1 July 1998 GST/HST Interpretation 1998-07-01[2] - Claim for Tax Remitted in Error

This is in response to XXXXX memorandum of October 3, 1996 regarding a claim for tax remitted in error by XXXXX[.]

It is our understanding that XXXXX is included in XXXXX and therefore is entitled to purchase GST/HST free.

XXXXX sold meals in its cafeteria and remitted GST on a tax included basis. However, there is no documentation indicating that the amount was collected as tax. The cash register receipts did not indicate that tax applied, nor did XXXXX display signs indicating that the meals were subject to tax. XXXXX then discovered that it had made the supply of these meals for less than direct cost. XXXXX has filed a rebate claim pursuant to section 261 of the Excise Tax Act for the tax remitted and has asked that its registration be cancelled.

XXXXX includes XXXXX which was formerly know as XXXXX was a hospital authority for purposes of the ETA. The Hospital did not notify Revenue Canada when its name was changed to XXXXX, nor did the XXXXX apply for designation as a hospital authority when it was created and took over the ownership and operation of the XXXXX XXXXX is not a registered charity.

Interpretations Requested

1. If a hospital was designated previously as a hospital authority, and is now run by a regional health board does the designation of the hospital carry over to the new entity?

2. Can a supply made by XXXXX be exempt as a supply made by a public service body (direct cost exemption in section 6, Part VI, Schedule V) even though the XXXXX is part of XXXXX under the RTA?

Interpretations Given

1. The designation of a hospital authority does not carry over to the new entity. As XXXXX has not applied to be designated, it is not a "hospital authority" for purposes of the ETA.

However, if XXXXX applies for and is found to qualify for designation as a hospital authority it may be designated retroactively to the date XXXXX was established.

2. If XXXXX falls within the definition of "public service body", it can use the direct cost exemption found in section 6 of Part VI of Schedule V to the ETA, even though it is a part of XXXXX for RTA purposes.

The ETA does not prohibit a government from being a public service body, other than a non-profit organization (NPO) (the definition of NPO in section 123(1) excludes government). As such, a body may be a government for purposes of making a purchase and a public service body (other than an NPO) when making a supply.

It must then be determined whether XXXXX is a "public service body". According to subsection 123(1) of the ETA, "'public service body' means a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university". It is clear that XXXXX is not a municipality, a school authority, a public college or a university. As we have already noted, XXXXX is not a "charity".

Although XXXXX is not currently a "hospital authority", if it applies for and is retroactively designated, it will have been entitled to use the public service body exemptions.

There is also a possibility that XXXXX is an NPO. As we noted above, government is excluded from the definition of NPO. The entities listed in XXXXX are agreed upon by the Government of Canada and XXXXX[.] In some cases the entities that are on that list may not meet the definition of "government". That is, a specific body may not be an agent of XXXXX. If an entity is not government, it may be an NPO.

If it is an NPO for GST/HST purposes it is entitled to use the direct cost exemption found in section 6 of Part VI of Schedule V to the ETA. Whether or not XXXXX is an agent of XXXXX is a question of fact. The statute or other documents which created XXXXX may state whether it is an agent of the crown. If not, you may wish to consult with XXXXX and ask if it considers XXXXX to be an agent of the crown.

If it is found that the meals provided in its cafeteria were exempt, the question of whether XXXXX is entitled to claim a rebate of an amount remitted as tax on those exempt supplies is not free from doubt. However, since no documentation exists to indicate that the meals were subject to tax (i.e. no indication on cash register receipts and no signs posted indicating tax applied to the meals), the amount taken into account as net tax was not remittable by XXXXX because it was not collected as tax.

In other words, if the meals were exempt, no tax was required to be collected or remitted. Any amount remitted on the sale of those meals would be remitted in error. Therefore, under section 261 of the Excise Tax Act, XXXXX would be entitled to claim a rebate of the amount remitted, assuming all of the rules regarding the filing of the rebate have been met.

Should you require further information, please contact me at (613) 954-7947.

Darlene Wladyka
Senior Rulings Officer
Governments
Public Service Bodies and Governments
GST/HST Rulings and Interpretations