“Arranging For” Card Payment Services is an Exempt Financial Service

In Zomaron Inc. v. The Queen (2020 TCC 35), the TCC held that Zomaron Inc. was an intermediary “arranging for” card payment processing services such that its services fell within the ambit of paragraph (l) of the definition of “financial service” in ETA subsection 123(1) and were therefore exempt from GST/HST pursuant to Part VII of Schedule V.

This decision broadens the meaning of “arranging for,” confirming that the intermediary does not need to be involved in each and every transaction or have the power to make binding agreements; it need only “bring the parties together.” Also, the court’s approach in determining the predominant element of the supply reinforces the importance of looking at the end result of the transaction and the required linkage in purpose between the “arranging for” service and the particular financial service.

Zomaron connected merchants with “payment processors,” who provided merchants with payment processing services by obtaining information from merchants on credit card purchases and paying the purchase amount less fees to the merchant’s account once the credit card network (e.g., Visa) authorized the transaction. Zomaron was primarily responsible for finding prospective merchants and negotiating the rates, fees, and certain terms and conditions related to the processing services. However, the processors retained the right to accept or deny a prospective merchant such that Zomaron did not have the authority to bind the processors. Zomaron received a portion of the processing fee paid by the merchants to the processors for every transaction processed through the processors. Zomaron did not collect and remit GST/HST on the fees it received from the processors on the basis that its services were exempt financial services.