Tax Court of Canada


Goods and Services Tax

Exempt supplies

Brokers had no authority to enter into any contracts on behalf of registrant

Registrant was sole shareholder of company and retained services of two brokers to find buyer for business. Registrant preferred share sale arrangement over other ways to dispose of business. When brokers found buyer who purchased shares of business, registrant paid brokers’ commission plus Harmonized Sales Tax (HST) of $140,792 for each broker for total of $281,584. Registrant then applied for refund of HST paid on commission, on basis that it was paid in error on ground that such services were exempt supplies of financial services. Minister denied HST refund. Registrant appealed. Appeal dismissed. It was clear that essential duty of brokers was to find buyer for registrant’s business and not specifically for shares of registrant. Brokers had no authority to enter into any contracts on behalf of registrant or bind him in any way nor to hire and instruct counsel and see transaction through to end. Sale of shares occurred, and it could be said registrant made supply of financial instrument but it was also clear that, because it was purchaser who provided written offer to purchase assets, brokers had no idea at that point or any control over whether binding agreement could be finalized. This did not rise to level of arranging to transfer ownership of shares, even in event share transaction ultimately materialized, and so it cannot be said to qualify as supply of financial service under Excise Tax Act.

Barr v. The Queen (2018), 2018 CarswellNat 2094, 2018 CarswellNat 7348, 2018 TCC 86, 2018 CCI 86, F.J. Pizzitelli J. (T.C.C. [General Procedure]).

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