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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 188947
Business Number: […]
April 3, 2019
Dear [Client]:
Subject: GST/HST RULING
Tax status of supplies made by a municipality
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies made by a municipality.
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 the facts as follows from the information you provided […]:
1. […][The Municipality], located in the Province of British Columbia (“BC”), is a municipality as defined in subsection 123(1) of the ETA. [The Municipality] is registered for GST/HST purposes.
2. In BC, the Community Charter provides municipalities and their councils with (a) a legal framework for the powers, duties and functions that are necessary to fulfill their purposes, (b) the authority and discretion to address existing and future community needs, and (c) the flexibility to determine the public interest of their communities and to respond to the different needs and changing circumstances of their communities.
3. Section 194 of the Community Charter establishes the authority for a municipal council to impose, by by-law, fees with respect to all or part of a service of the municipality, the use of municipal property, or the exercise of authority to regulate, prohibit or impose requirements.
4. Municipalities impose fees and charges wherever possible to recover the cost of services provided and as an alternative to property taxation. The fees and charges take into account market rates, cost recovery where possible, and any Community Charter restrictions.
5. […] [the Municipality has a] consolidated by-law to authorize the charging of fees and charges for various [Municipal] services. […]
[…]
6. BC’s Building Code is a provincial regulation that governs new construction and building alterations, repairs and demolitions. Building, renovation and demolition projects must comply with the Building Code, as well as applicable local government by-laws for zoning and permits.
7. [A Municipal] […] By-law […] provides for the administration and regulation of the Building Code within [the Municipality] and also serves to regulate building and development in general with respect to those matters not included in the Building Code. [The Municipality] assists citizens with the Building Code and building permit process and is responsible for the administration of, and compliance with, the codes and standards adopted from the Building Code.
8. Section 16 of the Community Charter authorizes officers, employees and agents of a municipality to enter, at all reasonable times, on any property to ascertain compliance with the municipality’s by-laws.
9. […]
10. […]
11. […]
[…]
12. [The Municipality] issues Building Permits for the construction of new buildings or the major renovation of existing buildings in [the Municipality] to ensure compliance with local by-laws, the Building Code, and health and safety standards.
13. The Building Permit fee
[This fee] includes two […][Reviews] and two inspections of the building. A [Review] is a process in which building plans are reviewed to ensure that they comply with basic safety, engineering, and planning rules. Inspections of the building are needed to ensure that the building complies with the Building Code.
14. [The Municipality] may also charge the following fees in relation to a Building Permit:
i) […][Additional Review Fee]
This fee is separate from the Building Permit fee and is charged for a review of revised drawings where more than two [Reviews] have been performed or substantial changes are made to the approved design during construction that requires additional building code or zoning reviews. A [Review] can only be undertaken by [the Municipality].
ii) […][Re-inspection Fee]
This fee is separate from the Building Permit fee and is charged for an additional building inspection where more than two inspections have been requested. The fee must be paid in full prior to any additional inspections being completed or completion certificate being granted. The re-inspection can only be undertaken by [the Municipality].
iii) […][Alternative Solutions Review Fee]
This fee is separate from the Building Permit fee and is charged for a review of an alternative solution or substantial revision to make sure that the alternative solution or substantial revision complies with the Building Code.
iv) […][Inspection Fee (Overtime)]
This fee is separate from the Building Permit fee and is charged for building inspections that are done outside of regular working hours.
[…]
15. BC’s Liquor and Cannabis Regulation Branch (“LCRB”), formerly called the Liquor Control and Licencing Branch, is the provincial body responsible for issuing Liquor Licences with the support of local municipalities. Each type of Liquor Licence has its own eligibility requirements and its own terms and conditions, as outlined in BC’s Liquor Control and Licensing Act (“Liquor Act”) and Liquor Control and Licensing Regulation (“Liquor Regulation”).
16. Under section 38 of the Liquor Act, a Liquor Licence would not be issued or amended unless the applicant notifies the local municipality of the application. However, the municipality may inform the LCRB that it does not wish to receive notification of applications.
17. Where an applicant provides notification to the municipality, the Liquor Act and Liquor Regulation provide the authority under which a municipality may opt to provide comments and recommendations to the LCRB. The municipality’s comments and recommendations would pertain to technical issues such as zoning, building (occupant loads) and other municipal regulations that form part of the LCRB’s review process done prior to the submission of a completed Liquor Licence application.
18. [The Municipality] has opted to provide comments and recommendations to the LCRB with respect to […] Liquor Licence applications. To initiate the review process, [the Municipality] requires […][that such applicants] inform [the Municipality] of its application. The resulting comments and recommendations may be provided directly by [Municipal] staff or require a public consultation process and a […][Municipal Council] resolution before being provided.
19. Where public consultation is required, [Municipal] residents in the immediate area are notified of the application (by way of signage), encouraged to provide written comments, and informed of when and where a decision will be made. Once [the Municipality] completes its review and passes a resolution, [the Municipality] notifies the LCRB of its recommendation.
20. Pursuant to section 41 of the Liquor Act, a municipality that provides comments and recommendations to the LCRB regarding Liquor Licence applications may, by by-law, impose fees on the applicant in order to recover the costs incurred by the municipality in assessing the application. The fees imposed may vary according to the different classes of applications and the different methods used to conduct the assessments. In the case of [the Municipality], the fees are authorized by By-law […].
21. [The Municipality] imposes the following fees with respect to the reviews it conducts:
i) […][Assessment Fees-Liquor Licence]
[The Municipality] charges fees in relation to the assessing of […] Liquor Licence applications for the purpose of providing comments and recommendations to the LCRB.
ii) […][Review Fees- Liquor Licence Consultations]
These are separate fees for [some costs incurred] […] to inform the public of the consultation being undertaken by [the Municipality] as part of the review process for providing comments and recommendations to the LCRB.
In all cases the fees are collected upfront by [the Municipality].
22. The Liquor Licences do not confer a right in respect of the importation of alcoholic beverages.
RULINGS REQUESTED
You would like to know whether the fees described above are subject to the GST/HST.
RULINGS GIVEN
Based on the facts set out above, we rule as follows:
- […]
- The Building Permit Fee is consideration for an exempt supply made by [the Municipality] and therefore is not subject to the GST/HST.
- The [Additional Reviews Fee], [the Re-inspection Fee], [the Alternative Solutions Review Fee], and [the Inspection Fee (Overtime)] are consideration for taxable supplies made by [the Municipality] and therefore are subject to the GST/HST.
- [The Municipality] is making a supply of assessing a Liquor Licence application […] in return for the [Assessment Fees-Liquor Licence] and, where applicable, the [Review Fees- Liquor Licence Consultations]. The supply is exempt pursuant to sub-paragraph 20(c)(ii) of Part VI of Schedule V.
EXPLANATION
Generally, supplies of property and services that are made in Canada are taxable supplies and are subject to the GST/HST, unless they are specifically identified as exempt. Taxable supplies include zero-rated supplies (subject to the GST/HST at the rate of 0%), which are listed in Schedule VI to the ETA. Exempt supplies are not subject to the GST/HST and are listed in Schedule V to the ETA.
Paragraph 20(c) of Part VI of Schedule V exempts the following supplies made by a government or municipality or by a board, commission or other body established by a government or municipality:
(c) a supply (other than of a right or service supplied in respect of the importation of alcoholic beverages) of
(i) a licence, permit, quota or similar right,
(ii) a service of processing an application for a licence, permit, quota or similar right, or
(iii) a right to have access to, or to use, a filing or registration system to make application for a licence, permit, quota or similar right.
The exemption under paragraph 20(c) does not include supplies of property or services that are conditions leading up to the supply of a right identified in paragraph 20(c). For instance, the exemption in paragraph 20(c) would not apply to separate supplies such as inspection, research, survey, consultation, planning and advisory services that may be related to a permit application.
Section 21 of Part VI of Schedule V exempts a supply of a municipal service, if
(a) the supply is
(i) made by a government or municipality to a recipient that is an owner or occupant of real property situated in a particular geographic area, or
(ii) made on behalf of a government or municipality to a recipient that is an owner or occupant of real property situated in a particular geographic area and that is not the government or municipality;
(b) the service is
(i) one which the owner or occupant has no option but to receive, or
(ii) supplied because of a failure by the owner or occupant to comply with an obligation imposed under a law; and
(c) the service is not one of testing or inspecting any property for the purpose of verifying or certifying that the property meets particular standards of quality or is suitable for consumption, use or supply in a particular manner.
For greater certainty, section 146 of the ETA provides, in part, that for GST/HST purposes, a supply of a service of testing or inspecting any property for the purpose of verifying or certifying that the property meets particular standards of quality or is suitable for consumption, use, or supply in a particular manner, when made for consideration by a government or municipality or a board, commission or other body established by a government or municipality, shall be deemed to be made in the course of a commercial activity, except where the supply is an exempt supply.
[…]
[…], [the Additional Reviews Fee], [the Re-inspection Fee], [the Alternative Solutions Review Fee], and […][the Inspection Fee (Overtime)] are consideration for the supply of a review or inspection service for the purpose of ensuring that a building or structure meets [the Municipality]’s standards and specifications. These fees are not consideration for a supply of a service of processing an application for a permit or licence that is exempt under paragraph 20(c) of Part VI of Schedule V, nor are they consideration for a supply of a municipal service that is exempt under section 21 of Part VI of Schedule V. Since no other exemption applies, the fees are subject to the GST/HST.
[…]
Once an applicant notifies [the Municipality] of […][an application] for a Liquor Licence, [the Municipality] would then consider the application with the intention of providing comments and recommendations to the LCRB. [The Municipality] is permitted to impose fees on the applicant in order to recover the costs incurred in undertaking this exercise. These amounts are imposed pursuant to section 41 of the Liquor Act and are authorized at the local level by […].
[The Municipality] is making a supply of assessing [each] […]Liquor Licence application […] in return for payment of the [Assessment Fees-Liquor Licence] and, where applicable, the [Review Fees-Liquor Licence Consultations]]. The [Assessment Fees-Liquor Licence] and the [Review Fees- Liquor Licence Consultations] are consideration for the supply, and this supply is exempt pursuant to sub-paragraph 20(c)(ii) of Part VI of Schedule V.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5201. Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Marlon Latchana
Municipal Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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