GST/HST Memorandum 18-2 “Provincial Governments” February 2020

Requirement for provincial governments making taxable supplies to register, perhaps with one BN and multiple branches

10. Paragraph 122(b) of the Act binds Her Majesty in right of a province in respect of obligations as a supplier to collect and to remit tax in respect of taxable supplies it makes. As a result, all provincial/territorial governments and their Crown agents are generally subject to the provisions of the Act that apply to suppliers, including the obligation to register, charge and collect the GST/HST on taxable supplies, file GST/HST returns and remit net tax to the CRA.

11. Generally, each provincial/territorial government, including all of its departments/ministries and some of its agencies, boards and commissions, has registered for GST/HST purposes under a single Business Number (BN) with various filing branches/divisions. …

12. Transactions between entities that are branches/divisions of the same provincial/territorial government registrant are not treated as supplies for purposes of the GST/HST. …

13. Crown corporations, and certain boards, commissions and agencies involved predominantly in commercial activities that are not registered for GST/HST under a BN of a provincial or territorial government are required to register separately for GST/HST purposes and are generally subject to all the provisions in the Act that apply to registrants.

No supplies between branches of a provincial government

11. Generally, each provincial/territorial government, including all of its departments/ministries and some of its agencies, boards and commissions, has registered for GST/HST purposes under a single Business Number (BN) with various filing branches/divisions. All the provincial/territorial government entities under the particular BN for a province/territory collectively form the provincial/territorial government registrant. Other provincial/territorial government entities may be registered under a different BN from the provincial/territorial government registrant.

12. Transactions between entities that are branches/divisions of the same provincial/territorial government registrant are not treated as supplies for purposes of the GST/HST. Therefore, the provision of property or services between those entities within a provincial/territorial government registrant is not subject to the GST/HST.

Examples of application of s. 146

18. Section 146 deems certain listed supplies made for consideration by a government, or a body established by a government, among others, to be made in the course of a commercial activity unless the supply is specifically exempt from the GST/HST under another provision of the Act. Examples of such supplies when made for consideration would include a supply by a government of a service of inspecting property, such as a building or an elevator, to verify that it meets particular standards of quality; a supply by a government to a consumer of a hunting or fishing licence; or a supply by a government of a right to enter a provincial or territorial park.

Examples of exempt provincial government supplies

17. …[S] ection 20 of Part VI of Schedule V lists a number of supplies of an administrative or regulatory nature that are exempt supplies when made by, among others, a government or a body established by a government. Such supplies by a provincial or territorial government would include the supply of a driver’s licence or a birth certificate or the registration of a mortgage in a property registration system.

Examples of exempt provincial government supplies

16. … [A] number of provisions listed in Part VI of Schedule V to the Act that exempt certain supplies by public sector bodies apply to such supplies when made by a government, such as section 10 of Part VI of Schedule V to the Act, which exempts a supply made by a government of property, like a brochure, or services, such as training, where at least 90% of the brochures or training are provided for free.

Listed entitities

5. Listed entity means, for the purposes of this memorandum, a provincial or territorial government department/ministry, Crown corporation, board, commission or agency that is specifically named in a list of Crown agents either listed in Schedule A to an RTA or provided to the Canada Revenue Agency (CRA) by the province in circumstances in which the province is not a signatory to an RTA (as is the case for New Brunswick and Alberta).

Provincial governments must collect GST/HST on their supplies

10. Paragraph 122(b) of the Act binds Her Majesty in right of a province in respect of obligations as a supplier to collect and to remit tax in respect of taxable supplies it makes. As a result, all provincial/territorial governments and their Crown agents are generally subject to the provisions of the Act that apply to suppliers, including the obligation to register, charge and collect the GST/HST on taxable supplies, file GST/HST returns and remit net tax to the CRA.

11. Generally, each provincial/territorial government, including all of its departments/ministries and some of its agencies, boards and commissions, has registered for GST/HST purposes under a single Business Number (BN) with various filing branches/divisions. All the provincial/territorial government entities under the particular BN for a province/territory collectively form the provincial/territorial government registrant.

Most provinces have entered into an RTA

20. Although the GST/HST may be payable in respect of their purchases, provincial and territorial governments and their Crown agents are not bound as purchasers by the provisions of the Act pursuant to section 122.

21. All provinces and territories other than New Brunswick and Alberta have entered into RTAs in which they have, among other things, negotiated how the particular province or territory (and its listed entities) will receive relief from the GST/HST on their purchases of taxable property and services.

Two models: pay and rebate; or point of purchase exemption

22. As purchasers, there are 2 ways in which a provincial or territorial government and its listed entities may be eligible for relief from the GST/HST:

• where a provincial or territorial government has agreed to a pay-and-rebate model, all government departments and Crown agents pay the GST/HST at the time of purchase and listed entities subsequently claim a government rebate of 100% of the GST/HST paid or payable
• claiming point-of-purchase relief from payment of the GST/HST through the use of an exemption certificate or a certification clause in a contract

23. The governments of all the participating provinces, as well as Quebec, British Columbia and Nunavut, have agreed to use the pay and rebate model. Therefore, their government departments and all of their Crown agents will pay the GST/HST on their purchases of taxable property and services. Their listed entities are eligible to claim a government rebate of 100% of the GST/HST paid or payable.

24. The governments of the remaining provinces and territories claim point-of-purchase relief from payment of the GST/HST. Listed entities in Manitoba, Saskatchewan, Alberta, the Northwest Territories and Yukon do not pay the GST/HST on purchases of taxable property and services, provided that an authorized official of the listed entity provides sufficient evidence to the supplier that the supplies are being purchased by a listed entity on its own behalf.

Purchase exemption certificate

26. Suppliers must charge the GST/HST on their taxable supplies of property or services made to a government entity of a province that is entitled to point-of-purchase relief from the GST/HST (Manitoba, Saskatchewan, Alberta, the Northwest Territories and Yukon) unless the entity meets both of the following conditions:

• it is a listed entity purchasing the taxable property or service on its own behalf
• it provides sufficient documentary evidence to show that it is eligible for point-of-purchase relief from the GST/HST

27. Where a supplier has not charged the GST/HST on taxable supplies of property or services to a listed entity that is entitled to point-of-purchase relief, the supplier must maintain sufficient documentary evidence that the listed entity was the recipient of the supply and was eligible for that relief. For example, the supplier should retain a copy of an exemption certificate or contract containing a certification clause.

28. An exemption certificate or certification clause is a statement detailing that a purchase is being made by a listed entity of a province or territory that is entitled to point-of-purchase relief from the GST/HST. The exemption certificate or certification clause should be similar in form and content to the following:

This is to certify that the property and/or services ordered/purchased hereby are being purchased by

________________________________________________
(Name of Provincial/Territorial Government Department or Entity)

and are not subject to the GST/HST.

____________________________________
(Signature of Authorized Official)

Taxability of purchases by employees of listed entities (other than with government credit card)

31. Purchases of taxable property or services made by employees of a listed entity in the employee’s own name are subject to the GST/HST even if the employee makes the purchase in the course of employment. Examples of these types of purchases include hotel and meal expenses incurred by employees of a listed entity while on travel status. Listed entities in the provinces and territories that are eligible to claim point-of-purchase relief cannot issue exemption certificates certifying entitlement to relief from paying the GST/HST for purchases of taxable property and services made by an employee in the employee’s name.

32. The GST/HST is not payable on purchases of taxable property and services if the employee uses a credit card for which a listed entity is solely liable. In such cases, the credit card must clearly indicate that it is for use in acquiring supplies for a listed entity entitled to point-of-purchase relief from the GST/HST. Purchases made by employees with a credit card issued in the name of the employee, or for which the employee and the listed entity are jointly liable, are subject to the GST/HST even if the purchase is made in the course of employment.