File: 11894-13(on)
c.n. 477(REG)
Sch. V/VI/21
XXXXX February 16, 1995
I refer to the letters of October 4, 1993 and February 1, 1994, written by XXXXX in response to the June 17, 1993 request from XXXXX of the City of XXXXX
XXXXX letters were copied to me for my comments. I apologize for the delay in replying to XXXXX request.
In her letter, XXXXX requested an interpretation of section 21 of Part VI of Schedule V to the Excise Tax Act (the "Act"). The request for the interpretation was in relation to the municipal supply of a weed cutting service and whether the supply of this service was an exempt supply pursuant to section 21.
Facts:
1. Pursuant to section 3 of the Ontario Weed Control Act (the "WCA"), the owner of land is required to destroy all noxious weeds on it. If a weed inspector appointed pursuant to the WCA, finds noxious weeds on land located within his jurisdiction, he may, pursuant to section 13 of the WCA, order the owner of the land to destroy them. Pursuant to subsection 16(1) of the WCA, the council of any city, town, village or township may direct any of its municipal weed inspectors or, if there are none, the area weed inspectors, to cause noxious weeds or weed seeds to be destroyed in the prescribed manner. If the owner fails to comply with the order, the weed inspector may, pursuant to section 15 of the WCA, cause the noxious weeds to be destroyed.
2. Pursuant to subsection 16(3) of the WCA, the weed inspector must then submit to the municipality, a statement of the expenses incurred to have the noxious weeds destroyed.
3. Pursuant to subsection 16(4) the municipality then sends the statement of the expenses to the owner of the land who has fifteen days to pay it. If the owner fails to pay the expenses within the time allowed, the municipality under subsection 16(6), is required to pay the expenses out of its general funds. The amount paid by the municipality is then deemed to be taxes and is added to the collector's roll and collected from the owner in the same manner and with the same priority as municipal taxes under subsection 16(7).
Request for comments:
Our comments were requested on the application of section 21 of Part VI of Schedule V to the Act to the situation described above, and in particular:
Whether the supply of the weed cutting service, when performed by XXXXX , is an exempt supply under section 21 of Part VI of Schedule V?
Our comments:
Pursuant to section 21, a supply of a municipal service made by or on behalf of a government or municipality to owners or occupants of real property situated in a particular geographic area who have no option but to receive the service, (other than a supply of a service of testing or inspecting any property for the purpose of verifying or certifying that the property meets particular standards of quality or is suitable for consumption, use or supply in a particular manner) is an exempt supply.
As explained in the Explanatory Notes, section 21 is intended to provide a blanket exemption for standard municipal services provided to property owners in a particular locale. This includes such services as road building and snow removal. In most municipalities, these services are financed from general revenues (i.e. property taxes).
Optional services supplied to individual households on a fee-for-service basis are not covered under section 21. This includes, for example, charges for snow removal on private property, driveway paving and tree removal where the real property owner chooses to have the municipality perform the service - in essence, commercial activities which are in competition with the private sector. Also excluded from the exemption are testing and inspection services that are for the purpose of verifying compliance with standards or suitability of property for consumption, use or supply in a particular manner.
With respect to your specific case, policy has recently been approved on section 21. Although the municipality does not supply the weed cutting service simultaneously to all property owners and supplies the service (either themselves or by hiring someone else) on an individual basis only to those owners who have failed to comply with XXXXX by-law, it is our view that the supply of the weed cutting service is a supply of a municipal service where the owner of the real property had no option but to receive the service from the municipality. The supply of a weed cutting service under these circumstances is an exempt supply pursuant to section 21 of Part VI of Schedule V. XXXXX interpretation of February 1, 1994, is therefore correct.
We have reviewed the treatment of by-law infractions in the Questions and Answers and Ruling databases and the Guide for Municipalities, and have noticed inconsistencies in the responses for which appropriate corrective action will be taken. We will be contacting the Federation of Canadian Municipalities to clarify our position on this issue.
As a result of the above noted inconsistencies, it is our view, that when making assessments, due consideration should be given to those registrants who have attempted to comply with the legislation and have relied upon the responses provided by the Department.
Should you require further assistance please contact Ms. Joanne Houlahan, Manager, MUSH, Non-Profit Organizations and Charities at (613) 954-7945 or Mr. Owen Newell, Policy Officer, Municipalities, at (613) 954-4280.
J.A. Venne
Director
Tax Policy - Special Sectors
GST Policy and Legislation
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