Section 156 of the Excise Tax Act (ETA) contains rules to relieve the cash flow problems that can arise when closely related corporations and partnerships that are members of a qualifying group engage in transactions among themselves that would normally be taxable.
By making a Section 156 election, certain taxable supplies made to each closely related registrant are deemed to be made for no consideration. As such, the members can make supplies to other members of the group without having to collect GST/HST. To make the election, all members of the qualifying group must be engaged exclusively in commercial activities, and their revenues must be taxable for GST/HST purposes.
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