Excise Tax Act — E-15 178.4
Effect of approval for distributor 178.4 (1) For the purposes of this Part, where at any time when an approval of the Minister for the application of this section to a distributor of a direct seller is in effect, the distributor makes in Canada a taxable supply by way of sale (other than a zero-rated supply) of an exclusive product of the direct seller to an independent sales contractor of the direct seller who is not a distributor in respect of whom an approval granted under subsection 178.2(4) on application made jointly with the direct seller is in effect at that time or becomes effective immediately after that time, the following rules apply: (a) the supply shall be deemed to have been made for consideration (i) that becomes due, and is paid, at the particular time that is the earliest time at which any consideration for the supply becomes due or is paid, and (ii) that is equal to the suggested retail price of the product at the time the supply is made; (b) tax is deemed not to be payable by the contractor in respect of the supply; (c) the contractor is not entitled to any rebate under section 261 in respect of the supply; and (d) in determining the net tax of the distributor for the reporting period of the distributor that includes the particular time, there shall be added an amount equal to tax calculated on the suggested retail price of the product at the time the supply is made. Idem (2) Where (a) at any time when an approval of the Minister for the application of this section to a distributor of a direct seller is in effect, a particular independent sales contractor of the direct seller (other than the distributor) makes in Canada a particular taxable supply by way of sale (other than a zero-rated supply) of an exclusive product of the direct seller, and (b) subsection (1) applied to a supply of the product made at an earlier time by an independent sales contractor of the direct seller or subsection 178.5(2) applied, at an earlier time, to the product, the following rules apply: (c) if the recipient of the particular supply is a person who is an independent sales contractor of the direct seller (other than the distributor), the particular supply shall be deemed, for the purposes of this Part except section 178.1 and this section, not to have been made by the particular contractor and not to have been received by the person, and (d) if the recipient of the particular supply is a person (other than the distributor and another independent sales contractor of the direct seller), (i) the particular supply is deemed, for the purposes of this Part except section 178.1 and subsections (4) to (6) and 178.5(7), to be a taxable supply made by the distributor, and not by the particular contractor, for consideration equal to the lesser of the actual consideration for the supply and the suggested retail price of the product at the time the particular supply is made, (ii) any tax in respect of the particular supply that is collected by the particular contractor shall be deemed to have been collected on behalf of the distributor, and (iii) tax in respect of the particular supply shall not be included in determining the net tax of the distributor for any reporting period. Adjustment to distributor’s net tax (3) For the purposes of this Part, where a distributor of a direct seller has made a supply of an exclusive product of the direct seller in circumstances in which an amount was required under paragraph (1)(d) to be added in determining the net tax of the distributor and another independent sales contractor of the direct seller subsequently supplies the product to the distributor in a particular reporting period of the distributor, the other contractor is deemed not to have so supplied the product and the amount may be deducted, in determining the net tax of the distributor for the particular reporting period or a subsequent reporting period, in a return under Division V filed by the distributor within four years after the day on or