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: 145607
Business Number: [...]
July 30, 2013
Dear [Client]:
Subject: GST/HST INTERPRETATION
Tax status of [...] first aid training and materials
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of [...] first aid courses.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 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Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.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.
BACKGROUND
The following is our understanding of your business operations, based on your submissions and [...]. [...] ([...] [the Division]) is a division of [...] ([...] [ACo])
The Canada Revenue Agency (CRA) issues a GST/HST ruling on specific provisions of the legislation as they relate to a clearly defined fact situation of a particular person. A ruling cannot be issued unless all relevant facts (including the identity of client, detailed descriptions of services provided, agreements, invoices, etc.) concerning the issues in question are presented. Instead, we offer the following comments regarding the interpretation and application of the legislation dealing with your case. This information should assist you in determining your obligations for GST/HST purposes.
Interpretation Requested
Are the supplies of the training sessions and related materials by [the Division] subject to the GST/HST?
Interpretation Given
Generally, under the provisions of the ETA, a supply made in the course of a business activity is taxable unless it is subject to an exempting provision. It appears that the only exempting provision that might apply to the training courses is section 8 of Part III of Schedule V to the ETA.
Please note that both the taxing and exempting provisions of the ETA apply to a "person" and that, pursuant to subsection 123(1), a "person" means "[...]". Accordingly, it is [ACo] in your situation that must meet the requirements of the exempting provision, and not just [the Division], if the supply is to be exempt.
Training services supplied by [the Division]
Section 8 of Part III of Schedule V exempts a supply, other than a zero-rated supply, made by a government, a school authority, a vocational school, a public college or a university of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licenses or similar documents, or classes or ratings in respect of licenses, that attest to the competence of individuals to practise or perform a trade or vocation.
For ETA purposes [ACo] is not a government, a school authority, a public college or a university. It would have to be a vocational school for section 8 of Part III of Schedule V to potentially be applicable to its supplies of training services. The term "vocational school" is defined as an organization that is established and operated primarily to provide students with correspondence courses, or instructions in courses, that develop or enhance students' occupational skills.
The CRA's policy P-229 Definition of Vocational School in Section 1 of Part III of Schedule V outlines the criteria to qualify as a vocational school (copy enclosed).
Established Primarily
In order to meet the definition of "vocational school" an organization must be established primarily to provide courses that develop or enhance a student's occupational skills. To determine this, the CRA will review the organization's governing documents. When these documents are not available or determinative we look to the activities of the organization for evidence of the purpose for its establishment.
[ACo]'s mandate is [...]. To fulfill its mandate, [ACo] has implemented a number of [...] [projects]. One such [...] [project] is to provide training and education [...].
Operated Primarily
The policy statement explains that a qualifying vocational school will meet the test of "being operated primarily to provide students with ...(vocational) courses" if more than 50% of an organization's total annual revenue is derived from course tuition, or revenue that may otherwise be attributed to the provision of instruction in courses that develop or enhance a student's occupational skills.
Grants and contributions received from governments to provide occupational training courses to individuals, and revenue earned from the provision of property or services related to providing occupational instruction will be included in this revenue calculation.
Although a breakdown of the revenues was not provided to us, a review of the annual report does give an indication of the revenues, and it does not appear that 50% of [ACo]'s revenue could be attributed to the provision of instruction in courses that develop or enhance a student's occupational skills.
Summary
While [the Division] of [ACo] may operate primarily to provide correspondence courses or instruction in courses that develop or enhance students' occupational skills, it appears that as a whole [ACo] does not. A review of the revenues from [the Division], as well as the revenues and grants and contributions that are not attributable to [the Division], is necessary in order to confirm that [ACo] is not operated primarily to provide students with ...(vocational) courses.
As noted in the background information, [ACo] was not established primarily to provide vocational courses. Where [ACo] does not qualify as a vocational school the training courses provided cannot be exempt under section 8 of Part III of Schedule V.
Requirement to register
Generally, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada must register for the GST/HST, except where the person is a small supplier.
The small supplier threshold for persons who fall within the meaning of public service body" as defined in subsection 123(1) is $50,000. This definition of a public service body includes non-profit organizations. [ACo] is a registrant if its total worldwide revenues from taxable supplies in the last four consecutive calendar quarters and in any single calendar quarter are more than $50,000. If [ACo] is a registrant, the consideration for these supplies is subject to GST/HST, as applicable depending on the place of supply.
If, during any one calendar quarter, [ACo]'s total worldwide revenues from taxable supplies are more than $50,000, it will immediately stop being a small supplier and will be required to start collecting GST/HST on its taxable supplies made in Canada from the date of, and including, the supply that caused it to exceed the $50,000 threshold, even if [ACo] is not yet registered.
If [ACo] does not exceed the small supplier threshold amount in one calendar quarter, but does so over four consecutive calendar quarters, it will be considered to be a small supplier for those four calendar quarters and a month following those quarters. It would have to start collecting GST/HST on its taxable supplies made in Canada on the first day of the month following the month after the calendar quarters.
Eligibility for Input Tax Credits (ITCs)
In general, ITCs may be claimed for the GST/HST paid or payable on the acquisition or importation of property or a service to the extent, expressed as a percentage, that a GST/HST registrant incurred the expense in the course of its commercial activity. The definition of "commercial activity" specifically excludes the making of exempt supplies.
Where a registrant acquires property or services for consumption or use in making both taxable supplies and exempt supplies, it is required to apportion its expense accordingly between those supplies in order to determine its eligibility to claim ITCs. Certain expenses can be attributed directly to either taxable or exempt activities. Other expenses, which relate to the making of both taxable and exempt supplies (e.g. overhead), must be apportioned in a manner that is fair and reasonable, and used consistently throughout the year.
As [ACo]'s supplies of instruction are taxable supplies, it is eligible to claim ITCs for the GST payable on its purchases of property and services made in the course of making those supplies.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9264. 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,
C. Christmas
Aboriginal Affairs and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
cc:
Enc.: P-229 Definition of Vocational School in Section 1 of Part III of Schedule V
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