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GST/HST — exported goods

My client ("Xco") was a small company that exported goods to the US, selling them to a related company that resold them.

When it first started carrying on business, Xco did not yet have a relationship with a Customs broker and had not yet posted a bond with US Customs and Border Protection to allow it to send commercial goods to the US. It therefore arranged for a related company ("Yco"), owned by a relative of Xco's owner, to handle the export. Yco already had these procedures in place.

The CRA audited Xco's net tax refund claim and proposed to assess HST on the goods exported to the US. The auditor was of the view that since Yco exported the goods, Xco had not exported them and was required to collect and remit 13% HST on them. He proposed to assess Xco for some $50,000.

I wrote to the auditor to explain that Yco had acted as agent of Xco. Xco had still exported the goods; it had just used Yco as agent because Yco already had the mechanism for exports. In later months, once Xco got itself set up, it did the exports directly. I explained that the concept of agency is well understood in law, and is a "look-through" for GST/HST purposes. In other words, Yco could be ignored since Xco did the exporting using Yco as its agent.

The auditor accepted my position and cancelled the proposed assessment.

Problem solved!

(2017)