https://decisia.lexum.com/tcc-cci/decisions/en/item/306562/index.do
Jayco, Inc. v. The Queen (February 16, 2018 – 2018 TCC 34, D’Auray J.).
Précis: The issue in this appeal was whether the taxpayer, Jayco, Inc., was required to collect and remit GST/HST in recreational vehicles (RVs) and parts shipped from the United States to Canadian dealers. The Tax Court held that title to the RVs passed in the United States with the result the GST/HST was not payable. In the case of parts however the Court reached the conclusion that tax was payable in view of the means by which they were transferred to Canada. Thus the appeal was allowed in part. Costs were payable to Jayco.
Decision: In the case of the RV’s the Court rejected the Crown’s argument that they were delivered to Canada by Jayco:
[110] I will now explain why I rejected the respondent’s position. She argued that the Canadian dealers had an expectation that the RVs would be delivered by Jayco to their business’ premises in Canada. She submitted that it was clear from the documents produced at trial that the RVs would be delivered in Canada.
[111] She stated that by Jayco accepting the Order Form whereby the dealer had chosen the OT method of shipment for the RV, Jayco became legally and factually obligated to deliver the RVs to Canada.
[112] In my view, what the Canadian dealers expected, when opting for the OT method of shipping, was that Jayco would make the arrangements on their behalf with a common carrier for the shipment of the RVs to Canada, not that Jayco would deliver the RVs. This was assumed as a factual basis by the Minister in assessing Jayco, at subparagraph 20(h)ii) of the Reply to Notice of appeal:
20(h)ii) The customer (the dealer) could have the Appellant (Jayco) arrange a common carrier to transport the product to the customer, in which cases the customer would select the “OT” (Other Transportation Method).
The parts however were delivered to Canada by Frontier Supply Chain Solutions (“Frontier”). Frontier was a customs broker and logistics firm retained by Jayco. The Court accepted CRA’s contention that title to the parts passed in Canada:
[128] Mr. Wolf also testified that Frontier acted as an agent of Jayco. Furthermore, in the document explaining the contractual arrangement between Jayco and Frontier, it is expressly written that Frontier would act as an agent of Jayco.
The business arrangement with Frontier Supply Chain Solutions requires us to operate in Canada as a Non-Resident Importer. Jayco already had an NRI number on file, but it was not in use. This NRI number is now active and Frontier operates as our agent in Canada.
[129] Accordingly, when Frontier hired Alvin Motor Freight to pick up the parts at the business premises of Jayco in Middlebury to transport them at Frontier’s facility in Bensenville and then from Bensenville to Frontier’s facility in Winnipeg to be further distributed to each Canadian dealer, title did not pass and the delivery did not occur at the business premises of Jayco since Frontier was not acting on behalf of the Canadian dealers. If damages had occurred to the parts while in transit, in my view, the risk would have been Jayco’s.
[130] In addition, although no bill of lading was submitted in evidence with respect to the parts, in the document explaining the contractual relationship between Jayco and Frontier, it is indicated that “Frontier would consolidate all material bound for Canada, and move it to Bensenville, IL daily. This is Frontier US consolidation point. It is moved via Alvin Motor Freight under one Bill of Lading.” Therefore, since Frontier was using one bill of lading for the entire shipment, it is clear that the bill of lading could not serve as a title and delivery document for individual parts orders going to different dealers. Nor, for the same reason, could the consolidated bill of lading be used to illustrate a “symbolical delivery” of the parts as was argued by Jayco with respect to the RVs. It is also clear that the consignees under a consolidated bill of lading could not have been the Canadian dealers. Finally, Jayco was the importer of record and not the Canadian dealers.
[131] Although it was stated by Jayco, that Frontier was used exclusively during the periods under appeal, the documentary evidence showed that UPS and Old Dominion was also used by Jayco to move the parts from the USA to Canada. No evidence was submitted by Jayco with respect to the contractual arrangements it had with UPS and Old Dominion.
[132] In light of the evidence, namely the contractual arrangements, the conduct of Jayco, the Canadian dealers and Frontier, and the bill of lading, I conclude that the parts were delivered or made available in Canada. Therefore, Jayco had to collect and remit the provincial component of the HST.
[Footnote omitted]
Thus the appeal was allowed with respect to the RVs only. Costs were awarded to Jayco.