River Cree Resort Limited Partnership v. The Queen

River Cree Resort Limited Partnership v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2022-04-22
Neutral citation
2022 TCC 45
File numbers
2016-4855(GST)G
Judges and Taxing Officers
David E. Graham
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2016-4855(GST)G
BETWEEN:
RIVER CREE RESORT LIMITED PARTNERSHIP,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on September 13, 14, 15 and 16, 2021, at Edmonton, Alberta
Additional written submissions received on January 17, 2022
Before: The Honourable Justice David E. Graham
Appearances:
Counsel for the Appellant:
David Douglas Robertson Maude Lussier-Bourque Laura Jochimski
Counsel for the Respondent:
Wendy Bridges Andrew Lawrence
JUDGMENT
The appeals of the reassessments of the following reporting periods are allowed and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant’s net tax be reduced by the following amounts to give effect to a concession made by the Respondent:
Reporting Period Ending
Reduction in Net Tax
September 30, 2011
$953.58
October 31, 2011
$1,126.09
November 30, 2011
$880.22
December 31, 2011
$2,507.49
February 29, 2012
$930.22
March 31, 2012
$1,272.76
April 30, 2012
$1,089.51
May 31, 2012
$1,257.99
June 30, 2012
$1,169.43
July 31, 2012
$1,262.98
August 31, 2012
$1,053.85
September 30, 2012
$1,738.23
October 31, 2012
$1,295.79
November 30, 2012
$1,058.60
December 31, 2012
$1,643.83
February 28, 2013
$1,094.35
April 30, 2013
$530.78
June 30, 2013
$95.02
July 31, 2013
$65.71
August 31, 2013
$113.93
September 30, 2013
$220.56
November 30, 2013
$320.69
December 31, 2013
$72.01
January 31, 2014
$2,904.21
February 28, 2014
$1,777.14
March 31, 2014
$1,436.19
April 30, 2014
$1,875.21
May 31, 2014
$1,895.35
July 31, 2014
$1,518.55
August 31, 2014
$1,434.08
September 30, 2014
$1,699.99
October 31, 2014
$1,560.31
November 30, 2014
$1,993.47
December 31, 2014
$1,494.44
January 31, 2015
$1,563.53
February 28, 2015
$2,764.35
March 31, 2015
$1,686.65
April 30, 2015
$1,990.87
May 31, 2015
$3,918.75
The appeals of the reassessments of the Appellant’s reporting periods ending January 31, 2012, January 31, 2013, March 31, 2013, May 31, 2013, October 31, 2013 and June 30, 2014 are dismissed.
The parties shall have until May 24, 2022 to reach an agreement on costs, failing which the parties shall have until June 23, 2022 to serve and file written submissions on costs and the parties shall have until July 4, 2022 to serve and file a written response. Any such submissions shall not exceed 10 pages in length. If the parties do not advise the Court that they have reached an agreement and no submissions are received within the foregoing time limits, the parties shall bear their own costs.
Signed at Ottawa, Canada, this 22nd day of April 2022.
“David E. Graham”
Graham J.
Citation: 2022 TCC 45
Date: 20220422
Docket: 2016-4855(GST)G
BETWEEN:
RIVER CREE RESORT LIMITED PARTNERSHIP,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Graham J.
[1] The Appellant is a member of the corporate group that owns and operates the River Cree Resort and Casino (the “Resort”). The Resort is located in Enoch, Alberta, just west of Edmonton. It contains a hotel, a conference centre, two ice rinks, many restaurants and bars, a large arena for shows and, of course, a casino. The casino has more than triple the number of slot machines of any other casino in Alberta.
[2] Casino customers need cash to gamble. As a result, the Appellant has ensured that a number of automated teller machines (“ATMs”) are conveniently situated throughout the Resort. During the reporting periods in question, the Appellant earned over $8 million in revenue in connection with those ATMs.
[3] The Minister of National Revenue reassessed the Appellant on the basis that the Appellant made taxable supplies to the business that provided the ATMs and thus that the Appellant should have collected GST on the revenue that it received.
[4] The Appellant says that it made exempt supplies of financial services either to the users of the ATMs or to the business that provided the ATMs and thus that it was not required to collect GST.
I. Issues
[5] In order to determine whether the Appellant should have collected GST on the revenue that it received, I must determine what the Appellant supplied and whether those supplies were exempt supplies of financial services. This requires me to answer the following questions:
(a) Did the cash in the ATMs belong to the Appellant?
(b) Did the Appellant provide the ATMs?
(c) Who earned the service fees paid by cardholders to withdraw money from the ATMs?
(d) Given those conclusions, what supplies did the Appellant make in consideration for the revenue it received?
(e) Were those supplies exempt supplies of financial services?
II. Background
[6] In order to place these issues in context, I will briefly describe the parties who are typically involved in an ATM withdrawal, provide an overview of the series of supplies that typically occurs during a withdrawal and explain how GST normally applies to that series.
A. Parties to an ATM Withdrawal
[7] ATM withdrawals involve a number of different parties. The specific parties involved depend, in part, on the type of ATM at which the withdrawal occurs. Many ATMs are owned and operated by financial institutions. Others, known as “white label ATMs”, are owned by persons other than financial institutions. The ATMs in these appeals were all white label ATMs.
[8] I will use the following terms to describe the parties to the series of supplies that typically occurs when a withdrawal is made from a white label ATM: [1]
cardholder: The cardholder is a person who uses an ATM to withdraw money from his or her account with a card issuer.
card issuer: A card issuer is a financial institution that is a member of a payment network. As the transactions in question occurred over the Interac payment network, I will use that network in my descriptions.
acquirer: The Interac payment network is made up of a number of individual networks operated by different Interac members. Each network operator is called an acquirer.
ATM provider: The ATM provider is the person who provides the ATM that is connected to the acquirer’s network. As set out above, the second issue that I must decide is whether the Appellant was an ATM provider in the periods in question.
cash provider: The cash provider is the person whose cash is placed in that ATM. As set out above, the first issue that I must decide is whether the Appellant was a cash provider in the periods in question.
[9] In a simple white label ATM transaction, a cardholder wants to withdraw cash from his or her account. He or she goes to an ATM connected to an acquirer’s network and inserts his or her card from his or her card issuer. The ATM has been placed by the ATM provider. It contains cash provided by the cash provider. Depending on the arrangements among the parties, the ATM provider and cash provider may be the same entity or different entities.
B. Series of Supplies
[10] When a cardholder inserts his or her card in a white label ATM, the ATM advises the cardholder that there will be a service fee for withdrawing cash and asks whether the cardholder would like to proceed. [2] This service fee is known as a “surcharge fee”.
[11] If the cardholder agrees to pay the surcharge fee, the ATM sends a message over the acquirer’s network to the card issuer⁠—usually the cardholder’s bank. The card issuer withdraws the necessary funds (i.e. the money that the cardholder wants plus the surcharge fee) from the cardholder’s account and informs the acquirer that the transaction is approved. A series of supplies then starts.
[12] The series begins with the acquirer providing services to the card issuer, continues as each party in the chain provides services to the party above it in the chain and ends when the cash provider transfers money to the cardholder. The exact nature of the series varies depending on the number of players involved and the specific arrangements made by the players. In particular, the series varies depending on whether the roles of cash provider and ATM provider are filled by the same entity.
[13] The following is an example of a series of supplies that would occur if the ATM provider and the cash provider were the same entity:
(a) The acquirer promises the card issuer that it will provide a transfer of money to the cardholder. The card issuer pays the acquirer a fee for this service. This fee is known as an “interchange fee”.
(b) The acquirer does not actually have the money, so it pays the cash provider a portion of the interchange fee to transfer money to the cardholder.
(c) The cash provider transfers its money to the cardholder. The cardholder pays the cash provider the surcharge fee for this service.
[14] As described in detail below, GST would typically not apply to any of these supplies.
C. GST and ATMs
[15] Normally, GST is not applicable to any of the supplies in the series of supplies as each supply is an exempt supply of the financial services of transferring money, agreeing to provide the transfer of money or arranging for the transfer of money. [3]
[16] The relevant portions of the definition of “financial service” are paragraphs (a) and (l). They read as follows: [4]
“financial service” means
(a) the exchange, payment, issue, receipt or transfer of money, whether effected by the exchange of currency, by crediting or debiting accounts or otherwise,
…
1) the agreeing to provide, or the arranging for, a service that is
referred to in any of paragraphs (a) to (i), and
not referred to in any of paragraphs (n) to (t)…
[Emphasis added]
[17] Paragraph (a) of the definition speaks of “the exchange, payment, issue, receipt or transfer of money”. The word that best describes what happens when a cardholder receives money from an ATM is that the money has been “dispensed” to the cardholder. Unfortunately, the word “dispensed” does not appear in paragraph (a).
[18] Of the words in paragraph (a) of the definition, I find that the word “transfer” best describes the transaction that occurs when money is dispensed from an ATM. The person supplying the money to the cardholder is clearly neither exchanging nor receiving money. That person is also not issuing money. The term “money” is defined in subsection 123(1). “Money” includes not only currency, but also such things as cheques, promissory notes and bank drafts. Cheques, promissory notes and bank drafts are all things that are issued. Since only the Bank of Canada can issue currency, it seems that the word “issue” appears in paragraph (a) in order to capture these other types of “money”.
[19] The remaining terms in paragraph (a) are “payment” and “transfer”. The word “payment” seems inappropriate as it suggests that an amount is owing. By contrast, the transfer of money simply involves moving it from one person to another. This is exactly what is happening in an ATM transaction.
[20] Paragraph (l) of the definition captures both “agreeing to provide” and “arranging for” a service described in paragraph (a). The paragraph therefore captures the supplies of agreeing to provide the transfer of money from an ATM and arranging for the transfer of money from an ATM.
[21] Returning to the above example of a series of supplies that could occur in an ATM withdrawal, it is clear that each supply in the series would be a supply of a financial service. First the acquirer agrees to transfer money, then the cash provider agrees to transfer money and, finally, the cash provider actually transfers the money. As described in more detail below, if the cash provider and ATM provider had been different people, the ATM provider would have arranged for the transfer of money from the cash provider to the cardholder. These are all supplies of exempt financial services.
[22] With this background on how GST applies to the series of supplies involved in an ATM withdrawal, I can now examine the Appellant’s role in the series of supplies that occurred at the ATMs at the Resort during the periods in question.
III. Reporting Periods in Issue
[23] The Minister reassessed the Appellant’s monthly reporting periods ending between September 1, 2011 and May 31, 2015. These reporting periods can be broken into two groups: the reporting periods from September 1, 2011 to May 31, 2014 (the “Initial Periods”) and the reporting periods from June 1, 2014 to May 31, 2015 (the “Subsequent Periods”).
[24] I will analyze the Initial Periods and the Subsequent Periods separately.
IV. Initial Periods
[25] Certain details about the Initial Periods are not in dispute. The surcharge fee was $3.00. The interchange fee was $0.75. The acquirer was a company named TNS Smart Network Inc. (“TNS”).
[26] A company named Cash N Go Ltd. was also involved in the series of supplies. That company was later acquired by Access Cash General Partnership. For simplicity, I will refer to both of these entities as “Access”. [5]
[27] What is in dispute is who the cash provider and ATM provider were. The Appellant says that it fulfilled these roles. The Respondent says that Access fulfilled these roles and that the Appellant played no part in the series of supplies.
A. Cash Provider
[28] The Appellant submits that it was the cash provider in the Initial Periods. It says that the ATMs were loaded with its money. I disagree. I find that, during the Initial Periods, Access was the cash provider. Access borrowed cash from the Appellant and loaded that cash into the ATMs.
[29] The relationship between Access and the Appellant during the Initial Periods was covered by an agreement dated January 1, 2010 (the “2010 Agreement”).
[30] The 2010 Agreement clearly states that Access was responsible for providing the money needed to fill the ATMs and that the Appellant would “sell” Access the cash necessary for it to do so.
[31] The Excise Tax Act does not recognize currency as something that can be sold unless its value exceeds its stated value as legal tender or it is supplied or held for its numismatic value. [6] Currency is not included in the definition of “financial instrument” and is specifically excluded from the definition of “property”. What Access and the Appellant were doing could best be described in Excise Tax Act terms as the advance of money (paragraph (g) of the definition of “financial service”) followed by the payment of money (paragraph (a)). Nothing turns on this distinction. Whether the Appellant sold or lent cash to Access, the result is still that, at the time the cash was placed in the ATMs, it belonged to Access.
[32] I find that Access borrowed money from the Appellant and used that money to load the ATMs. Access could have loaded the ATMs with cash from any source. It could have borrowed from its bank or withdrawn from its own account. However, because the Appellant had a ready supply of cash in the appropriate dominations, Access chose to obtain the cash from the Appellant.
[33] The time that Access took to repay the Appellant’s loan depended on how quickly the money in the ATM was withdrawn. Repayment worked as follows. The card issuer would withdraw the money that the cardholder wanted from the cardholder’s account. The next business day, the card issuer would give that money to TNS. TNS would immediately give it to Access. Access would then give it to the Appellant as partial repayment of the loan. Thus, the loan that the Appellant made to fill a given ATM with cash was repaid in bits and pieces the business day after each withdrawal. The final payment occurred the business day after the last withdrawal. Since the ATM would need to be refilled immediately after the final withdrawal, the Appellant typically advanced a new loan before the old loan was repaid in full. This cycle of advances and repayments continued throughout the Initial Periods.
[34] The Appellant called Terry Brodhecker as a witness. Ms. Brodhecker is the slot cage manager at the Resort. She provided detailed evidence regarding the loading of the ATM cash cassettes. I found Ms. Brodhecker to be a credible witness.
[35] Cash is loaded into an ATM using one or more trays called cassettes. Ms. Brodhecker testified that, during the Initial Periods, Access’ employees loaded cash into the cassettes in a secure room near the cash cage. Access’s employees then took the cassettes to the ATMs and loaded them into the vaults on the bottom of the ATMs. Only Access knew the combination of these vaults. The Appellant could not open the vaults.
[36] Ms. Brodhecker explained that, when the cassettes needed reloading, the Appellant’s employees at the Resort’s cash cage provided two of Access’ employees with the necessary cash. The Appellant used detailed checks and balances to ensure that both parties agreed on the amount of money being provided. Employees of both Access and the Appellant signed all receipts. Cassettes were sometimes reloaded before they were completely empty. Therefore, the cash cage also maintained records of the amount of cash remaining in any returned cassettes. When a partially full cassette was replaced with a separate full cassette, the records had to reflect both the repayment of the cash from the partially full cassette and the advance of the cash in the full cassette.
[37] The Appellant tracked the money that was placed into the ATMs and later deposited into the Appellant’s bank account using a spreadsheet. The column headings described these amounts as “Cash N Go Purchases” and “Cash N Go Payments”. [7] These headings indicate that the Appellant believed that it was selling money to Access, not filling the ATMs with its own money.
[38] A dispute arose between Access and the Appellant in 2015. Despite the detailed records that were maintained regarding the money that the Appellant lent to Access, neither the Appellant nor Access had records showing who first filled the ATMs. There was $580,000 unaccounted for. The Appellant took the position that it had supplied the $580,000 and sued Access to recover it. Access took the position that it had supplied the $580,000. The Appellant ultimately dropped the lawsuit as a lack of evidence made it difficult for it to prove its case. What is important for the purpose of these appeals is not who supplied the initial $580,000. What is important is what the pleadings reveal about the parties’ views of the funds in the ATMs. The pleadings of both the Appellant and Access make it clear that, other than the disputed initial $580,000, all of the funds placed in the ATMs prior to June 1, 2014 had been sold to Access by the Appellant. The Appellant’s statement of claim specifically states that Access “agreed to cover the periodic costs of new cash purchases from [the Appellant] as required to load the ATMs, and [the Appellant] agreed to sell to [Access] sufficient currency in the required denominations for this purpose…”. [8]
[39] The Appellant called its CFO, Ron Klein, as a witness. Mr. Klein testified that the money in the ATMs in the Initial Periods was the Appellant’s money. I generally did not find Mr. Klein to be credible. His testimony appeared crafted to suit the Appellant’s view of the appeals. Faced with contemporaneous documentary evidence to the contrary, his fallback position was that the people preparing the documents did not fully understand the transactions. I find that a more accurate characterization would be that the people preparing the documents were unaware of the position that the Appellant would ultimately take in this appeal and thus described the actual transactions that occurred rather than the ones that the Appellant would now like to have occurred.
[40] The Appellant also called James Wilson as a witness. Mr. Wilson formerly worked at Access. When Access acquired Cash N Go, Mr. Wilson took over management of the Appellant’s account. Other than as set out below, I found Mr. Wilson to be a credible witness.
[41] Mr. Wilson testified that the portions of the 2010 Agreement that described Access as supplying the money were inaccurate and that, in fact, Access loaded the machines with the Appellant’s money. I prefer the contemporaneous documentary evidence in the form of the 2010 Agreement, the spreadsheet, the cash cage paperwork and the unvarnished characterizations in the lawsuit pleadings to Mr. Wilson’s testimony.
[42] Mr. Wilson has significant experience in the ATM industry. He described different arrangements that companies like Access enter into with their customers. He explained that a “full placement” contract was one where Access provided the hardware, the communications and the cash whereas a “partial placement” contract was one where Access provided the hardware and communications and the customer provided the cash. The 2010 Agreement sets out the revenue that the Appellant will receive on each transaction. These amounts are described under the heading “Full Placement Schedule”. [9] I find that this description is consistent with the statements in the rest of the 2010 Agreement. The description is also consistent with the description of the 2010 Agreement that the Appellant itself made in its statement of claim when it sued Access. The Appellant described the agreement as one which obligated Access to, among other things, provide and fully service ATMs at the Resort. [10]
[43] Finally, the Appellant called its CEO, Vik Mahajan, as a witness. It is unclear whether Mr. Mahajan’s testimony was simply that the cash in the ATMs originated from the Appellant or that it belonged to the Appellant. When presented with the provision in the 2010 Agreement which states that the Appellant will sell the money to Access, Mr. Mahajan avoided either confirming or denying that the sale had occurred. He simply stated, “So the loaders would come in, we would give our money to the loaders to load up the ATM machines”. [11] As I am unable to discern what Mr. Mahajan’s testimony on this issue was, I give it no weight.
[44] On the basis of all of the foregoing, I conclude that Access’ money was in the ATMs during the Initial Periods and therefore that Access, not the Appellant, was the cash provider during those periods.
[45] Since Access was the cash provider, it was the one who made the final supply in the series of supplies. It was Access that transferred money to the cardholders.
B. ATM Provider
[46] The Appellant submits that it was the ATM provider in the Initial Periods. I disagree. I find that Access was the ATM provider.
[47] An ATM provider operates an ATM that it has either purchased or leased. If the ATM provider and the cash provider are different entities, the ATM provider may arrange for the transfer of money from the cash provider to the cardholder. To determine who the ATM provider was in the Initial Periods, I will consider the ownership of the ATMs, the operation of the ATMs and who arranged for the transfer of money to the cardholders.
(a) Ownership of the ATMs
[48] The 2010 Agreement is titled “ATM Purchase Agreement”. In the agreement, Access purports to sell the ATMs to the Appellant on a “free use” basis. In other words, a purchase price is established and then waived in consideration for the Appellant entering into the agreement. Despite this, the Appellant admits that it did not purchase the ATMs from Access. [12]
[49] The 2010 Agreement makes it clear that legal and beneficial title to the ATMs remained with Access throughout the Initial Periods. While ownership was to be transferred to the Appellant at the end of the term, Mr. Mahajan testified that the Appellant simply returned the ATMs to Access as Access provided new ATMs under the 2014 Agreement and the old ones were of no use to the Appellant.
[50] In oral submissions, counsel for the Appellant raised the possibility that the Appellant had leased the ATMs from Access. There is no evidence to support that position.
[51] The fact that Access owned the ATMs throughout the Initial Periods argues strongly in favour of Access being the ATM operator.
(b) Operation of the ATMs
[52] To operate an ATM, first and foremost, the ATM must be connected to a network. In addition, someone must have loaded the cassettes with cash and placed those cassettes in the ATM. The ATM must have power and internet access. It must be maintained. Finally, the ATMs need to be physically located somewhere. The ATM provider may provide these things itself or it may contract with others to provide them to it. I will consider each of these factors.
(i) Connection to the Network
[53] Access connected the ATMs to TNS’s network. The question is whether Access connected the ATMs because it was operating them or because it was retained by the Appellant to connect the ATMs so that the Appellant could operate them.
[54] I struggle to see why the Appellant would have retained Access to connect ATMs that it neither owned nor leased. It seems far more likely to me that Access connected the ATMs that it owned to the network so that it could operate them.
[55] The fact that no consideration flowed from the Appellant to Access under the 2010 Agreement supports this conclusion. If the Appellant had retained Access to provide connection services, I would have expected the Appellant to pay for those services.
(ii) Loading Cassettes
[56] As set out above, Access borrowed money from the Appellant and then loaded that money into the cassettes. Access was responsible for loading the cassettes with cash and then placing those cassettes in the ATMs. The 2010 Agreement provided that, if the Appellant was prepared to take over that function, Access would pay it an additional $0.40 per transaction. Mr. Wilson explained that this additional payment reflected the savings that Access would have achieved by not having to pay its employees to travel to the Resort and spend hours loading the cash. The Appellant did not exercise this option.
[57] For me to accept that the Appellant was operating the ATMs, I would have to conclude that the Appellant had the obligation to load the cassettes, that it hired Access to perform that task for it for no apparent consideration and that Access then offered to pay the Appellant $0.40 per transaction to perform the very task that it had just agreed to do for free. This is patently absurd.
[58] In summary, the fact that Access was responsible for loading the cassettes and tried to pay the Appellant to do so on its behalf strongly suggests that Access was the one operating the ATMs.
(iii) Utilities, Maintenance and Other Support
[59] There is no question that the Appellant provided the utilities, security, routine maintenance and customer support necessary to operate the ATMs. The question is whether the Appellant provided these services because it was operating the ATMs or because it was retained by Access to provide these services so that Access could operate them.
[60] Again, I struggle to see why the Appellant would have wanted to support the operation of ATMs that it did not own or lease. It seems far more likely to me that Access retained the Appellant to provide these services to it. The fact that no consideration flowed from the Appellant to Access under the 2010 Agreement supports this conclusion.
(iv) Location
[61] The Appellant was required to provide a physical location for the ATMs. The 2010 Agreement specified where the ATMs were to be initially placed at the Resort. The Appellant was not allowed to remove the ATMs from the Resort and required Access’ written consent if it wanted to relocate the ATMs within the Resort. The Appellant was not allowed to obstruct access to the ATMs and was required to allow the public to use the ATMs during its normal business hours.
[62] I would not have expected these restrictions to be present if the Appellant were the one operating the ATMs. This level of control strongly suggests that Access was the operator, that the Appellant was merely providing a location and that Access wanted to ensure that the Appellant did not interfere with the ATMs’ operations.
(v) Limitations on Use
[63] The 2010 Agreement placed significant restrictions on what the Appellant could do with the ATMs.
[64] The Appellant was prohibited from making any alterations to the ATMs that would change or affect their operation without Access’ consent. Access, on the other hand, was allowed to change the wording, branding, design or appearance of the ATMs without the Appellant’s consent.
[65] The ATMs could only be connected to the network that Access wanted and could only be connected through Access.
[66] The Appellant could not change the surcharge fee without Access’ written consent. [13] By contrast, Access had the ability to increase the fee (and presumably retain the excess) if it determined that the operation of the ATMs was not commercially viable.
[67] Most importantly, Access had the ability to terminate the agreement and take the ATMs back if the Appellant did not comply with any of these conditions or any other term of the 2010 Agreement.
[68] In summary, the Appellant was allowed to do anything it wanted with the ATMs as long as what it wanted to do was what Access wanted it to do. All of these restrictions on the use of the ATMs strongly support the idea that Access was the one operating the ATMs.
[69] The evidence indicates that, in practice, Access allowed the Appellant some small level of control over the ATMs. The Appellant could apply stickers to the outside of the ATMs and determine the wording on the greeting screen that the cardholders saw when they inserted their cards. The Appellant could also choose the denominations of bills that Access would load into the ATMs. I find that the limited control that Access gave to the Appellant does not change the fact that Access was the one operating the ATMs.
(vi) Conclusion: Operation of the ATMs
[70] On the basis of all of the above, I find that Access operated the ATMs in the Initial Periods.
(c) Arranging for the Transfer of Money
[71] If the cash provider and the ATM provider are different people, the ATM provider fulfills an important role in the series of supplies. The ATM provider arranges for the transfer of the money.
[72] In Zomaron Inc. v. The Queen, Justice Lyons considered what “arranging for” meant in the context of credit card transactions. She concluded that the essence of the concept was “bringing together parties to a service” and held that the intermediary must “have a sufficient amount of involvement to then ‘cause to occur’ or effect the financial service…” [14]
[73] I find that the ATM provider meets that test. The ATM provider brings the cash provider and the cardholder together so that the transfer of money can occur. The cash provider has money that it wants to transfer. The cardholder wants to receive that money. The ATM provider supplies the means by which the cash provider and the cardholder can effect that transfer. It supplies the necessary ATM and network connection.
[74] As set out above, arranging for the transfer of money is caught by paragraph (l) of the definition of “financial service”. Thus, if either the cardholder or the cash provider pays the ATM provider a fee for this service, GST would generally not apply.
[75] Having concluded that Access was both the cash provider and the ATM provider in the Initial Periods, I would not normally have to consider whether someone else had arranged for the transfer of the money. Access, as cash provider, did not need anyone to arrange to transfer its money to the cardholders. As ATM provider, it already had the means to connect the cardholders to its cash.
[76] However, the Appellant submitted that, even if it was not the ATM provider, it did other things to arrange for the transfer of money from Access to the cardholders. I disagree.
[77] Certainly the Appellant provided space for the ATMs. However, in Mac’s Convenience Stores Inc. v. The Queen, Justice Hogan held that merely providing the physical space where an ATM transaction could occur does not amount to arranging the transaction. [15]
[78] The Appellant says that it did more than just allow Access to place ATMs in the Resort. The Appellant points to the utilities, security, routine maintenance and customer support that it provided. I find that these elements of its supply to Access supported Access’ operation of the ATMs but did nothing to bring the cardholder and Access (as cash provider) together or cause the transactions to occur.
[79] The Appellant also highlights its decisions to locate the ATMs in prominent, high traffic locations throughout the Resort, its labelling on the ATMs that clearly identified the denominations that would be dispensed from a given ATM and its decision as to which denominations would be dispensed from a given ATM. The Resort wanted its patrons to be able to easily withdraw money to spend or gamble at the Resort. I find that the Appellant’s actions could better be described as decisions that benefited the Resort’s business than arranging for the transfer of money to the cardholders.
[80] The Appellant also points out that it lent Access the money that Access transferred to the cardholders. I find that Access borrowing money from the Appellant is too far removed from the transactions to amount to arranging for them.
[81] Even looking at all of the above collectively, I still cannot find that the Appellant arranged for the transfer of money from Access to the cardholders.
(d) Conclusion
[82] Access gave ATMs that it owned to the Appellant for free on the condition that the Appellant would place them in specific locations at the Resort and allow cardholders to access them. Access then loaded the ATMs with cash, connected them to a network and processed the cardholders’ transactions. In the circumstances, I have no difficulty in concluding that the Appellant did nothing to arrange for the transfer of money to the cardholders. [16] Accordingly, I find that Access was the ATM provider in the Initial Periods.
C. Who Supplied the Services that Gave Rise to the Surcharge Fees?
[83] Because I have concluded that Access was both the cash provider and the ATM provider, it is easy to determine who earned the surcharge fees.
[84] The cardholders paid the surcharge fees in exchange for services. Access was the only person who supplied services to the cardholders. Therefore, the cardholders must have paid the surcharge fees to Access for the services it supplied.
[85] There is no need for me to determine which service or services the cardholders paid Access for. It is sufficient that I have concluded that the Appellant did not supply those services.
[86] The Appellant argues that, because it set the amount of the surcharge fee, it must have earned the surcharge fee. I disagree. The fact that a person had the ability to set the price to be charged for a service does not mean that the person supplied the service.
[87] There is no doubt that the Appellant was interested in setting an appropriate surcharge fee. The Appellant’s compensation for the services it provided to Access was calculated based on the surcharge fee. But the fact that the Appellant received an amount from Access that was calculated by reference to the surcharge fees does not change the fact that the Appellant did not supply any services to the cardholders.
D. The Series of Supplies
[88] Having determined that Access was both the cash provider and the ATM provider during the Initial Periods, I can now describe the series of supplies that occurred. The Appellant played no role in that series.
[89] A diagram showing the series of supplies made during the Initial Periods and the separate supplies made by the Appellant to Access during those periods is attached as Appendix “A”.
(a) First Supply in the Series
[90] The first supply in the series of supplies in the Initial Periods was a supply from TNS to the card issuer.
[91] Once the card issuer approved a cardholder’s request to withdraw funds, the card issuer sent a message to TNS. TNS then agreed to provide the card issuer with the service of providing the transfer of money to the cardholder. The card issuer paid TNS the $0.75 interchange fee for this service.
[92] This first supply fell within paragraph (l) of the definition of “financial service”. The card issuer paid TNS for agreeing to provide the transfer of money to the cardholder. Thus, there would have been no GST on the interchange fee that TNS received. [17]
(b) Second Supply in the Series
[93] The second supply in the series in the Initial Periods was a supply from Access to TNS.
[94] At this point in the series of supplies, TNS had promised to provide the transfer of money to the cardholder. However, TNS did not have a direct means of doing so. Access had connected the ATMs to TNS’s network. Therefore, TNS entered into an agreement with Access.
[95] TNS paid Access $0.71 of the $0.75 interchange fee to transfer Access’ money to the cardholder.
[96] This second supply fell within paragraph (a) of the definition of “financial service”. Access was paid to transfer money. [18] Thus, there would have been no GST on the portion of the interchange fee that Access received. [19]
(c) Final Supply in the Series
[97] The final supply in the series of supplies was from Access to the cardholder.
[98] The final supply in the series of supplies always results in the transfer of money from the cash provider to the cardholder. The cash provider is the only person in the series who can actually transfer money to the cardholder. The cash belongs to the cash provider. Others can agree to provide the transfer of the money or arrange for the transfer of the money but only the cash provider can actually transfer it. Since I have concluded that Access was the cash provider, it was the one who made the final supply to the cardholder.
[99] As described above, as Access was the only person who supplied a service to the cardholder, the cardholder must have paid the surcharge fee to Access. No GST would have been payable on the supply as it would have been caught by paragraph (a). [20]
(d) Supplies by the Appellant
[100] Since the Appellant was neither the cash provider nor the ATM provider, it played no role in the series of supplies. Yet Access paid the Appellant $3.10 to $3.14 per transaction. While these fees were calculated by reference to the surcharge fee and the interchange fee, the Appellant did not actually earn either of those fees. Access earned the surcharge fee. The interchange fee was earned by both TNS and Access.
[101] The Respondent submits that the fees the Appellant received were consideration paid to it by Access for supplies made outside of the series of supplies. I agree. So what did the Appellant supply to earn the fees it received and were those supplies financial services?
E. Nature of the Supplies
(e) Test for Supplies with More Than One Element
[102] A given supply is sometimes composed of more than one element. If all of the elements in a supply would be taxable supplies if made on their own, then there is no need to distinguish among them. The same is true if all of the elements in a supply would be exempt supplies if made on their own. However, complexities can arise when elements, like financial services, that would be exempt supplies are supplied together with elements that would be taxable supplies.
[103] The courts have set out tests to use in these circumstances to determine the nature of the supplies. The following is an attempt to assimilate those tests into a comprehensive step-by-step test:
(1) What was provided: Determine what goods and/or services the supplier provided for the consideration received (O.A. Brown Ltd. v. The Queen; [21] Global Cash Access (Canada) Inc. v. The Queen; [22] Great-West Life Assurance Co. v. The Queen; [23] SLFI Group v. The Queen; [24] CIBC v. The Queen [25] ).
(2) Single