[OFFICIAL ENGLISH TRANSLATION]
2000-528(GST)I
BETWEEN:
134343 CANADA INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on January 16, 2002, at Montréal, Quebec, by
the Honourable Judge Louise Lamarre Proulx
Appearances
Agent for the Appellant: Marc Robillard
Counsel for the Respondent: Gérald Danis
JUDGMENT
The appeal from the assessment of goods and services tax made under the Excise Tax Act, notice of which is dated October 21, 1997, and bears number T97G719, is allowed, without costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the appellant shall be allowed a rebate of the tax payable in respect of "short-term accommodation" in the case where that service was billed separately to the recipient, in accordance with the attached Reasons for Judgment.
The appellant is not entitled to any further relief.
Signed at Ottawa, Canada, this 24th day of April 2002.
|
"Louise Lamarre Proulx" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020424
Docket: 2000-528(GST)I
BETWEEN:
134343 CANADA INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the informal procedure from an assessment made under the Excise Tax Act (the "Act") for the period from May 1, 1993, to April 30, 1997.
[2] The point for determination is whether the appellant made a separate supply of short-term accommodation or whether that supply was included in a tour package.
[3] The expression "tour package" is defined in subsection 163(3) of the Act. It did not change during the assessment period. It is defined as follows:
... a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price.
[4] The definition of the expression "short-term accommodation" has changed. However, since the case does not deal with the meaning of the expression but rather the inclusion or exclusion of short-term accommodation in the supplies of tour packages, the definition currently in effect will suffice for the purposes of these reasons. It appears in subsection 123(1) of the Act:
... a residential complex or a residential unit that is supplied to a recipient by way of lease, licence or similar arrangement for the purpose of its occupancy by an individual as a place of residence or lodging, where the period throughout which the individual is given continuous occupancy of the complex or unit is less than one month and, for the purposes of sections 252.1, 252.2 and 252.4,
(a) includes any type of overnight shelter (other than shelter on a train, trailer, boat or structure that has means of, or is capable of being readily adapted for, self-propulsion) when supplied as part of a tour package (within the meaning assigned by subsection 163(3)) that also includes food and the services of a guide, and
(b) does not include a complex or unit when it
(i) is supplied to the recipient under a timeshare arrangement, or
(ii) is included in that part of a tour package that is not the taxable portion of the tour package (within the meaning assigned to those expressions by subsection 163(3)).
[5] Mairena Castro testified for the appellant. Carole Boudreau testified for the respondent party.
[6] Ms. Castro described the appellant's services as those of a wholesaler that sells travel services to foreign retailers, which resell them to travelling customers. According to Ms. Castro, the appellant sells travel services separately. Those services are provided in Canada.
[7] Those services include accommodation. Each service has a price, which is stated on the invoice. At the end of the invoice, there is a total price but that price is merely a total. It is not a single price for a number of services.
[8] Ms. Castro makes presentations in Spain and South America on the services the appellant can provide and the hotels with which it does business. She has a work manual for wholesalers in which information is provided in accordance with a code understood by tour operators. Everything offered is included along with prices. At page 88 of the transcript she states:
[TRANSLATION]
. . . and we give the name of the hotel, the periods, how much that hotel costs during each period. So we make a list and all the hotels in everything - I just sell Ontario and Quebec, okay. I include all the hotels I do business with. I include everything: how much a transfer costs based on the number of passengers, how much a city tour costs based on the number of passengers. All that is indicated item by item, okay. So, and when they ask me, say, "I have two passengers and I want them to do this, this, this, this and this," their wholesaler already has my price lists for each service they are going to ask for. That's how I actually proceed.
[9] At pages 41 and 42 of the transcript, she explained the context in which she sells services:
[TRANSLATION]
. . . "Mairena, I have 40, 50 persons - sometimes it's two, four persons - who would like to spend a week, let's say, between Montreal and Québec and go see the whales." So I send an itemized list of all the activities offered by the tourist region they ask to visit. So they answer me: "The customer wants this, this, this, this, this, this and this." I put the program together; it's really the customer himself who will put his own program together.
Q. Okay.
A. You see. And I bill what is really requested for the customer. And in those cases, what I will do, since I'm going to do it separately, is I tax the separate items based on the principles showed me by the auditors who came and told me: "Ms. Castro, you're not going to tax the rooms because they're rebatable; just note at the bottom of the invoice that the room tax has already been rebated and that the customer is no longer entitled to claim a rebate from the government." I do it on all my invoices - there's a note at the bottom indicating that. You see; so that's how we go about it at Dominion Tours.
[10] Ms. Castro filed Exhibit A-2, which consists of a large number of invoices. The invoice that was studied at the hearing bore number 1268 and was dated December 4, 1996. It described four services, and there was a price for each. That price was to include taxes payable and the supplier's profit, since the total price was merely a total of those prices. One price was for a double room at the Sheraton Hotel in Niagara for two passengers. On the same invoice, there was the price for transportation from the airport to the hotel, the price for the visit to Niagara Falls and the price for transportation from the hotel to the airport.
[11] Ms. Castro said that she remitted all of the tax on accommodation and nothing else. Her method of calculating the tax payable was not clearly explained.
[12] Carole Boudreau, a financial management officer at Revenu Québec, testified for the respondent party. She contended that, in the prices stated for the rooms, there were almost always costs included for other services.
[13] She filed invoices of the appellant as Exhibit I-2. Those invoices in fact showed that, in the item including the cost of the rooms, various other services were included, in particular, the prices of all meals and the services of a guide. The Minister's officer also pointed out that the invoices did not show the tax that had been charged and rebated.
[14] The appellant's agent argued that the appellant's billing method was consistent with what is provided for in Policy Paper P-089, entitled "Short-Term Accommodation Rebate," and he referred in particular to the following paragraphs:
A tour package means a combination of two or more travel services or of property and services provided at an all inclusive price (i.e. the supplier is not providing the services separately). These could include transportation, accommodation, meals, sightseeing excursions or the services of a guide. For the purpose of section 163, a tour package does not necessarily have to include accommodation or transportation services. However, for the purpose of the non-resident rebate, a tour package must include eligible short-term accommodation.
However, in situations where the short-term accommodation and the other travel services are not sold at an all inclusive price (i.e. each of the property and services listed on the invoice can be purchased separately), it is not a supply of a tour package and the registered supplier cannot use the 50% rule. He/she may only credit 7% of the actual value of the accommodation as shown on the invoice to the non-residents.
[15] He stated that the short-term accommodation and services are sold separately and therefore they do not form a tour package.
[16] Counsel for the respondent argued that the short-term accommodation was always supplied and billed with other services and that the rebate to which the foreign recipient was entitled was the one provided for in subsection 252.1(5) of the Act.
Conclusion
[17] As noted above, the expression "tour package", as it stands for the purposes of the rebate by the registrant provided for in subsection 252.1(8) of the Act is defined as follows in subsection 163(3) of the Act:
... a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price.
[18] The concept of "bulk sale" ("vente en bloc") appeared earlier in Quebec civil law in article 1569a of the Civil Code of Lower Canada. That article was replaced in the Civil Code of Quebec (the "Civil Code") by article 1767, which now contains the expression "sale of an enterprise" ("vente d'entreprise") instead of "bulk sale" ("vente en bloc"). Article 1767 of the Civil Code reads as follows:
The sale of an enterprise is a sale which has as its object the whole or a substantial part of an enterprise and which is made outside the ordinary course of business of the seller.
[19] The concept of "bulk sale" in the Civil Code relates to the sale of a set of goods that constitute the enterprise or to the sale of a substantial portion of the enterprise.
[20] Therefore this concept cannot be the one that applies in the instant case. Since there are no other possible legal meanings, the ordinary meaning of the French expression "en bloc" must apply. The phrase "en bloc" is defined in the dictionaries as meaning all together, as a whole.
[21] The expression "tour package" must therefore be understood as meaning a set of services comprising of certain services such as transportation, accommodation, the right to use a campground or the services of a guide or interpreter, where those various services are sold together for a single price. The French version uses the following terms: ". . . si les biens et les services sont fournis en bloc pour un prix forfaitaire."
[22] This entire argument is based on section 252.1 of the Act, which provides for a rebate to a non-resident person who is the recipient of a supply made by a registrant of the tax in respect of short-term accommodation or of a tour package that includes such short-term accommodation. In the case of short-term accommodation, the Minister allows a rebate of the total tax paid by the person in respect of the accommodation. In the case of the supply of a tour package that includes the supply of short-term accommodation, the refundable amount is one-half of the tax payable in respect of the tour package if all nights are spent in Canada. The rebate calculation is provided for in subsection 252.1(5) of the Act.
[23] For explanatory purposes, I refer to paragraph 15 of GST Memorandum 500-4-1-2:
15. Unregistered non-resident tour operators who apply for the rebate and registered tour operators who credit the rebate calculate the GST rebate for short-term accommodation as follows:
(a) Accommodation only: The rebate is equal to the actual tax on short-term accommodation.
(b) Tour packages: The rebate is equal to 50% of the actual tax on a tour package regardless of the actual value of the accommodation in the tour package. The rebate will be adjusted if the total number of nights of eligible accommodation provided in Canada is less than the total number of nights in the package. For example, if only two nights of eligible accommodation are provided in a six day/five night package, the rebate would be 2/5ths of 50% of the tax paid on the package.
[24] On the one hand, the appellant filed invoices showing, among other services, separate hotel service. The invoice produced in evidence clearly reflected the price invoiced for the short-term accommodation. This would also appear to be the case in a few other invoices in Exhibit A-2. On the other hand, the Minister's agent adduced invoices on which that service was not billed separately. No price on the invoice related exclusively to short-term accommodation. The item including short-term accommodation also included other services.
[25] The onus was on the appellant to compile invoices on which short-term accommodation service was shown separately. If porter service is included in the price of the hotel room or the price of breakfast, that does not alter the nature of the short-term accommodation service. If the price that was billed moreover includes other services such as meals, bus and guides, it is no longer a price for accommodation. It constitutes a tour package. I am not referring here to the total amount of the invoice but to the price stated for each item on the invoice.
[26] This is not a matter of the internal calculation of the accommodation cost but of the price that is billed to the recipient. If the appellant wishes to be granted a rebate of all tax relating to short-term accommodation, the invoice must show the price of that service separately on the invoice. If the price of short-term accommodation does not appear separately on the invoice but includes other services, then what we are dealing with is a tour package within the meaning of that expression under section 163 of the Act.
[27] The appeal is allowed in order that the appellant obtain a rebate of tax payable in respect of short-term accommodation in those cases where that service was billed separately to the recipient. The onus is on the appellant to compile relevant invoices. In those cases where the price billed to the recipient in respect of short-term accommodation also included other services, the appellant was correctly assessed.
Signed at Ottawa, Canada, this 24th day of April 2002.
|
"Louise Lamarre Proulx" |
J.T.C.C.