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Place of supply rules for tangible personal property (goods)
Deemed delivery of goods
For purposes of the place of supply rules that apply to supplies of good, where an agreement for a supply of goods is entered into but the property is never delivered to the recipient, the property is deemed to have been delivered where the property was to be delivered, as the case may be, under the terms of the agreement.
General rules - sales of goods
There is no change to the current place of supply rules for supplies of goods by way of sale. A supply by way of sale of goods is deemed to be made in a province if the supplier delivers the property or makes it available in the province to the recipient of the supply.
The application of this place of supply rule is generally based on the province in which legal delivery of the goods to the recipient occurs. However, for purposes of the rule, property is also deemed to be delivered in a particular province, and not in any other province, if the supplier either:
- ships the property to a destination in the particular province that is specified in the contract for carriage of the property or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination; or
- sends the property by mail or courier to an address in the particular province.
Examples
A bank orders cheques to be shipped by the supplier directly to all its branches situated across Canada. HST applies to the supply of cheques that are shipped to the branches of the bank that are situated in the participating provinces. GST applies to the supply of cheques that are shipped to the branches of the bank that are situated in the non-participating provinces.
A store in Ontario agrees to sell goods to a purchaser in British Columbia (BC). Based on the terms of delivery in the agreement for the sale of the goods, legal delivery of the goods to the purchaser occurs in BC. Because legal delivery of the goods to the purchaser occurs in BC, the supply of the goods is made in BC and is subject to HST at a rate of 12%.
A store in Alberta agrees to sell goods to a purchaser in Ontario. Based on the terms of delivery in the agreement for the sale of the goods, legal delivery of the goods to the purchaser occurs in Alberta. However, the supplier agrees to have the goods shipped to the purchaser in Ontario. Although legal delivery of the goods to the purchaser occurs in Alberta, delivery of the goods to the purchaser is considered to occur in Ontario because the supplier ships the goods to an address in Ontario. The supply of the goods is therefore made in Ontario and HST will apply at a rate of 13%.
A supplier in BC makes a supply by way of sale of a good to an Ontario company. Based on the terms of delivery for the sale of the good, legal delivery of the good to the purchaser occurs in BC. The supplier sends the good by courier to an address outside Canada. Although the supply of the good is made in BC, the supply of the good is zero-rated as an export because the supplier sends the good by courier to an address outside Canada.
Delivery of goods on exercise of with the option to purchase
A recipient of a supply by way of lease, licence or similar arrangement that exercises an option to purchase the good under the arrangement is for greater certainty considered to take delivery of the good supplied by way of sale at the place and time where the recipient ceases to have possession of the good as a lessee and begins to have possession of the good as a purchaser. In this case, the place of supply will be based on the place where the recipient begins to have possession of the good as a purchaser rather than the place where the recipient first obtained possession of the good as a lessee.
Rentals and leases-three months or less
A supply of property otherwise than by way of sale under an arrangement under which continuous possession or use of the property is provided for a period of no more than three months is deemed to be made in the province in which the supplier delivers the property or makes it available to the recipient of the supply.
The application of this place of supply rule is generally based on the province in which legal delivery of the goods to the recipient occurs. However, for purposes of this rule, the property is also deemed to be delivered in a particular province, and not in any other province, if the supplier either:
- ships the property to a destination in the particular province that is specified in the contract for carriage of the property or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination; or
- sends the property by mail or courier to an address in the particular province.
Example
You rent a video camera from a store in Truro, Nova Scotia, to use while traveling through several provinces. The rental agreement is for two weeks. Nova Scotia is the place of supply, and HST applies on the rental.
Rentals and leases-more than three months
For GST/HST purposes, where a supply of property is made by way of lease, licence or similar arrangement for an amount that is attributable to a period (referred to as a "lease interval") that is the whole or a part of the period during which possession or use of the property is provided under the arrangement, a separate supply of the property for a separate amount is deemed to be made by the supplier and received by the recipient for each lease interval. Furthermore, the supply for each lease interval is deemed to be made on the earliest of the first day of the lease interval, the day on which the lease payment attributable to that interval becomes due and the day that payment is made.
A supply of goods (other than a specified motor vehicle) by way of lease, licence or similar arrangement for more than three months is deemed to be made in a province if the ordinary location of the property, as determined at the time the supply is made is in the province. A separate supply of the property is deemed to be made for each lease interval on the earliest of the first day of the lease interval, the day on which the lease payment attributable to that interval becomes due and the day that payment is made.
For purposes of the place of supply rules, the ordinary location of property is deemed to be the location where the supplier and the recipient mutually agree that the ordinary location of the property is to be at a particular point in time. In other words, the mutual agreement of the supplier and recipient will be determinative even where the property is actually located at a different place at the relevant time than what had been agreed upon. The mutual agreement of the parties may change from time to time. Therefore, even if the original written agreement for a supply of property specified that the property will be located in a particular province, the parties may mutually agree subsequent to the signing of the contract that the property is to be moved at a particular time to a location in another province in which case the latter location will be the ordinary location of the property at that particular time.
Example
A national leasing company leases a photocopier to a consulting firm situated in New Brunswick for a four-year period to which monthly payments are required. The photocopier is initially stored and maintained at the consulting firm's office in New Brunswick. During the second monthly lease interval, the firm expands its operations to Manitoba and with the agreement of the lessor relocates the photocopier to the firm's new office in Manitoba. In this case, the payment for the first two lease intervals is subject to HST at 13%, and the third lease interval is subject to GST.
Railway rolling stock supplied otherwise than by way of sale
There is no change to the specific place of supply rule that currently applies to a supply of railway rolling stock otherwise than by way of sale. A supply of railway rolling stock otherwise than by way of sale is made in a province if the supplier delivers the rolling stock or makes it available to the recipient of the supply in that province. This place of supply rule overrides the previously explained place of supply rule that applies to supplies of tangible personal property other than by way of sale for a period of more than three months which is based on the ordinary location of the property.
The application of this place of supply rule is generally based on the province in which legal delivery of the rolling stock to the recipient occurs. However, for purposes of the rule, the rolling stock is also deemed to be delivered in a particular province, and not in any other province, if the supplier ships the rolling stock to a destination in the province that is specified in the contract for carriage of the rolling stock or transfers possession of the rolling stock to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the rolling stock to such a destination.
The province in which the supply of the rolling stock is determined to be made for the first lease interval is the province in which all supplies of the rolling stock for subsequent lease intervals are deemed to be made.
If continuous possession or use of railway rolling stock is given by a supplier to a recipient throughout a period under two or more successive leases, licenses or similar arrangements entered into between the supplier and the recipient (i.e. where the arrangement is renewed), the rolling stock is deemed to have been delivered or made available to the recipient under each of those arrangements at the location at which it is delivered or made available to the recipient under the first of those arrangements.
Although the place of supply rule for a supply of railway rolling stock as explained above will remain the same, a special transitional rule is added to address a transitional issue that applies in relation to Ontario or British Columbia. If a supply of railway rolling stock is made under a lease in effect on July 1, 2010, the provincial part of the HST will not apply to the extent that the rolling stock is delivered or made available in Ontario or British Columbia. The supplier will be required to keep track of whether the rolling stock is delivered or made available to the recipient under the next renewal agreement with the same recipient. If that delivery occurs in Ontario, Nova Scotia, New Brunswick, British Columbia or Newfoundland and Labrador, the supply under that renewal agreement will be subject to the HST.
Example
A company in Ontario enters into a lease agreement to supply a railway car to a company in Quebec. The Quebec company takes delivery of the railway car in Ontario. The supply of the railway car throughout the period covered by the lease is made in Ontario because the railway car is delivered to the recipient in Ontario. As a result, the HST at a rate of 13% will apply to the lease payments for the railway car.
