Two bakery plants of the appellant were staffed in significant part by temporary workers (“TWs”), who were sourced from third parties (the “Agencies”), which solicited for the TWs and directed them to the appellant and used part of the payments from the appellant on their invoices to pay the TWs in cash without taking or remitting source deductions. They pocketed rather than remitting the HST collected by them. CRA denied the appellant’s ITC claims.
Owen J found that the appellant “chose to ignore the obvious signs that the Agencies were not treating the TWs as employees and/or were not meeting the obligations of an employer” (para. 215) - but nonetheless concluded that the appellant was entitled to its ITC claims given his finding (at para. 236) that the “Agencies provided a supply to the Appellant that comprised soliciting and directing TWs to the Appellant and paying the TWs for the services provided by those TWs to the Appellant” so that “with respect to the supply provided by each Agency to the Appellant, the Agency was a ‘supplier', and the Appellant was a ‘recipient’.”
Owen J also stated (at para. 253) that the “addition to an input tax credit of amounts that are paid without having become payable captures situations in which a person has paid the tax prior to the time the rules in the ETA cause the amount to become payable (e.g., a prepayment of tax)” and (at para. 259):
[S]ubsection 169(1) does not require that the tax payable by the person that acquires the supply be payable to a particular person. Subsection 169(1) simply requires that the tax in respect of a supply be payable by the person.