CanLII – Tax Court of Canada finds that law society funding received by CanLII was consideration for taxable supplies of its services

CanLII was a not-for-profit corporation providing an open-access virtual law library that had all of its operating budget (of around $3 million per annum) funded by its sole member, being the Federation of Law Societies of Canada (Federation), which collected matching fees from 14 Canadian law societies. CanLII collected GST on the payments from the Federation, and claimed input tax credits on its taxable purchases. The Minister disallowed these ITCs on the basis that CanLII provided its service for no consideration (i.e., to its readers) and, therefore, provided an exempt supply pursuant to Shed. V, Pt. V, s. 10.

Lamarre ACJ found that CanLII instead was making a taxable supply for which the amounts collected from the Federation were the consideration. She first noted that the ETA definition of “consideration” included any amount that is payable for a supply “by operation of law.” Given that the Federation became legally obligated to pay a “levy” for a year to CanLII once such levy and the corresponding levies on the provincial law societies, had been approved by its council, “the levy was paid by operation of law for the supply of the virtual library,” i.e., “[t]here was an obligation on the Federation to pay and payment was not discretionary as argued by the [Crown].”

Accordingly, the Sched. V, Pt. V, s. 10 exemption was inapplicable, and CanLII was entitled to its denied ITC claims.

Neal Armstrong. Summaries of Canadian Legal Information Institute v. The Queen, 2020 TCC 56 under ETA Sched. V, Pt. V, s. 10 and s. 123(1) - consideration.