21 December 1999 GST/HST Ruling 8282/HQR0001888 - Tax Status of Supplies by

Dear XXXXX

Thank you for your letter of July 15, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the service provided by XXXXX of arranging for medical practitioners to perform pre-placement examinations and drug screening tests on individuals who are potential employees of various companies that are located across Canada.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (the "CCRA").

On the basis of the above mentioned letter, our understanding of the facts and the transactions is as follows:

Statement of Facts

1. XXXXX is a GST/HST registrant located in XXXXX. It arranges for pre-placement examinations and drug screening tests to be performed by medical practitioners on prospective employees (i.e., individuals) of other companies located across Canada.

2. A company contacts XXXXX for the pre-placement medical examination and/or drug screening test to be performed on an individual who is in XXXXX subcontracts with a medical practitioner to perform the medical examination and/or drug screening test and books the appointment for the individual. It will notify either the individual or the company of the time and date of the appointment.

4. The entire service made by XXXXX is performed in XXXXX[.]

5. The pre-placement examinations and drug screening tests are not insured services for the purposes of the provincial health insurance plan.

6. The medical practitioner invoices XXXXX for the supply of the pre-placement medical examination and/or drug screening test performed on the individual.

7. XXXXX invoices the company (i.e., its client) for the service of arranging for the medical practitioner to perform the pre-placement examination and/or drug screening test on the individual. The consideration charged by XXXXX includes an amount for the reimbursement of the medical practitioner's charges and an amount in respect of XXXXX fee for providing this service.

Ruling Requested

XXXXX is required to collect the HST on the amount it charges a company for the service of arranging for a medical practitioner to perform an examination and/or drug screening test on an individual who is a prospective employee of the company.

Ruling Given

Based on the facts set out above, we rule that XXXXX is required to collect the HST at the rate of 15% on the amount (i.e., the consideration) it charges a company for the service of arranging for a medical practitioner to perform a pre-placement examination and/or drug screening test on an individual who is a prospective employee of the company. The tax is calculated on the value of the consideration for this service which includes the amount for the reimbursement of the medical practitioner's charges and an amount in respect of XXXXX fee.

As you were previously advised in a letter from our XXXXX XXXXX dated April 27, 1999, services that are performed all or substantially all (i.e., 90% or more) in a participating province are considered to have been performed in a participating province and to the extent that the services are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate of 15%.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act (the "ETA"), or to CCRA interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

XXXXX is making a supply of a service of arranging for a medical practitioner to perform an examination or a drug screening test on an individual who is a prospective employee of another company. This supply is not a supply of a health care service. As there are no exempting provisions in the ETA that apply, the HST at the rate of 15% is collectible on the consideration charged by XXXXX for facilitating the medical examinations and drug screening tests. XXXXX is entitled to claim input tax credits for any GST/HST it paid on supplies it incurred in the course of arranging for the examinations and drug screen testing.

Under Part II of Schedule V to the ETA, a supply of a health care service is exempt from tax when the service is supplied by a specific health care professional, such as a medical practitioner or other practitioner (e.g., physiotherapist) and the service is rendered to an individual. The terms "medical practitioner" and "practitioner" are defined in section 1 of Part II of Schedule V. By virtue of provincial legislation, only a natural person (i.e., individual) can be licensed or otherwise certified as a medical practitioner or other practitioner to practice medicine or render other health care services. XXXXX is not a medical or other health care practitioner and thus the exempting provisions in Part II of Schedule V are not applicable to XXXXX supplies, whether or not its supplies are health-related.

For the purposes of the ETA, health care services have to promote physical and mental health, and the protection against disease. Only these health care services are exempt. With respect to drug screening tests, it is the CCRA's position that testing for drug and/or alcohol levels is not diagnostic in nature nor is it considered to be a health care service. Consequently, the supply of such a service does not meet any of the exempting provisions of Part II of Schedule V to the ETA and is therefore taxable.

Please note that supplies made by medical practitioners and other practitioners of health care services rendered to individuals will retain their exempt status regardless of who pays for these services, i.e., where the consideration for these services is billed to a third party. Thus, where a medical practitioner makes a supply to XXXXX of a health care service rendered to an individual (i.e., a medical examination), this supply is exempt and no GST/HST is collectible on the invoice billed to XXXXX by the medical practitioner. When XXXXX invoices a company for the reimbursement of the medical practitioner's charges and for the service of arranging for the medical examination, the invoice is in respect of a separate supply from the original supply made by the medical practitioner to XXXXX that, as stated above, does not meet any of the exempting provisions of Part II of Schedule V (i.e., it is not a supply made by a medical practitioner nor is it a supply of a health care service).

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division