Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 160594
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING and INTERPRETATION
Services provided for children in care of a province
Thank you for your letter of March 4, 2014, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of services provided for children in the care of a province. We apologize for the delay in providing our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand from your letter and our telephone conversations that:
1. You were a self-employed sub-contractor working with […] ([…][Company A]), based in […][City 1], Alberta. You stopped working for [Company A] in [mm/yyyy].
2. You are registered for GST/HST purposes with account number […]
3. You are not a social worker.
4. You noted that [Company A] “are contracted by […] to provide services to support children and their families experiencing trauma associated with family crisis.”
5. You described the services you provided to [Company A] as follows:
a. “The services include transportation of clients (children and/or family members) to visits, medical appointments and school or other activities and functions that promotes healthy family dynamics. I am responsible for the care and well-being of the clients, predominantly under the age of 14 years old, as I pick them up to and from their foster or group home setting to the destination designated by their case workers. […][Specific details about the work and responsibilities]”
b. “[Company A] offers the service of supervising visits. With this service I am required to sit in on a visit between parents/family members and their children who been placed in the care of […][children services]. Ensuring safety of the child is first and foremost with this service and if the visit becomes uncomfortable or distressing to the child I am required to end the visit and return the child to their care situation. As I supervise these visits I am required to take observation notes of the events and interactions taking place and submit a formal report detailing the visit to the case worker.”
c. “I provide youth work/mentorship support to children and youth who have been placed in a foster or group care setting. Case/social workers may require additional or supported involvement in recreational activities for children to encourage and foster health and social skill development. Supporting youth in identifying daily stressors and developing strategies is another service I am requested to provide. In the event the youth is at an age where he/she may need to acquire a part-time job, I provide them with support in attaining forms of identification that they may need or access resources that would assist them in finding a job; help fill out job applications; and take them to job interviews. Consistency is also a factor with this type of service as well to ensure the child/youth feels supported in their activities or ventures so they may feel a sense of accomplishment in setting a goal and see it through.”
6. The majority of the children you worked with were 14 years of age or under and the period of time a child was in your care was usually less than 24 hours.
7. […][Details about GST/HST returns].
8. […][Additional details about GST/HST returns].
RULINGS REQUESTED
You would like to know
1. If your supplies of services to [Company A] are exempt from the GST/HST; and
2. If you can deregister for GST/HST purposes.
RULINGS GIVEN
Based on the facts set out above, we rule that
1. The supply of transportation services (described in paragraph two of your letter and reproduced in fact 5a) above) is taxable as no exempting provision applies;
2. The supply of child care services the primary purpose of which is to provide care and supervision to children 14 years of age or under for periods normally less than 24 hours per day (described in paragraph three of your letter and reproduced in fact 5b) above) is exempt from the GST/HST under section 1 of Part IV of Schedule V; and
3. The supply of child care services to children 15 years of age or older is taxable as no exempting provision applies.
We acknowledge your request for rulings on the services described in fact 5c) and deregistration. However, as noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency’s (CRA’s) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person. As the circumstances are such that all of the facts pertinent to determine the tax status of your supplies in fact 5c) or if you can deregister cannot be established at this time, we are unable to rule on these issues. Rather, we are providing general information which we trust will be of assistance.
EXPLANATION
What is the GST/HST?
The GST/HST is a tax that applies to most supplies of property and services made in Canada. If you are a GST/HST registrant, you generally have to charge and collect the GST/HST on taxable supplies (other than zero-rated supplies) you make in Canada and file regular GST/HST returns to report that tax. A “supply” is the provision of property or a service in any manner.
Almost everyone has to pay the GST/HST on purchases of taxable supplies of property and services (other than zero-rated supplies). However, Indians and some groups and organizations, such as certain provincial and territorial governments, do not always pay the GST/HST on their purchases of taxable supplies.
Some supplies are exempt from the GST/HST – that is, no GST/HST applies to them. This means that you do not charge the GST/HST on these supplies of property and services.
For more information, see Guide RC4022, General Information for GST/HST Registrants, available on the CRA website.
The GST/HST is a transaction-based tax and for each transaction, the supplier must determine whether the tax is applicable. When you provide services to [Company A], you have made a supply for GST/HST purposes. There are multiple supplies between you and [Company A]. The specific services you provided to [Company A] as described in your letter are viewed as a separate supply, because our understanding is they are not related to one another.
Taxable supplies
Generally, most supplies of property and services made in Canada are taxable for GST/HST purposes, unless they are specifically exempt.
Therefore, you made taxable supplies to [Company A] when you provided some of the services described in your letter. If you are a GST/HST registrant, you are required to charge and collect the GST/HST on these supplies.
The supplies described in paragraph two of your letter and reproduced in fact 5a) above are transportation services, not child care services. Although you were responsible for the care and supervision of the children during the transportation, this was not the primary purpose of the supply (see “Exempt supplies” on the next page). The supplies are therefore taxable, as no exempting provision applies.
Exempt supplies
Exempt supplies of property and services are listed in Schedule V. The only exempting provision that could possibly apply to your supplies of services is section 1 of Part IV of Schedule V, which exempts certain supplies of child care services.
Section 1 of Part IV of Schedule V exempts a supply of child care services, the primary purpose of which is to provide care and supervision to children 14 years of age or under for periods normally less than 24 hours per day, but not including a supply of a service of supervising an unaccompanied child made by a person in connection with a taxable supply by that person of a passenger transportation service (this service is usually offered where a child is travelling unaccompanied).
The supplies that you described in your letter in paragraph three and that are reproduced in fact 5b) are child care services. The primary purpose of this supply was to supervise the children and maintain their safety during visits with their parents or family members. The other elements of the supply, the transportation and the report writing, were incidental to the care and supervision, as the care and supervision are the main components of the supply. The majority of the children in your care were 14 years of age or under and the period of time the child was in your care was less than 24 hours per day. Therefore, this supply is exempt under section 1 of Part IV of Schedule V where the children are 14 years of age or under. Where the children are 15 years of age or over, the supply is taxable as no exempting provision applies.
INTERPRETATION GIVEN
“Youth work/mentorship support”
We are unable to rule on the supplies you described in your letter in paragraph four and that are reproduced in fact 5c) as we cannot determine the exact nature of the supply. While the supplies described could be child care services, we cannot determine the exact nature of the services or the age of the children you worked with.
Per the information given in the “Explanation” section of this letter, where the supply is of a child care service, the primary purpose of which is to provide care and supervision to children 14 years of age or under for periods of less than 24 hours, the supply would be exempt under section 1 of Part IV of Schedule V. In any other case (for example, the child in your care was 15 years of age or over or the primary purpose of the child care service was not care and supervision), the supplies would be taxable supplies, as no exempting provision would apply.
Deregistration
The CRA will generally cancel the registration of a person on the request of that person if:
a. the person is a small supplier (see the discussion on this topic in the next section), and
b. the person has been registered for not less than one year.
In such circumstances, the effective date of the cancellation would generally be after the last day of the fiscal year of the person provided the person was registered for at least one year. However, administratively, the effective date of the cancellation may be any other date established in consultation with the registrant as long as the above conditions are met.
To cancel your GST/HST registration, please send us completed Form RC145, Request to Close Business Number Program Accounts. Alternatively, you may request cancellation of registration by calling the Business Window at 1-800-959-5525 or in writing as long as all necessary information is received.
For more information on a registrant’s obligations upon cancelling registration, please refer to GST/HST Memorandum 2.7, Cancellation of Registration, and Guide RC4022, under the heading “Cancelling your registration”.
ADDITIONAL INFORMATION
Small supplier
In general, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for the GST/HST, except where the person is a small supplier. You are a small supplier if your total revenues from taxable supplies are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.
Based on our rulings above, you made a combination of taxable and exempt supplies to [Company A]. Therefore, not all of your income is revenue from taxable supplies. Your revenue from exempt supplies is not included in your small supplier calculation.
For more information, see GST/HST Memorandum 2.2, Small Suppliers, and Guide RC4022, under the heading “Small supplier”.
Tax not collected
If you determine that you were a registrant (that is, a person who is registered or has to be registered) when you supplied services to [Company A], you were required to collect tax on your taxable supplies.
In cases where a supply made in Canada is taxable, the recipient ([Company A]) is liable to pay the GST/HST in respect of a taxable supply made. The recipient’s liability is not discharged where the supplier has failed to correctly charge the tax.
The CRA generally accepts that the disclosure of an amount of tax payable may be met after the fact. The supplier can normally issue an additional invoice to the recipient for the GST/HST that the supplier should have previously collected.
For more information, please refer to GST/HST Memorandum 3.1, Liability for Tax, and Guide RC4022, under the heading “Collecting the GST/HST”.
Input tax credits
In general, a GST/HST registrant is eligible to claim an input tax credit for the GST/HST paid or payable by the registrant on property or a service to the extent that the property or service was acquired, imported or brought into a participating province for consumption, use or supply in the course of the registrant’s commercial activities (e.g., for making taxable supplies for consideration) provided all other conditions for claiming the input tax credit are met.
Therefore, while a registrant, you may be entitled to claim input tax credits to recover the GST/HST paid or payable on your purchases and expenses to the extent that they are for consumption, use, or supply in making taxable supplies for consideration, such as taxable supplies of transportation services. You cannot claim input tax credits for the GST/HST paid or payable on property and services to the extent the property or service is consumed, used or supplied in making exempt supplies, such as exempt supplies of child care services.
For more information on the general rules for claiming input tax credits and methods for calculating input tax credits, see GST/HST Memorandum 8.1, General Eligibility Rules, and 8.3, Calculating Input Tax Credits, and Guide RC4022, under the heading “Input tax credits”.
Amending a GST/HST return
Amounts included on previously filed GST/HST returns may be adjusted, except where a person is attempting to increase the amount of input tax credits or other credit adjustments without a corresponding increase in tax liability for the same reporting period.
All requests for adjustments to previously filed GST/HST returns should be made in writing, provide details of the requested adjustments, and be addressed to your tax services office. Alternatively, you can adjust your returns using My Business Account. For more information, please refer to Guide RC4022, under the heading “How do you change a return?”.
If you require assistance with your GST/HST accounts, please contact 1-800-959-5525.
Supplies to the Province of Alberta
Generally, provincial governments are not required to pay the GST/HST. The Government of Alberta does not pay the GST/HST to its suppliers. Although a supplier is not required to charge the GST/HST on taxable supplies of property and services made to the Government of Alberta, the revenue from these supplies must be included in its small supplier calculation. For more information, see GST/HST Memorandum 18.2, Provincial Governments.
[Company A] is not part of the Government of Alberta. Therefore, if you were a GST/HST registrant during your work with [Company A], you must charge GST/HST on your taxable supplies of services to [Company A].
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7943. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Desneiges Arbour
Charities and Non-profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate