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: 147147
June 19, 2013
Dear [Client]:
Subject: GST/HST INTERPRETATION
Obligation of recipient to pay GST/HST on a taxable supply
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to services.
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Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.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.
We understand from your incoming letter that [...] ([...][Company A]) is a GST/HST registrant and has a contract with [...] ([...][Company B]) that involves the supply of services.
According to the [Company B]'s website they are licenced for both group homes and foster homes in accordance with [...].
In the enclosed copy of an unsigned agreement between [Company A] and [Company B] dated [mm/dd/yyyy], it is stated that: [...]
Many of the services provided by [Company A] are exempt of GST/HST under the provisions contained in Part II of Schedule V.
In particular, [Company A] is providing therapy services to [Company B] that have in turn been provided to [Company A] by independent sub-contractors. These independent sub-contractors are Master's level or equivalent clinicians but do not meet the definition of a "practitioner of the service" as they are not licenced in [...][Province X] to provide the specific health care services. As a result, the independent sub-contractors, if registrants for GST/HST, charge the [tax] to [Company A], and [Company A] then charges [tax] to its customer, [Company B] on the resupply of these services.
It is [Company A]'s supplies that are being called in to question by [Company B].
[Company B] has recently stopped paying the [GST/HST] to [Company A] in respect to supplies that [Company A] believes are taxable services. [Company B] then resupplies these services to band-empowered entities. It is [Company A's] understanding that band-empowered entities are not required to pay the GST/HST to [Company B]. Given that the band-empowered entity claims that the services acquired from [Company B] are tax relieved, [Company B] believes it does not have to pay GST/HST to [Company A].
A ruling provides the CRA's position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, where the supporting documentation has been submitted. As this information has not been provided we are unable to issue a ruling. However, we are pleased to issue the following interpretation, which is a general explanation of the applicable provisions and how the legislation would apply.
Interpretation Requested
Is [Company A] correct in charging [GST/HST] or does [Company B]'s lack of ability to collect GST/HST from the [...][band funded organization] (because the services are being acquired by a band-empowered entity) have any bearing on whether [Company A] should charge [GST/HST] to [Company B] and whether [Company B] should pay [GST/HST] on the counselling services provided to them by [Company A].
Interpretation Given
In general, supplies of property and services that are made in [Province X] are taxable supplies, subject to the [GST/HST] at the rate of 0% (zero-rated under Schedule VI) or [...]% unless a specific provision applies to exempt the particular supply from tax. As noted in your letter, you are aware that tax exempt supplies of health services are generally found in Part II of Schedule V and you have determined that the supplies to [Company A] are taxable.
Furthermore, every "recipient" of such a taxable supply is generally required under subsection 165(1) to pay the [GST/HST] in respect of the supply and a GST/HST registrant who makes the supply is generally required, under subsection 221(1), to collect the tax payable by the recipient in respect of the supply. Where tax is not paid, under subsection 224(1) the supplier has the right to sue the recipient provided the HST has been disclosed.
The GST/HST is a multi-level value added tax. The tax status of the final supply in the chain of transactions prior to the property or service being acquired by the final consumer is not necessarily the same as the tax status of prior supplies. For example, counselling services provided to a group home may be taxable but may be exempt under the child care provisions contained in Part IV of Schedule V as a single supply of residential group care when provided by the group home to a non-governmental organization entrusted with the care of children in need of protection.
Any subsequent supply by [Company B] to its clients is a separate transaction that would have to be reviewed based on the facts and legislative provisions that apply to that particular supply.
With respect to [Company A]'s obligation to charge tax on the supply to [Company B], it is immaterial whether or not [Company B] provides tax relief to their clients [band funded organization] under the Technical Interpretation Bulletin B-039 - GST/HST Administrative Policy - Application of the GST/HST to Indians (B-039). The tax relief that may be applicable on transactions made to band-empowered entities by [Company B] is not applicable to prior supplies acquired by [Company B] from [Company A] (assuming of course that these supplies are not exempt).
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.
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) 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,
Cindy Christmas
Aboriginal Affairs and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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