Section 236.5 — Excise Tax Act: First and second variant years

For the purposes of this section, a fiscal year of a network seller in respect of which an approval granted under 178(5) is in effect is the first variant year of the network seller if the network seller fails to meet the condition referred to in paragraph 178(2)(c) in respect of the fiscal year, and meets the condition referred to in paragraph 178(2)(c) for each fiscal year of the network seller, in respect of which an approval granted under 178(5) is in effect, preceding the fiscal year; and the second variant year of the network seller if the fiscal year is after the first variant year of the network seller, the network seller fails to meet the condition referred to in paragraph 178(2)(c) in respect of the fiscal year, and the network seller meets the condition referred to in paragraph 178(2)(c) for each fiscal year (other than the first variant year) of the network seller, in respect of which an approval granted under 178(5) is in effect, preceding the fiscal year. Subject to subsections (3) and (4), if a network seller fails to satisfy any condition referred to in paragraphs 178(2)(a) to (c) for a fiscal year of the network seller in respect of which an approval granted under subsection 178(5) is in effect and, at any time during the fiscal year, a network commission would, if this Part were read without reference to subsection 178(7), become payable by the network seller to a sales representative of the network seller as consideration for a taxable supply (other than a zero-rated supply) made in Canada by the sales representative, the network seller shall, in determining the net tax for the first reporting period of the network seller following the fiscal year, add an amount equal to interest, at the prescribed rate, on the total amount of tax that would be payable in respect of the taxable supply if tax were payable in respect of the taxable supply, computed for the period beginning on the earliest day on which consideration for the taxable supply is paid or becomes due and ending on the day on or before which the network seller is required to file a return for the reporting period that includes that earliest day. In determining the net tax for the first reporting period of a network seller following the first variant year of the network seller, the network seller is not required to add an amount in accordance with subsection (2) if the network seller satisfies the conditions referred to in paragraphs 178(2)(a) and (b) for the first variant year and for each fiscal year, in respect of which an approval granted under subsection 178(5) is in effect, preceding the first variant year; and the network seller would meet the condition referred to in paragraph 178(2)(c) for the first variant year if the reference in that paragraph to “all or substantially all” were read as a reference to “at least 80%”. In determining the net tax for the first reporting period of the network seller following the second variant year of the network seller, the network seller is not required to add an amount in accordance with subsection (2) if the network seller satisfies the conditions referred to in paragraphs 178(2)(a) and (b) for the second variant year and for each fiscal year, in respect of which an approval granted under subsection 178(5) is in effect, preceding the second variant year; the network seller would meet the condition referred to in paragraph 178(2)(c) for each of the first variant year and the second variant year if the reference in that paragraph to “all or substantially all” were read as a reference to “at least 80%”; and within 180 days after the beginning of the second variant year, the network seller requests in writing that the Minister revoke the approval. If, at any time after an approval granted under subsection 178(5) in respect of a network seller and each of its sales representatives ceases to have effect as a consequence of a revocation under subsection 178(11) or (12), a network commission would, if this Part were read without reference to subsection 178(7), become payable as consideration for a taxable supply (other than a zero-rated supply) made in Canada by a sales representative of the network seller that has not been notified, as required under paragraph 178(13)(b), of the revocation and an amount is not charged or collected as, or on account of, tax in respect of the taxable supply, the network seller shall, in determining the net tax for the particular reporting period of the network seller that includes the earliest day on which consideration for the taxable supply is paid or becomes due, add an amount equal to interest, at the prescribed rate, on the total amount of tax that would be payable in respect of the taxable supply if tax were payable in respect of the taxable supply, computed for the period beginning on that earliest day and ending on the day on or before which the network seller is required to file a return for the particular reporting period.