threshold (described above) within a 12-month period.
However, where a non-resident supplier of tangible personal property, or a person acting on their behalf, sends the property by mail or courier to a recipient at an address in Canada from an address outside Canada, and maintains satisfactory evidence of such, the supply would be excluded, in accordance with exclusionary paragraph (b) of the definition of ‘qualifying tangible personal property supply’ from the calculation of the CAN$30,000 threshold for mandatory registration described at subsection 211.22(2).
Based on the limited facts provided, we cannot confirm NonResCo’s method of delivering Products into Canada or the registration status of its customers. As such, we cannot determine if NonResCo is making qualifying tangible personal property supplies to specified recipients or if they are required to register for the GST/HST pursuant to subsection 211.22(2).
However, if NonResCo makes qualifying tangible personal property supplies to specified recipients and the amount of such sales, as determined by the formula described at subsection 211.22(2), exceeds CAN$30,000 within a 12 month period, NonResCo would be required to register under subsection 240(1.5) of Subdivision D of Division V pursuant to subsection 211.22(2).
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 819-271-7136.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Megan MacDonald
Rulings Officer
Border Issues Unit 2
General Operations and Border Issues Division
GST/HST Rulings Directorate
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