Subsection 4(1)
Person at Risk
See Also
Skylink Voyages v. The Queen, [1999] GSTC 119, docket 96-4400-GST-G (TCC)
The registrant served retail travel agencies by booking and purchasing airline tickets for the agencies' customers, which resulted in the receipt by it of commissions from the airlines. Where the retail agencies had no agreement with the issuer of the customer's credit card, the registrant would act as the "merchant" insofar as the credit card issuer was concerned, so that the voucher amount for the ticket was advanced to it, with that amount being used by the registrant towards the cost of the ticket. In those situations, the registrant charged $15 per ticket to the retail agency to cover the charge of 2% to 3% by which the credit card issuer discounted the amounts which it paid to the registrant.
After finding that the registrant's $15 fees to the travel agencies qualified as consideration for services described under paras. (l) and (i) of the financial services definition in s. 123(1) (arranging for payment of a credit card voucher amount), Archambault J found that such arrangement services were not excluded by the Regulations, as the collection of the voucher amounts was "solely the ... taking of the receipt ... of other amounts" under s. 4(2) of the Financial Services (GST) Regulations: "I do not see here any other kind of service" (para. 38). S. 4(2) also did not apply because, under s. 4(3)(a), the registrant was a "person at risk" for the amounts involved. Archambault J. stated (at para. 40):
By accepting ownership of the credit card slip, Skylink took a financial risk, albeit a slight one. Under the terms and conditions of its agreement with the issuer, Skylink could be required to pay back to the issuer the amount of the credit card slip. For example, if a customer does not sign the slip and disputes its validity, the issuer is entitled to require Skylink to repay it the amount appearing on the slip....[I]n some instances, as a result of bankruptcy or for some other reason, the retail agency may be unable to reimburse Skylink.
Subsection 4(2)
See Also
Drug Trading Co. v. R., [2001] GSTC 48, docket 1999-3262-GST-I (TCC)
The registrant was a wholesaler of products to independent retail pharmacies operating under the "I.D.A." name, and also provided franchisor-like services to them. One such service was to negotiate favourable terms with various banks for credit and debit card services. When a customer made a purchase from an IDA member, the bank would deposit the amount (which it debited to the customer's account) into the registrant's bank account, and the registrant would transfer the full amount of the funds to the member's bank account. However, as the bank charged its "discount fees" to the registrant's account, the registrant in turn debited the members for these amounts - which Bowie J found represented a reimbursement for such fees which it had incurred as the members' agent.
In response to a submission of the Justice lawyer that the service which the registrant supplied to the members when it received funds from the banks for the credit and debit card transactions was an administrative rather than financial service (for which it was not a "person at risk" under the Financial Services (GST) Regulations), Bowie J found (at para. 21) that "there is no service to the members that is not a financial, and therefore exempt, service."