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Excise Tax Act (R.S.C., 1985, c. E-15)

Full Document:  

Act current to 2022-09-22 and last amended on 2022-09-01. Previous Versions

PART IXGoods and Services Tax (continued)

DIVISION IIGoods and Services Tax (continued)

SUBDIVISION CSpecial Cases (continued)

Marginal note:Effect of approval for distributor

  •  (1) For the purposes of this Part, where at any time when an approval of the Minister for the application of this section to a distributor of a direct seller is in effect, the distributor makes in Canada a taxable supply by way of sale (other than a zero-rated supply) of an exclusive product of the direct seller to an independent sales contractor of the direct seller who is not a distributor in respect of whom an approval granted under subsection 178.2(4) on application made jointly with the direct seller is in effect at that time or becomes effective immediately after that time, the following rules apply:

    • (a) the supply shall be deemed to have been made for consideration

      • (i) that becomes due, and is paid, at the particular time that is the earliest time at which any consideration for the supply becomes due or is paid, and

      • (ii) that is equal to the suggested retail price of the product at the time the supply is made;

    • (b) tax is deemed not to be payable by the contractor in respect of the supply;

    • (c) the contractor is not entitled to any rebate under section 261 in respect of the supply; and

    • (d) in determining the net tax of the distributor for the reporting period of the distributor that includes the particular time, there shall be added an amount equal to tax calculated on the suggested retail price of the product at the time the supply is made.

  • Marginal note:Idem

    (2) Where

    • (a) at any time when an approval of the Minister for the application of this section to a distributor of a direct seller is in effect, a particular independent sales contractor of the direct seller (other than the distributor) makes in Canada a particular taxable supply by way of sale (other than a zero-rated supply) of an exclusive product of the direct seller, and

    • (b) subsection (1) applied to a supply of the product made at an earlier time by an independent sales contractor of the direct seller or subsection 178.5(2) applied, at an earlier time, to the product,

    the following rules apply:

    • (c) if the recipient of the particular supply is a person who is an independent sales contractor of the direct seller (other than the distributor), the particular supply shall be deemed, for the purposes of this Part except section 178.1 and this section, not to have been made by the particular contractor and not to have been received by the person, and

    • (d) if the recipient of the particular supply is a person (other than the distributor and another independent sales contractor of the direct seller),

      • (i) the particular supply is deemed, for the purposes of this Part except section 178.1 and subsections (4) to (6) and 178.5(7), to be a taxable supply made by the distributor, and not by the particular contractor, for consideration equal to the lesser of the actual consideration for the supply and the suggested retail price of the product at the time the particular supply is made,

      • (ii) any tax in respect of the particular supply that is collected by the particular contractor shall be deemed to have been collected on behalf of the distributor, and

      • (iii) tax in respect of the particular supply shall not be included in determining the net tax of the distributor for any reporting period.

  • Marginal note:Adjustment to distributor’s net tax

    (3) For the purposes of this Part, where a distributor of a direct seller has made a supply of an exclusive product of the direct seller in circumstances in which an amount was required under paragraph (1)(d) to be added in determining the net tax of the distributor and another independent sales contractor of the direct seller subsequently supplies the product to the distributor in a particular reporting period of the distributor, the other contractor is deemed not to have so supplied the product and the amount may be deducted, in determining the net tax of the distributor for the particular reporting period or a subsequent reporting period, in a return under Division V filed by the distributor within four years after the day on or before which the return under Division V for the particular reporting period is required to be filed.

  • Marginal note:Idem

    (4) Where

    • (a) at a particular time a distributor of a direct seller makes a supply of an exclusive product of the direct seller in circumstances in which an amount is required under paragraph (1)(d) to be added in determining the net tax of the distributor,

    • (b) after March 1993 a particular independent sales contractor of the direct seller (other than the distributor)

      • (i) makes a supply of the product that is

        • (A) a zero-rated supply,

        • (B) a supply made outside Canada, or

        • (C) a supply in respect of which the recipient is not required to pay tax because of an Act of Parliament,

      • (ii) makes a supply of the product to a person other than an independent sales contractor of the direct seller for consideration

        • (A) that is less than the suggested retail price of the product at the particular time and more than nominal, and

        • (B) on which was calculated tax that was paid by the person, or

      • (iii) makes a supply of the product to a person other than an independent sales contractor of the direct seller for no consideration or for nominal consideration or appropriates the product for the consumption, use or enjoyment of the particular contractor, and

    • (c) the distributor pays to, or credits in favour of, the particular contractor an amount in respect of the product equal to

      • (i) where subparagraph (b)(i) applies, tax calculated on the suggested retail price of the product at the particular time, and

      • (ii) where subparagraph (b)(ii) or (iii) applies, the amount determined by the formula

        A - B

        where

        A
        is the tax calculated on the suggested retail price of the product at the particular time, and
        B
        is
        • (A) where subparagraph (b)(ii) applies, tax calculated on the consideration for the supply of the product by the particular contractor, and

        • (B) where subparagraph (b)(iii) applies, tax calculated on the consideration for the supply of the product to the particular contractor determined without reference to paragraph (1)(a),

    the distributor may deduct the amount determined under paragraph (c), in determining the net tax for the particular reporting period of the distributor in which the payment or credit is given or a subsequent reporting period, in a return under Division V filed by the distributor within four years after the day on or before which the return under Division V for the particular reporting period is required to be filed.

  • Marginal note:Adjustment where supply not in participating province

    (5) Where

    • (a) at a particular time a distributor of a direct seller makes a supply in a participating province of an exclusive product of the direct seller in circumstances in which an amount is required under paragraph (1)(d) to be added in determining the net tax of the distributor,

    • (b) included in the amount required under paragraph (1)(d) to be added in determining the net tax of the distributor is tax payable under subsection 165(2) in respect of the supply,

    • (c) a particular independent sales contractor of the direct seller (other than the distributor) makes a supply of the product outside the participating provinces, and

    • (d) the distributor pays to, or credits in favour of, the particular contractor an amount in respect of the product equal to the amount of the tax payable under subsection 165(2) calculated on the suggested retail price of the product at the particular time,

    the distributor may deduct the amount determined under paragraph (d) in determining the net tax for the particular reporting period of the distributor in which the payment or credit is given or a subsequent reporting period, in a return under Division V filed by the distributor within four years after the day on or before which the return under Division V for the particular reporting period is required to be filed.

  • Marginal note:Adjustment where supply is in participating province

    (6) Where

    • (a) a distributor of a direct seller makes a supply outside the participating provinces of an exclusive product of the direct seller in circumstances in which an amount is required under paragraph (1)(d) to be added in determining the net tax of the distributor,

    • (b) no tax under subsection 165(2) in respect of the supply is included in the amount required under paragraph (1)(d) to be added in determining the net tax of the distributor, and

    • (c) a particular independent sales contractor of the direct seller (other than the distributor) makes at a particular time a supply of the product in a participating province,

    in determining the net tax of the distributor for the reporting period of the distributor that includes the particular time, there shall be added an amount equal to the tax that would be payable under subsection 165(2) in respect of the supply, calculated on the suggested retail price of the product at the particular time, if the supply by the distributor were made in that participating province at the particular time.

  • Marginal note:Adjustment in respect of participating provinces

    (6.1) In determining the net tax of a distributor of a direct seller for a reporting period of the distributor that includes a prescribed time, the distributor shall add or may deduct, as the case may require, an amount determined in prescribed manner if

    • (a) the distributor makes a supply of an exclusive product of the direct seller in a participating province in circumstances in which an amount is required under paragraph (1)(d) to be added in determining the net tax of the distributor;

    • (b) tax payable under subsection 165(2) in respect of the supply is included in the amount required under paragraph (1)(d) to be added in determining the net tax of the distributor;

    • (c) a particular independent sales contractor of the direct seller (other than the distributor) makes a supply of the exclusive product in another participating province; and

    • (d) prescribed conditions, if any, are satisfied.

  • Marginal note:Bad debt on sale by contractor

    (7) If

    • (a) a distributor of a direct seller has made a supply of an exclusive product of the direct seller in circumstances in which an amount was required under paragraph (1)(d) to be added in determining the net tax of the distributor,

    • (b) a particular independent sales contractor of the direct seller (other than the distributor) has or would have, but for paragraph (2)(d), also made a supply of the product to a person with whom the particular contractor was dealing at arm’s length (other than the direct seller, distributor and another independent sales contractor of the direct seller),

    • (c) the distributor has obtained evidence satisfactory to the Minister that the consideration and the tax payable in respect of the supply by the particular contractor have become in whole or in part a bad debt and that the amount of the bad debt has, at a particular time, been written off in the particular contractor’s books of account, and

    • (d) the distributor pays to, or credits in favour of, the particular contractor an amount in respect of the product equal to the amount determined by the formula

      A × B/C

      where

      A
      is the tax payable in respect of the supply by the particular contractor,
      B
      is the total of the consideration and tax, and any applicable provincial tax, in respect of that supply remaining unpaid and written off at the particular time as a bad debt, and
      C
      is the total of the consideration and tax, and applicable provincial tax, payable in respect of that supply,

    the distributor may, in determining the net tax for the particular reporting period of the distributor in which the payment or credit is given or for a subsequent reporting period, deduct the amount paid or credited in a return under Division V filed by the distributor within four years after the day on or before which the return for the particular reporting period is required to be filed.

  • Marginal note:Recovery of bad debt

    (8) If all or part of a bad debt in respect of which a distributor of a direct seller has made a deduction under subsection (7) is recovered, the distributor shall, in determining the net tax for the distributor’s reporting period in which the bad debt or that part is recovered, add the amount determined by the formula

    A × B/C

    where

    A
    is the amount recovered;
    B
    is the tax payable in respect of the supply to which the bad debt relates; and
    C
    is the total of the consideration and tax, and any applicable provincial tax, payable in respect of that supply.
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1993, c. 27, s. 43
  • 1997, c. 10, ss. 29, 171
  • 2000, c. 30, s. 31
  • 2009, c. 32, s. 9
  • 2017, c. 33, s. 118(F)

Marginal note:Products held at time of approval

  •  (1) Where

    • (a) an approval granted under subsection 178.2(3) in respect of a direct seller becomes effective at any time after January 1, 1991,

    • (b) a registrant who is an independent sales contractor of the direct seller has, at that time, in inventory an exclusive product of the direct seller, and

    • (c) the registrant is not a distributor in respect of whom an approval granted under subsection 178.2(4) on application made jointly with the direct seller is in effect at that time or becomes effective immediately after that time,

    the registrant shall be deemed, for the purposes of this Part except sections 148 and 249,

    • (d) to have made, immediately before that time, a supply of the product for consideration, that becomes due and is paid immediately before that time, equal to the suggested retail price of the product at that time, and

    • (e) to have collected, immediately before that time, tax in respect of the supply calculated on that consideration.

  • Marginal note:Products held at time of revocation

    (2) Where, at the time an approval granted under subsection 178.2(4) in respect of a distributor of a direct seller ceases to have effect, the distributor has in inventory an exclusive product of the direct seller and an approval granted under subsection 178.2(3) in respect of the direct seller does not cease to have effect at that time, the distributor shall be deemed, for the purposes of this Part except sections 148 and 249,

    • (a) to have made, immediately before that time, a supply of the product for consideration, that becomes due and is paid immediately before that time, equal to the suggested retail price of the product at that time; and

    • (b) to have collected, immediately before that time, tax in respect of the supply calculated on that consideration.

  • Marginal note:Idem

    (3) For the purposes of this Part, where an approval granted under subsection 178.2(4) in respect of a distributor of a direct seller ceases to have effect at the same time as an approval granted under subsection 178.2(3) in respect of the direct seller ceases to have effect, each independent sales contractor of the direct seller, other than a distributor in respect of whom an approval granted under subsection 178.2(4) ceases to have effect at that time, shall be deemed

    • (a) to have received, immediately after that time, a supply of each exclusive product of the direct seller that the contractor has in inventory at that time for consideration, that becomes due and is paid immediately after that time, equal to the suggested retail price of the product at that time; and

    • (b) to have paid, immediately after that time, tax in respect of the supply calculated on that consideration.

  • Marginal note:Idem

    (4) For the purposes of this Part, where an approval granted under subsection 178.2(3) in respect of a direct seller ceases, at any time after March 1993, to have effect and subsection (3) does not apply, each independent sales contractor of the direct seller shall be deemed

    • (a) to have received, immediately after that time, a supply of each exclusive product of the direct seller that the contractor has in inventory at that time for consideration, that becomes due and is paid immediately after that time, equal to the suggested retail price of the product at that time; and

    • (b) to have paid, immediately after that time, tax in respect of the supply calculated on that consideration.

  • Marginal note:Sales aids

    (5) For the purposes of this Part, where at any time when an approval of the Minister for the application of section 178.3 to a direct seller is in effect, the direct seller or an independent sales contractor of the direct seller makes in Canada a taxable supply by way of sale of a sales aid of the direct seller or of the contractor, as the case may be, to an independent sales contractor of the direct seller, the supply shall be deemed not to be a supply.

  • Marginal note:Bonus payments

    (6) For the purposes of this Part, where, at any time after March 1993 when an approval of the Minister for the application of section 178.3 to a direct seller is in effect, an amount is paid or payable by the direct seller or an independent sales contractor of the direct seller to an independent sales contractor of the direct seller because of the volume of purchases or sales of exclusive products of the direct seller or of sales aids and otherwise than as consideration for a supply of such a product or sales aid, the amount shall be deemed not to be consideration for a supply.

  • Marginal note:Host gifts

    (7) For the purposes of this Part, where, at any time after March 1993 when an approval of the Minister for the application of section 178.3 to a direct seller is in effect, an independent sales contractor of the direct seller, who is not a distributor in respect of whom an approval granted under subsection 178.2(4) on application made jointly with the direct seller is in effect at that time or becomes effective immediately after that time, makes a supply of property to a person as consideration for the supply by the person of a service of acting as a host at an occasion that is organized for the purpose of the promotion or distribution by the contractor of exclusive products of the direct seller, the person shall be deemed not to have made a supply of the service and the service shall be deemed not to be consideration for a supply.

  • Marginal note:Restriction on input tax credits

    (8) Where

    • (a) after March, 1993 a registrant, who is a direct seller in respect of whom an approval granted under subsection 178.2(3) is in effect or who is a distributor of such a direct seller, acquires or imports property (other than an exclusive product of the direct seller) or a service or brings it into a participating province for supply to an independent sales contractor of the direct seller or an individual related thereto,

    • (b) the property or service is so supplied by the registrant for no consideration or for consideration that is less than the fair market value of the property or service, and

    • (c) the contractor or individual is not acquiring the property or service for consumption, use or supply exclusively in the course of commercial activities of the contractor or individual, as the case may be,

    the following rules apply:

    • (d) no tax is payable in respect of the supply, and

    • (e) in determining an input tax credit of the registrant, no amount shall be included in respect of tax that becomes payable, or is paid without having become payable, by the registrant in respect of the property or service.

  • Marginal note:Appropriations for contractors

    (9) For the purposes of this Part, where a registrant who is a direct seller in respect of whom an approval granted under subsection 178.2(3) is in effect or who is a distributor of such a direct seller appropriates, at any time after March 1993, property (other than an exclusive product of the direct seller) that was acquired, manufactured or produced, or any service acquired or performed, in the course of commercial activities of the registrant, to or for the benefit of an independent sales contractor of the direct seller, or any individual related thereto, who is not acquiring the property or service for consumption, use or supply exclusively in the course of commercial activities of the contractor or individual, in any manner whatever (otherwise than by way of supply for consideration equal to the fair market value of the property or service), the registrant shall be deemed

    • (a) to have made a supply of the property or service for consideration paid at that time equal to the fair market value of the property or service at that time; and

    • (b) except where the supply is an exempt supply, to have collected, at that time, tax in respect of the supply calculated on that consideration.

  • Marginal note:Exception

    (10) Subsection (9) does not apply to property or a service appropriated by a registrant where the registrant was not entitled to claim an input tax credit in respect of the property or service because of section 170.

  • Marginal note:Ceasing to be registrant

    (11) Where, at any time after March 1993 when an approval granted under subsection 178.2(3) in respect of a direct seller is in effect, an independent sales contractor of the direct seller ceases to be a registrant, paragraph 171(3)(a) does not apply to sales aids of the contractor that were supplied to the contractor by the direct seller or another independent sales contractor of the direct seller at any time when the approval was in effect.

  • Marginal note:Non-arm’s length supply

    (12) Section 155 does not apply to a supply described in subparagraph 178.3(4)(b)(ii) or (iii) or 178.4(4)(b)(ii) or (iii) or subsection (7).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1993, c. 27, s. 43
  • 1997, c. 10, s. 172
  • 2017, c. 33, s. 119(F)
 
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