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: 206102
Business Number: […]
January 21, 2021
Dear [Client]:
Subject: GST/HST RULING
[Supplies made by a Charity] […]
Thank you for your letter (with attachments) of January 6, 2020, as well as subsequent facsimiles and telephone conversations, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) as it pertains to supplies made to […][X] by […][Y]. We apologize for the delay in our response.
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.
We understand the following based on: discussions with you and […][various correspondence]:
1. [X] is a non-resident […] based […][outside of Canada]. […]
2. [X] operates for-profit and is not registered for the GST/HST.
3. […], [X] has been delivering […][Program A] at […][the Venue]. […][Description of Program A].
4. […][The Venue] is located […][in Canada].
5. [The Venue] is administered [under an Agreement] by […][Y]. […][Information about Y’s responsibilities under the Agreement] .
6. […][Information about the Agreement].
7. […][Information from an Act other than the ETA]
8. [Y] became a registered charity for income tax purposes on [mm/dd/yyyy].
9. [Y] is not a public institution and meets the definition of charity found in subsection 123(1) of the Excise Tax Act.
10. […][Program A] is offered [by X] at [the Venue] an average of […] times per year […], each with a duration of […] days.
11. Invoices were issued by [Y] to [X] on the following dates […]: […][Dates of Various Invoices by year, Year 1, Year 2 and Year 3]
12. On the invoice dates indicated above, [Y] was a GST/HST registrant operating under business number […].
13. [Y] offers a […][Hospitality Program] at [the Venue] which includes the following elements that are only available through the [Hospitality Program]:
- [group] overnight accommodations […]
- meeting facilities
- catered meals
14. [X] utilized all the elements of the […][Hospitality Program] in […] [Program A].
15. The invoices [issued by Y to X] provide the following breakdown per element:
- Single room occupancy (# of rooms x # of nights x rate)
- Double room occupancy (# of rooms x # of nights x rate)
- Breakfast (catered) (# of participants x rate x number of days)
- Lunch (catered) (# of participants x rate x number of days)
- Dinner (catered) (# of participants x rate x number of days)
- Catered boxed lunch (for off-site excursions) (# of participants x rate)
- […][Transportation] […] (charged by the hour)
- […][Activity A] (reserved afternoon seating @ $[…] per person)
16. […] was used for transporting participants to off-site locations […].
17. [Y] offers two time slots for […][Activity A]. Per the invoices, due to the low number of participants this was not a mandatory activity. […][Time slot 1] is free of charge to anyone. […][Time slot 2] requires a reservation and had a cost of $[…] per person. Both time slots offer […][the same beverage, snack and entertainment]. […] [Time slot 2] also includes a copy of a book […].
18. [Y] had not charged the [GST/HST] on their invoices to [X] until […][Year 1]. [GST/HST] was charged on the total invoice amounts for the years […][Year 1, Year 2 and Year 3]. […].
19. You do not know whether [Y] has made an election under section 211 in respect of the [real] property at [the Venue], which allows a public service body, including a charity, to […][make] an exempt supply of real property […] be treated as taxable.
20. […]
RULINGS REQUESTED
You have requested a ruling to determine the following:
1. Is [Y] required to remit to the Canada Revenue Agency (CRA) the total amount of [GST/HST] they collected?
2. Is [Y] required to adjust, credit or refund the [GST/HST] collected from [X] in error?
3. Is the supply of [Activity A] an exempt supply?
4. Are the supplies made by [Y] to [X] exempt supplies?
RULINGS GIVEN
1. [Y] is required to remit to the Canada Revenue Agency (CRA) any positive amount of net tax for a reporting period.
2. [Y] is not required to adjust, credit or refund the amount collected as or on account of tax.
As outlined in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service (Memorandum 1.4), a ruling provides the position of the CRA on specific provisions of the legislation as they relate to a clearly defined fact situation of a particular person, supported by relevant documentation such as contracts and other pertinent agreements. Alternatively, an interpretation is a written statement that sets out the CRA’s view of how the legislation applies to a generic fact situation or sets out the CRA’s general understanding of particular provisions of the legislation, whether proposed or enacted.
As the facts available in this case do not provide sufficient information to determine the tax status of [Y’s] supplies to [X], we are providing you with an interpretation on this issue.
EXPLANATION
The [GST/HST] is a tax that applies to most supplies of property and services made in Canada. It also applies to many supplies of real property (for example, land, buildings, and interests in such property) and intangible personal property such as trademarks, rights to use a patent, and digitized products downloaded from the internet and paid for individually. […].
Generally, all supplies of property and services made in Canada are either taxable or exempt. Taxable supplies (including zero-rated) are made in the course of a commercial activity and are subject to the GST/HST on the value of consideration. Zero-rated supplies are listed in Schedule VI and are taxable at the rate of 0%. Exempt supplies are not taxable and can be found in Schedule V.
A GST/HST registrant has to calculate its net tax for each GST/HST reporting period and report it on its GST/HST return. Information Sheet GI-066, How a Charity Completes its GST/HST Return, explains how a charity that is a GST/HST registrant calculates its net tax for a reporting period. Net tax of a charity that is a GST/HST registrant is generally comprised of 60% of the total GST/HST collected less any input tax credits and adjustments to which it is entitled. Occasionally, a charity will have to include additional amounts in its net tax calculation, including 100% of any amounts collected as or on account of tax in error. The result of the calculation will be either a positive or negative net tax.
Upon registration, each GST/HST registrant is assigned specific reporting periods and due dates. Every GST/HST registrant must file a return with the Minister for each reporting period of the registrant. In addition, if the registrant’s net tax calculated for the reporting period is a positive amount, that amount must be remitted to the Receiver General (the CRA) on or before the due date of the return.
Refund, adjustment or credit of the GST/HST
A supplier is permitted, but not required, to adjust, refund or credit GST/HST where an excess amount of tax has been charged or collected. Under subsection 232(1) of the ETA, where a supplier has charged to, or collected from, another person an amount as or on account of tax in excess of the amount of tax collectible, the supplier may
(a) adjust the amount of tax charged, where the excess amount was charged but not collected; or
(b) refund or credit the excess amount of tax collected, where the excess amount was charged and collected.
The supplier has up to two years after the day on which the excess amount was charged to the other person but not collected to adjust the amount of tax charged, or if the excess amount was collected from the other person, two years after the day on which it was collected to refund or credit the excess tax. For additional information, see GST/HST Memorandum 12-2 Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act.
Alternatively, persons that paid an amount as GST/HST on supplies that should not have been taxed may file an application for a rebate of amounts paid in error. Form GST189, General Application for Rebate of GST/HST, is used to apply for the rebate. The time limit to apply for this rebate is within two years after the day the amount was paid. An amount that has previously been refunded or credited is not eligible for the rebate. For additional information, see the GST/HST Guide RC4033 General Application for GST/HST Rebates.
INTERPRETATIONS GIVEN
We are unable to issue a ruling [(in response to Ruling Requested #3 and # 4)] on the supplies […][made] by [Y] as we have insufficient information. We are issuing the following interpretations, which are general explanations of the applicable provisions and how the legislation would apply.
Single or multiple supplies
When determining the tax status of a supply, we must first analyze the facts and ascertain whether a supplier is making a single supply or multiple supplies. The CRA has set out guidelines to assist with this determination in GST/HST Policy statement P-077R2, Single and Multiple Supplies.
Two or more elements are part of a single supply when the elements are integral components; they are inextricably bound up with each other; the elements are so intertwined and interdependent that they must be supplied together; or one element of the transaction is so dominated by another element that the first element has lost any identity for fiscal purposes.
Multiple supplies occur when one or more of the elements can sensibly or realistically be broken out.
When analyzing the supply, the process should not involve artificially splitting something that commercially is a single supply. The intent of the parties, the circumstances surrounding the transaction, and the supplier’s usual business practices must be taken into account.
Furthermore, the way in which the price for a transaction is set out, such as in the invoices you provided, does not in itself determine whether there are one or more supplies. Although the invoices set out the individual costs charged for each of the elements, this breakdown does not mean that each invoice item is a separate supply. Due to the nature of the supplies in question, for accounting purposes the invoices have been broken down by number of single/double occupancy rooms and sittings per meal.
[…][Hospitality Program]
[X] acquires multiple elements from [Y] as part of the [Hospitality Program]. We have determined that the elements of short-term accommodations, meeting facilities and catered meals are a single supply of real property.
Section 1 of Part V.1 of Schedule V provides that a supply made by a charity of any property (including real property) or service is exempt, unless it is listed as one of the exclusions in paragraphs (a) to (p) of that section. The supply of real property by way of lease, licence or similar arrangement is not listed as an exclusion and is therefore generally an exempt supply.
However, section 211 allows a public service body, such as a charity, to file an election in respect of real property that is capital property of the body. Real property used to supply short-term accommodations meets this criteria. Paragraph 1(m) of Part V.1 of Schedule V recognizes this election and provides an exception to the general exemption for charities where a section 211 election has been filed. In other words, as [Y] is a charity, if it has not filed the election, the supply would be exempt; if it has filed the election, the supply would be taxable. For confidentiality reasons we are unable to provide information as to whether the election has or has not been filed by [Y]. Therefore, there is insufficient information to allow us to determine the tax status of the single supply of real property.
[Activity A]
[Activity A] is not a mandatory element of the [Hospitality Program]. […][Both time slots] include […][a beverage, snack and entertainment]. The afternoon session also includes a […] book. It is therefore reasonable to conclude that the charge of $[…]/person for the afternoon session is to cover the cost of the book. The supply of a book is a separate single supply of tangible personal property.
Paragraph 1(d) of Part V.1 of Schedule V provides an exception to the general exemption for charities where a charity supplies tangible personal property that was acquired, manufactured or produced by the charity for the purpose of making a supply of that property. Therefore, the supply of the book would not be exempt under the general exemption.
However, section 5.1 of Part V.1 of Schedule V provides another potential exempting provision which stipulates that a supply may be exempt if the consideration for which the property is sold does not exceed its direct cost. We do not have the facts as to [Y’s] direct cost for the book. We therefore have insufficient information to determine if the book may be an exempt supply under section 5.1 of Part V.1 of Schedule V.
[Transportation]
We are unable to determine the tax status of the [Transportation] service without additional information. We do not know if this service is only available through the [Hospitality Program]. It is also not clear whether you would have the option of obtaining an alternate form of […] from another supplier. Therefore, we cannot determine whether the [Transportation] service is part of a single supply of the [Hospitality Program] or a separate supply.
For example, the following two possible scenarios may apply:
1) the [Transportation] service is only available as an element of the [Hospitality Program]:
- the [Transportation] service would take on the tax status of the single supply of real property, i.e. with the short-term accommodations, meeting facilities and catering. As stated above, we have insufficient information to determine the tax status of the single supply of real property.
2) the [Transportation] service is a separate supply:
- per section 1 of Part V.1 of Schedule V, there are no exclusions to the general exemption for charities for this type of service. Therefore, this would be an exempt supply.
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 rulings given in this letter provided that: none of the issues discussed in the rulings 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. The interpretations given in this letter, including any additional information, are not rulings and do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretations or the additional information provided herein.
We have completed our analysis of this case and the file is now closed. If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7909. 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.
Sincerely,
Connie Carnegie
Charities, Non-Profit Organizations and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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