The issue of single versus multiple supplies in the context of the GST is the subject of frequent litigation. This is likely attributable to the fairly fact-driven analysis employed by the courts in determining the existence of single or multiple supplies and the arguably subjective nature of the test applied to those facts.
The recent Tele-Mobile decision (2015 TCC 197) will likely do little to reduce the frequency of this issue coming before the courts; however, it does provide some additional clarity on how the issue should be analyzed.
The facts of the case deal with the murky issue of “telecommunications” services, which are subject to a number of specific rules for GST/HST purposes. On the facts, for every call that a Tele-Mobile (“Telus”) cellular customer made from the US to Canada, there was a transmission between the originating cell phone and a toll switch in the US, whereby the transmission was transferred as a cross border transmission (collectively, the “Roaming Transmission”) and then further transmitted to the ultimate recipient of the call in Canada (the “Long Distance Transmission”). Telus treated the Roaming and Long Distance Transmissions as separate supplies and only applied GST on the Long Distance Transmission (viewing the Roaming Transmission as a supply made outside of Canada). (Telus took the position that the Roaming Transmission was neither emitted nor received in Canada and, therefore, was not a supply made in Canada for the purposes of the special place of supply rule in subsection 142.1(2) of the ETA). CRA took the position that the call was in fact a single supply of a long distance call, which – since the call was received in Canada – was entirely considered to be made in Canada for subsection 142.1(2) purposes, and therefore subject to GST/HST in its entirety.
In grappling with this fundamental issue, the TCC considered a number of different cases dealing with the single versus multiple supplies issue, while initially accepting Telus’ identification of five factors derived from these cases for conducting the single vs. multiple analysis. These could be distilled into the following questions: (1) Do each of the supplies have commercial efficacy? (2) Is the recipient aware of the specific elements of each of the supplies? (3) Are there separate fees for each of the supplies? (4) Are any of the supplies an optional component? (5) Are any of the supplies useful on their own?
While the TCC acknowledged that some of these factors could suggest that the Roaming and Long Distance Transmissions were separate single supplies, it held that the ultimate test for determination of the single or multiple supply issue is the integration approach explained by Chief Justice Rip in the O.A. Brown Ltd. case. This required consideration of whether “the alleged separate supply is an integral part, integrant or component of the overall supply” and the extent to which “the services alleged to constitute a single supply are interconnected, the extent of their independence and… whether each is an integral part or component of a composite whole.” The TCC noted that test requires the application of a “common sense” approach.
Using that formulation, the TCC concluded that despite the fact that some of the five factors provided some support to Telus’ multiple supply position, the better view was that only a single supply was being made here – namely, the making of a long distance phone call from the US to Canada. That the Roaming and Long Distance Transmissions were considered to be “fully and seamlessly integrated into making that [call] happen”, and that both were required, indicated that the two were totally interdependent and integral components of an overall supply.
In our view, the TCC’s ultimate conclusions on these matters appears reasonable in the circumstances (and probably the right answer). The reasoning prevents a highly parsing approach to components of commercial relationships, and the arguably abstract divisions of relatively straightforward concepts that these approaches sometimes entail.
Ultimately, Tele-Mobile may be more important for its conclusions on the proper analysis to be applied in these single vs. multiple supply situations (i.e., that the five single factors outlined above will not, in and of themselves, be determinative of the issue and that the key question remains that of integration as outlined in the O.A. Brown Ltd. case), the result of the case does certainly hit Canadians in the pocket book. Given the trans-border nature of these supplies, perhaps the Department of Finance ought to consider zero-rating them altogether (similar go the zero-rated treatment of most cross-border transportation services).
A previous version of this article appeared in a recent edition of the GST & Commodity Tax newsletter.