Canada: Techtronic Industries Canada Inc. Decision: Application Of Incoterms® And Other Similar Commercial Terms In QST Matters

In a decision rendered last July 14th,1 the Court of Québec established the impact of commercial terms like "free on board" (F.O.B.) (North America), as well as international commercial terms like Incoterms® in connection with the application of the Act respecting the Québec sales tax (the QSTA), when determining if a taxable supply of corporeal movable property by way of sale is made in Québec (and, therefore, subject to QST) or outside the province (and consequently not subject to QST).


The plaintiff, Techtronic Industries Canada Inc. (Techtronic), operates a power handtool company out of an establishment located in Ontario. In addition to being a GST/HST registrant under the Excise Tax Act, Techtronic is also a QST registrant. In connection with its operations, Techtronic makes taxable supplies of tools by way of sale to customers located in Québec (the Québec Customers) but only collects the GST (and not QST) on these particular sales. Once Techtronic and a Québec Customer finalize the sale, Techtronic generally hires a carrier, in particular FedEx, to ship the tools to the Québec Customer. Sales are made pursuant to a document entitled Sales Policy that specifies that supplies destined to Québec Customers are made "F.O.B. Distribution Centre". As its distribution centre is located in Ontario, Techtronic took the position that the place of supply by way of sale of the tools was Ontario and that, consequently, these supplies were not subject to QST.

Disagreeing with the taxpayer's position, the Agence du revenu du Québec (the ARQ) issued a notice of reassessment against Techtronic for QST that it should have collected on taxable supplies of tools to Québec Customers based, in particular, on sections 22.7 and 22.9 of the QSTA.

Pursuant to section 22.7 of the QSTA, a supply of corporeal movable property by way of sale is deemed to be made in Québec if the property is delivered in Québec to the recipient of the supply. Section 22.9 of the QSTA in turn provides that property is deemed to be delivered in Québec where the supplier ships the property to a destination in Québec that is specified in the contract for carriage of the property, or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient, to ship the property to such a destination.


Judge Hamel noted that the QSTA contains absolute presumptions that govern the determination of the place of supply upon the sale of corporeal movable property in an interprovincial context and ruled that the use of particular commercial terms cannot rebut these presumptions.

Section 22.9 of the QSTA on which the ARQ specifically relied to issue the notice of reassessment against Techtronic must, therefore, take precedence.

Reference to the commercial term "F.O.B. Origin" in the Sales Policy is made, among other things, to let Québec Customers know that, legally, they are assuming the risks of loss during transportation.

Commercial terms versus specific rules under the QSTA

To find that the supply of tools by way of sale was subject to QST, Judge Hamel first considered the usefulness and scope of commercial terms with regards to QST. The Court noted that commercial terms do not have force of law and that the reference to "F.O.B. Origin" cannot take precedence over the special rules provided in the QSTA.

The Court agreed with the ARQ by referring, in particular, to the application of section 22.9 of the QSTA which provides as follows:

Property is deemed to be delivered

1. in Québec where the supplier

(a) ships the property to a destination in Québec that is specified in the contract for carriage of the property or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination, or

(b) sends the property by mail or courier to an address in Québec; and

2. outside Québec where the supplier

(a) ships the property to a destination in another province that is specified in the contract for carriage of the property or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination, or

(b) sends the property by mail or courier to an address in another province.

Techtronic contended that from a legal standpoint:

[Translation] In application of the commercial term "F.O.B. Distribution Centre" contained in the Sales Policy, Québec Customers would transfer possession of the corporeal movable property to themselves when FedEx receives them from Techtronic at its distribution centre located in Ontario. Consequently, the provisions of the QSTA cannot apply [.]

Pursuant to section 22.9 of the QSTA, a corporeal movable property (i.e., the tools) is deemed delivered to Québec if the supplier (i.e., Techtronic) ships the property to Québec or transfers the property to a common carrier (i.e., FedEx) to an address in Québec. This absolute presumption regarding the place of supply is applicable when possession of the tools is transferred to FedEx, whose services were retained by Techtronic on behalf of Québec Customers2, in order for the latter to ship the tools to Québec to these same customers. Judge Hamel expresses himself as follows:

[Translation] Even though the Sales Policy provides that sales of corporeal movable properties to Québec Customers are "F.O.B. Distribution Centre", this does not serve to nullify the legal effects of sections 22.7 and 22.9 of the QSTA where the conditions provided under section 22.9 of the QSTA are established, as the evidence showed.

According to Judge Hamel, to conclude otherwise would mean that, for all intents and purposes, the parties may contractually, by referring to the "F.O.B. Origin" notion, circumvent the mandatory provisions of the QSTA and the absolute legal presumptions under section 22.9 of the QSTA. Insofar as the factual conditions under section 22.9 of the QSTA are present, the particular commercial terms set out in the contract will, therefore, not have any impact.


This decision sheds light on the potentially limited usefulness of commercial terms from a QST standpoint. These commercial terms must be interpreted and applied as additional information, as the case may be, and not on a priority basis or contrary to the provisions of the QSTA, which constitute particular mandatory provisions with which a taxpayer must comply.

Lastly, it is important to note that the outcome would be quite another matter where a taxpayer did not reside in Québec, was not registered for QST and was not required to register because he or she does not carry on a business in Québec (even if he or she has activities there). Indeed, pursuant to section 23 of the QSTA, the supply of a movable property or service made in Québec by such non-resident taxpayer is deemed made outside Québec for QST purposes. In the present case, given that Techtronic was registered for QST purposes, section 23 of the QSTA could not apply.


1. Techtronic Industries Canada inc. c. Agence du revenu du Québec 2014 QCCQ 7394. (French version only)

2. Techtronic did not succeed in proving that the Québec Customers themselves hired FedEx. This evidence would perhaps have precluded the application of section 22.9 of the QSTA. Supra note 1, par. 184.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.