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: 109069
Business Number: [...]
July 24, 2013
Dear [Client]:
Subject: GST/HST RULING
Tax status of a supply of dance instruction
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to dance instruction. We apologize for the delay in responding to your inquiry.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Our understanding of this matter is based on our review of your letter of [mm/dd/yyyy] and [...].
Our understanding of the facts is as follows:
1. You are a self-employed ballet instructor operating as a sole proprietor.
2. You are licensed as both a qualified instructor and a Practical Teaching Supervisor by the Royal Academy of Dance (RAD).
3. You indicated that you became a dance instructor to develop and enhance the technical and performance skills students require to attain careers in the field of professional dance or the other performing arts.
4. You continue to devote all of your instruction to this purpose by limiting your activities to only teaching ballet using the RAD method of instruction.
5. The RAD method is divided into two graded syllabi: the Graded Examinations in Dance syllabus (Graded Syllabus) and the Vocational Graded Examinations in Dance (Vocational Graded Examination Syllabus).
6. The RAD Vocational Graded Examination Syllabus is designed for students wishing to study classical ballet with the intent to pursue a career in dance or dance related subjects.
7. Neither syllabus established a set timeframe for each level of instruction. As a student approaches the more advanced levels, it may take two years of dance instruction to develop enough skill to pass the examination for that level.
8. You instruct students at the Grade 1 to Advanced 2 level.
9. You also administer RAD examinations.
10. As a sole proprietor you contract out your services of instruction in dance to local dance schools. Under the contract(s) you are paid by the school and not directly by the students.
Ruling Requested
You would like to know the GST/HST status of your supplies of dance instruction. That is, you are asking whether you qualify as a vocational school for purposes of section 1 of Part III of Schedule V, and whether your services of instruction in dance under contract is exempt under section 8 of Part III of Schedule V.
Ruling Given
Based on the facts set out above, we rule that your services provided as an instructor to dance schools are taxable supplies and are not exempt under section 8 of Part III of Schedule V.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Part III of Schedule V exempts certain supplies related to educational services provided by educational institutions. In particular, supplies of instruction provided to students who have enrolled in eligible courses or programs offered by certain educational institutions, such as elementary and secondary schools, vocational schools, public colleges and universities are exempt. For purposes of the GST/HST, the tax treatment of instructional services may vary depending upon the nature of the supplier (e.g. type of educational institution) and the type of services that are provided (e.g. instruction that is recreational vs. occupational).
Instructional services provided by a self-employed coach, instructor, teacher or other type of individual educator are normally taxable supplies unless they are music lessons, or services of tutoring or instructing an individual in "a course that is approved for credit by, or that follows a curriculum designated by" an elementary or secondary school.
Self-employed sole proprietors, such as those noted above, are generally not schools as contemplated under Part III of Schedule V, especially when they contractually provide their services to other learning institutes and not directly to the individual student. For example, an employee of a vocational school, who is a teacher, is on leave for one year to upgrade her education. She will be returning to her position at the end of the year. The vocational school has to replace her for that year and hires a self-employed instructor on a contract basis to replace the employee. The self-employed instructor's service to the vocational school is a taxable supply subject to the GST/HST except where the instructor is a small supplier as defined in subsection 123(1) and has not registered for GST/HST purposes. The individual instructor is not regarded as a school or other learning institution as contemplated under Part III of Schedule V.
In addition, an instructor who provides private lessons to one individual at a time with a customized program for each client is normally not regarded as a school. For example, the definition of the term "vocational school" in section 1 of Part III of Schedule V refers to an "organization". An individual may create an organization to establish and operate a school, in which case that organization may qualify as a school. Although possible, it would be unusual for a school to be established and operated by only one individual without the use of other staff. However, it is a question of fact whether an individual has created an organization to establish and operate a school. Generally, schools have all or some of the following characteristics:
• The organization would normally be a corporation or an unincorporated association of some type, not an individual;
• The organization identifies/advertises itself as a school and is known publically as a school;
• The school offers courses or programs following a scheduled curriculum under which the courses progress in the depth of the learning from semester to semester;
• The school has a regularly enrolled student body who form a class or classes;
• The school is paid by the students, or their parents if they are under the provincial age of majority, for the service of instruction they receive (in the case of a sole proprietor operating a school, the students would pay the sole proprietor);
• The organization owns/rents/leases a place from where students are provided correspondence courses or instruction in courses.
ADDITIONAL INFORMATION
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 register for GST/HST purposes. An exception to this requirement is where a person is a "small supplier". A person (who is not a charity or public service body) is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies (other than supplies of financial services, sales of capital property, and goodwill attributable to the sale of a business) made by the person, or an associate of the person at the beginning of the particular calendar quarter, that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000.
A person must make a determination at the end of each calendar quarter as to whether they continue to qualify as a small supplier. A person who no longer qualifies as a small supplier is required to register and must apply to the Minister for registration before the thirtieth day after the day the person first makes a taxable supply in the course of the commercial activity in Canada otherwise than as a small supplier.
According to the financial information you provided for the years [yyyy-yyyy] inclusive, the total value of the consideration you received for the taxable supply of instruction of dance lessons exceeded $30,000. This being the case, you were required to register for GST/HST purposes.
[...]. Based on this ruling, you do not qualify as a vocational school. You are therefore required to collect and remit GST/HST on your taxable supplies of dance instruction beginning [mm/dd/yyyy].
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7957. 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,
Dave Caron, Manager
Aboriginal Affairs and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Enc. GST/HST Memorandum 1.4
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