GST/HST Memorandum 28-3 [28.3] Passenger Transportation Services July 2019

Examples of transit authority not satisfying the substantially all test (para. 35)

Example 5

A transit authority sells transit passes to another transit authority for the purpose of resale. Each transit pass exclusively entitles an individual to use municipal transit services provided by the first transit authority. The supplies made by the first transit authority to the second transit authority would not be exempt under section 24, as section 24 does not apply to supplies made to transit authorities. However, the supplies would be exempt under paragraph 24.1(a), as all of the conditions for the exemption to apply have been satisfied.

Example 6

A local transit authority regularly provides municipal transit services. It also provides charter services to schools for special field trips, and transportation services to tour companies for sightseeing tours of the city. The supply of a charter service or a service that is part of a tour is specifically excluded from the definition of municipal transit service. Therefore, the supply to schools and tour companies of the services described above would not be exempt under section 24 even though the supply is made by a transit authority.

Interruption under 24 hours generally not a stopover

14. An interruption between 2 legs of a journey to transfer between conveyances is not considered a stopover when the interruption is 24 hours or less or ends with the next available scheduled transportation for the next leg of the journey. However, when the stop is longer than 24 hours and is for connection purposes only, the supplier or agent must provide supporting evidence that the interruption is not a stopover.

Round trip by ground back to Canada has no stopover if less than 24 hours

17. When determining the province in which the supply is made, a trans-border (between Canada and the United States) day trip that begins and ends in Canada, and does not include transportation by air, is not considered to have a stopover outside Canada if the scheduled stop is for less than 24 hours.

Continuous journey where 1 ticket agent issues 2 tickets with 3-hour stopover (para. 6)

Example 4

An individual travels by bus from Windsor, Ontario to Chicago, Illinois, USA, then by air from Chicago to Cancun, Mexico; the bus arrives at the airport in Chicago 3 hours before the flight leaves. The individual receives separate tickets for the bus and the flight from his travel agent when he books the travel.

These passenger transportation services form a continuous journey.

Exclusion if day trip returning to Canada

40. Specifically excluded from this zero-rating provision is a passenger transportation service that is part of a continuous journey if both the origin and termination of the journey are in Canada and, at the time the journey begins, the individual or group is not scheduled to be outside Canada for an uninterrupted period of at least 24 hours during the journey. Such continuous journeys (trans-border day trips) are subject to the GST/HST.

Example 7

A tour boat ride along the St. Lawrence River is not zero-rated if it starts and ends in Canada on the same day, even if the boat docks on the American side for lunch or sightseeing purposes.

Bus trip to Seattle and plane flight to Lima form continuous journey (para. 41)

Example 11

A bus ticket for return travel from Vancouver, British Columbia to Seattle, Washington, USA and a return air ticket from Seattle to Lima, Peru are issued together to a client of a Vancouver travel agency. The individual travels by bus from Vancouver to Seattle and boards a flight to Lima a few hours after arriving in Seattle. Two weeks later, the individual returns from Lima to Seattle by air and boards the bus to Vancouver a few hours after arriving in Seattle.

The passenger transportation services that form part of this continuous journey are zero-rated because the stopover is outside Canada and all places at which the individual embarks or disembarks the aircraft are outside Canada.

Zero-rating of charge for extending ticket (para. 55)

55. Where the supplier of a passenger transportation service provides a service (listed in paragraph 56 of this memorandum) and the original passenger transportation service would have been zero-rated under section 2 or 3 of Part VII of Schedule VI to the Act, the listed service is zero-rated even if it is supplied at a different time or at a different location.

Example 13

A registered supplier in Canada provides an individual with a return ticket for a zero-rated flight from Toronto, Ontario to Barcelona, Spain. While in Barcelona, the individual decides to stay another week and contacts the supplier to have the ticket for the flight home amended. The supply of a service of amending the ticket to extend the stay in Barcelona is also zero-rated.

Rule of origin

61. Generally, where the origin is specified on the ticket or voucher issued in respect of the first passenger transportation service in a continuous journey (or the origin is otherwise known to be in a province), and the termination and all stopovers in respect of the continuous journey are in Canada, the province in which the origin is located will determine whether the supply is made in a participating province or a non-participating province.

Stopover outside Canada trumps Ontario origin

64. Where there is a termination or a stopover outside Canada in respect of a continuous journey, the passenger transportation services in that continuous journey are deemed to have been made in a non-participating province and are subject to the GST, regardless of the origin.

Example 17

An individual purchases a return air ticket from Ottawa, Ontario to Boston, Massachusetts, USA. Ottawa is specified as the origin of the continuous journey on the ticket.

Although the ticket issued in respect of the first passenger transportation service in the continuous journey specifies that the origin of the continuous journey is in Ontario, there is a stopover outside Canada in respect of the continuous journey. The supply of the passenger transportation service is therefore made in a non-participating province and subject to the GST at the rate of 5%.

Assimilation to same place of supply of cancellation of ticket (para. 70)

Example 18

A supply of a passenger transportation service from Gander, Newfoundland and Labrador to Toronto, Ontario would be considered to be made in Newfoundland and Labrador. A supply of a service of cancelling the ticket for that trip would therefore also be considered to be made in Newfoundland and Labrador and subject to the HST at a rate of 15%.

Application where rail pass can only be used in Ontario (para. 74)

Example 19

An individual resident of Ontario purchases a rail pass at a rail station in Ontario. The pass entitles the individual to ten one-way trips from Ottawa to Toronto. When the individual wishes to travel, the individual uses the pass to obtain a rail ticket which specifies that the origin of the trip is Ottawa.

When the supply of the intangible personal property (the rail pass) is made, the supplier can determine that each passenger transportation service covered by the passenger transportation pass would always begin in the same participating province (Ontario) and would terminate in Canada. The supply of the intangible personal property is therefore made in Ontario and subject to the HST at a rate of 13%.

Different tax rate on each leg of journey (para. 76)

Example 20

A traveller buys an airline ticket for travel from St. John’s, Newfoundland and Labrador to Winnipeg, Manitoba via Montreal, Quebec. The traveller buys a glass of wine on the first leg of the journey to Montreal. The traveller has to pay the HST at the rate of 15% on the glass of wine because that leg of the journey begins in Newfoundland and Labrador. If the traveller buys another glass of wine on the second leg of the journey, the GST applies at the rate of 5% because that leg of the journey begins in Quebec.

Restriction of definition to a business

83. The definition only applies to taxable supplies of passenger transportation services that are made in the course of a commercial activity. A person is considered to be making such supplies once the person starts providing commercial ride-sharing services, including commercial carpool services. A commercial activity generally means a business carried on by a person (and in the case of an individual, carried on with a reasonable expectation of profit), except to the extent to which the business involves the making of exempt supplies by the person. The definition does not apply to the part of a business that involves the operation of a sightseeing service or the school transportation of elementary or secondary students, a business or activity of a business prescribed by regulation (to date no business or activity has been prescribed), or the part of a business that does not involve the making of a taxable supply, such as an exempt supply or non-commercial ride-sharing, including non-commercial carpooling.