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This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter 07-0254, January 2008
I refer to your correspondence dated XXXX, 2007 regarding remuneration paid to Quebec resident employees, and the Ontario Employer Health Tax (EHT).
EHT is payable by all employers who pay remuneration to employees who:
- report for work at a permanent establishment (PE) of the employer in Ontario, or
- are not required to report for work at the employer's PE, but are paid from or through a PE of the employer in Ontario.
Remuneration paid to employees who report for work at a PE of the employer outside of Ontario is not subject to EHT.
A PE usually consists of a physical structure or building where employees work such as an agency, a branch, a factory, a farm, a gas well, a mine, an office, an oil well, timberland, a warehouse and a workshop. A PE may also exist or be deemed to exist where the employee:
- has general authority to contract on behalf of the employer
- conducts day to day business of the employer at an office in his home, or
- fills orders from stock of merchandise owned by the employer.
From your correspondence and our conversations I understand that:
- Company A is a manufacturer and distributor of XXXXXX
- Company A's manufacturing plant and head office are in Toronto, Ontario
- Company A has no other offices outside of Ontario
- Company A has sales representatives (Reps) working in Ontario and in Quebec
- Reps working in Quebec are also residents there
- Reps work on the road calling on customers to address issues or to respond to technical inquiries as well as trying to solicit new clients
- There is no requirement for these employees to have a home office
- Company A pays for incidental office expenses only
- The Reps business cards shows the Rep's cell phone number, Company A's Toronto, address and toll free number
- Quebec resident Reps:
- are hired and paid from Company A's head office in Toronto, Ontario
- are supervised and receive direction from Ontario
- submit attendance records and expense claims to Ontario
- do not have general authority to contract
- sometimes deliver a small order to a client from stock held at a rented warehouse in Montreal, Quebec
- Sales orders are received directly from customer at the Toronto office for approval and then are transmitted to the rented warehouse facility (the Warehouse) in Montreal, Quebec for shipping
- The Warehouse:
- Company A pays rent to Company B to store stock there and for services to process orders sent there from the Toronto head office.
- Orders are transmitted from Company A's Toronto office for shipping.
- Company A has no employees working at the warehouse nor do they conduct day to day business or any portion of business at the warehouse.
- Company A does not have authority over the warehouse other than their own stock.
- The warehouse address is not publicly listed on letterhead, website, telephone directory.
A home office is not required by employment contract, nor does the employer pay any rent for exclusive use of space in the employees' homes. Telephone numbers listed on the Reps' business cards are their cell phone numbers and the Toronto, Ontario, head office toll free number. Reps in Quebec do not have general authority to contract. Reps are hired, paid and supervised from Company A's head office in Toronto, Ontario; therefore, they are regarded as attached to the office in Ontario.
Customers submit their sales orders directly to the office in Ontario for approval. The orders are then transmitted to a rented warehouse in Montreal, Quebec for shipping. Company A's employees do not work at the warehouse. The warehouse is used for storage of stock and shipping is done by employees of Company B. Company A has no control over the day to day operations at the warehouse. No advertising is done to show the space as belonging to Company A.
Based on the information provided, it is our opinion that, remuneration paid to the Quebec resident employees is subject to EHT based on the facts that they report for work at Company A's office in Toronto, and that they are paid from the head office in Toronto, Ontario. You should request a refund from the Ministère du Revenue du Quebec for contributions made in error to the Quebec Health Services Fund.
