18 July 2000 GST/HST Interpretation 8061 - - Duplicate Certificate of Registration

This refers to your e-mail dated February 11, 1999, and additional information provided on September 28, 1999, concerning whether tax applies to an amount that is invoiced by an auctioneer to a principal in respect of a duplicate certificate of registration (dcr) that is obtained by the auctioneer.

Facts

An auctioneer that is a registrant and a resident of Canada supplies used motor vehicles by way of auction in a XXXXX province on behalf of XXXXX XXXXX (the principal) that is also a registrant and resident in Canada.

The purchasers of the vehicles are normally vehicle dealerships and manufacturers and are generally residents of other provinces or non-residents.

A dcr is a piece of paper stamped "True Copy" that is issued by the licensing authority in the province and indicates who the current owner of the vehicle is and certifies that the vehicle is in fact registered in the particular province. The licensing authority charges XXXXX for the dcr.

For confidentiality purposes, the licensing authority will not issue a dcr to third parties if the vehicle is owned by an individual. However, a person other than the owner of the vehicle can obtain a dcr from the licencing authority if the owner of the vehicle is not an individual, such as a corporation.

XXXXX[.] The dcr is then provided to the purchaser of the vehicle when it is sold at auction. Purchasers of the vehicles must usually supply a dcr and a bill of sale in order to register the vehicles in another jurisdiction. XXXXX XXXXX[.] Though you have not been provided with a copy of the agreement, your understanding is that the agreement between the auctioneer and the principal provides that the auctioneer is to be paid an amount equal to a fixed amount per vehicle sold (commission) plus an amount for costs related to the sale of the vehicle. XXXXX[.] It is also your understanding that the auctioneer may not recover the cost of the dcr, nor its commission, from the principal unless the vehicle is sold. If the vehicle is not sold at a particular auction, the dcr is kept by the auctioneer for when the vehicle is scheduled to be sold at a subsequent auction. We also understand that the principal would never actually obtain physical possession of the dcr.

When the vehicle is sold, the auctioneer bills the principal XXXXX for the cost of the dcr. The cost of the dcr is shown separately on the auctioneer's invoice to the principal.

The principal and the auctioneer have not jointly elected under subsection 177(1.3) of the Excise Tax Act (ETA) to not have subsection 177(1.2) apply to the sales of the vehicles.

Interpretation requested

The auctioneer has requested whether the charge by the auctioneer to the principal for the cost of the dcr would be subject to tax.

Interpretation provided

Based on the facts provided, an argument could possibly be made that the auctioneer has incurred the cost of the dcr as an agent of the principal. The auctioneer obtains the dcr and provides it to the purchaser of the vehicle XXXXX. The auctioneer also separately itemizes the cost of the dcr and recovers the expense from the principal at its exact cost. Of the principal and the auctioneer, it appears to be the principal who is benefiting the most from the obtaining of the dcr and its transmittal to the purchaser of the vehicle. The dcr is of no use to the auctioneer unless the vehicle is sold. It remains unclear, however, based on the information available, to what extent the auctioneer would be ultimately liable to the issuing authority for the cost of the dcr.

If the cost of the dcr were to be incurred by the auctioneer as agent, it would not attract tax when billed to the principal. As you know, the determination of whether a particular expense has been incurred as agent is to be based on fact and legal principles. Although there are certain indications that the cost of the dcr was incurred by the auctioneer as agent, based on the information provided, our view is that it was likely not.

To the extent that the expense has not been incurred as agent, it is our view that the obtaining of the dcr and its transmittal to the purchaser would form part of the auctioneer's service of selling the vehicle and would consequently not be subject to tax by virtue of subsection 177(1.2) of the ETA. As you know, under subsection 177(1.2) of the ETA, the auctioneer is deemed not to have made a supply to the principal of services relating to the supply of the auctioned goods.

We would like to point out that even if the obtaining and transmitting of the dcr was not part of the auctioneer's service, but rather distinct from that service, we would nevertheless view it as a supply of a service to the principal as opposed to a supply of a good, and one that would be related to the supply of the vehicle to the purchaser for purposes of subsection 177(1.2) of the ETA.

In conclusion, we would consider the cost of the dcr as forming part of the consideration for the auctioneering service and, on this basis, not subject to tax under subsection 177(1.2) of the ETA. Again, we note that the amount would not have been subject to tax under the other possible tax treatments considered.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8815.

Raymond Labelle
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate