Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 102754
XXXXX
April 16, 2008
Subject:
GST/HST INTERPRETATION
Continuous Journey
Dear XXXXX:
Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by XXXXX ("the Company").
We understand that the Company provides sightseeing tours and transportation by motor coach. As the Company operates in XXXXX, we will not make reference to the HST in our response.
Interpretation Requested
You have asked several questions related to continuous journeys:
1. On page 14 of GST/HST Guide RC4036 (Revised 2006), GST/HST Information for the Travel and Convention Industry, under the subheading "Single Ticket", it states "For a continuous journey including air travel, as long as there is at least one overseas origin, destination, or stopover, all passenger transportation services included in the ticket are zero-rated." Does this apply to the continental U.S.?
2. An Australian travel provider sells an air ticket to XXXXX that has either a return air ticket back to Australia or enroute to the U.K. (final destination would be home, i.e., Australia) and buys a sightseeing trip or bus transportation to XXXXX from the Company. Is this considered a continuous journey and is the Company's supply to the Australian travel provider zero-rated?
3. A U.S.-based travel provider sells a return ticket from the U.S. to XXXXX either through air travel, bus travel, ship or train travel (origin is the U.S.) and buys a sightseeing trip or bus transportation to XXXXX from the Company. Is this considered a continuous journey and is the Company's supply to the U.S.-based travel provider zero-rated?
4. Is a zero-rated passenger transportation service considered to be by air, sea, train or bus?
5. If a travel provider purchased one of the Company's services for an individual that was in Canada for less than 24 hours, does GST apply?
6. If a travel provider from either overseas or the U.S. purchases one of the Company's sightseeing trips or transportation services in XXXXX, and the travel continues through Canada with various stops enroute (ultimate destination is home), is the Company's supply zero-rated?
7. XXXXX
Interpretation Given
Passenger Transportation Service and Continuous Journey (Question 4):
A passenger transportation service is any mode of transportation available to the public, such as transportation by bus, taxi, train, aircraft, or boat, as long as there is:
• a mode of conveyance;
• an operator of the conveyance independent of the traveller; and
• an itinerary.
Generally, an itinerary describes all elements of a journey, including origin, termination, stopovers, dates and times of arrivals and departures, and all modes of conveyance throughout the journey.
A passenger transportation service made in Canada is taxable at 5%, unless it is zero-rated or exempt. A passenger transportation service made in Canada that is part of a continuous journey with an international element will be zero-rated if all the necessary conditions are fulfilled (these conditions are outlined below). Municipal transit service and most domestic ferry services are exempt.
Generally, a continuous journey of an individual means the set of all passenger transportation services provided to the individual as part of the same journey. However, certain conditions must be met before a journey is a continuous journey. These conditions depend on whether all of the passenger transportation services in the journey are provided on a single ticket or voucher, or on two or more tickets or vouchers.
When a single ticket or voucher is issued for one or more passenger transportation services, all of the passenger transportation services on that ticket or voucher are treated as part of one continuous journey.
When more than one passenger transportation service is provided and separate tickets or vouchers are issued for the different legs of the journey of the individual, all of the legs may be part of one continuous journey if all of the following conditions are met:
• all of the tickets or vouchers are issued by a single supplier, or from an agent acting on behalf of all the suppliers;
• all of the tickets or vouchers are for the same individual;
• there is no stopover between any legs of the journey for which separate tickets or vouchers are issued; and
• the supplier or agent can show CRA that it has met all the above conditions.
These rules for a continuous journey also apply to a group of individuals.
A stopover means any place at which the individual or group embarks or disembarks a conveyance for any reason other than transferring to another conveyance or to allow for servicing or refuelling of the conveyance.
A stop between two legs of a journey that is 24 hours or less is not considered to be a stopover and will not affect whether the legs are part of a continuous journey. A stop of more than 24 hours between two legs of a journey will generally be considered a stopover where two or more tickets or vouchers are issued for the legs of the journey. However, if the supplier or agent can prove that a stop of more than 24 hours is for servicing or refuelling the conveyance, or for the individual to transfer to another conveyance, the stop will not be considered a stopover and the continuous journey status will be unaffected.
A zero-rated passenger transportation service may be by bus, taxi, train, aircraft or boat. However, the conditions under which a passenger transportation service that is part of a continuous journey is zero-rated differ depending on whether or not the continuous journey includes air travel.
Continuous Journey with Air Travel (Question 1):
A passenger transportation service is zero-rated if it is provided to an individual (or group of individuals) as part of a continuous journey that includes air travel and any one of the following applies:
(a) the origin or termination of the continuous journey or any stopover during the continuous journey is outside the taxation area (the "taxation area" means Canada, the United States (except Hawaii), and the islands of St. Pierre and Miquelon); or
(b) the origin, termination, and all stopovers during the continuous journey are outside Canada; or
(c) the origin of the continuous journey is within the taxation area, but outside Canada; or
(d) all places where the individual or group embarks or disembarks an aircraft are outside Canada and the origin or termination of the continuous journey, or any stopover during that journey, is outside Canada.
The origin of a continuous journey means the place where the passenger transportation service that is included in the continuous journey and that is first provided begins. The termination of a continuous journey means the place where the passenger transportation service that is included in the continuous journey and that is last provided ends.
The sentence referred to on page 14 of GST/HST Guide RC4036 would not apply to the continental U.S. ("overseas" in this sentence means outside the taxation area). However, where a single ticket is issued for a continuous journey that includes air travel that originates in the continental U.S. (including Alaska), all passenger transportation services included in the ticket would be zero-rated.
Continuous Journey without Air Travel:
A passenger transportation service is zero-rated if it is provided to an individual (or group of individuals) as part of a continuous journey that does not include air travel and one of the following applies:
(a) the origin or termination of the continuous journey is outside Canada; or
(b) there is a stopover outside Canada.
However, the zero-rating does not apply if both the origin and the termination of the journey are in Canada and, at the time the journey begins, the individual or group is not scheduled to be outside Canada for more than 24 hours during the course of the journey.
Tour Packages:
When passenger transportation services are provided as part of a sightseeing trip, the special rules for determining the GST/HST to charge on tour packages may apply. For GST/HST purposes, a tour package is a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price.
However, not all combinations of two or more services, or of property and services that include elements such as transportation services or accommodation are necessarily tour packages. The nature and purpose of the package being sold has to be considered in order to determine whether it is a tour package or something else. For example, if the overall purpose of a package is to provide a specialized service, it is not considered to be a tour package for GST/HST purposes.
Based on the information XXXXX, when the Company sells sightseeing trips, it appears to be selling tour packages. If you are unsure whether a particular sightseeing trip is a tour package, please contact us with the details of the sightseeing trip.
When a tour package contains components that would not be subject to tax if provided separately, the supplier must prorate the selling price of the tour package between the taxable portion and the non-taxable portion of the tour package. The taxable portion includes the components of the tour package that would be taxable at 5% if purchased separately by the customer, such as admissions to attractions, accommodation, meals, and other supplies made in Canada. The non-taxable portion of the tour package includes the components that would be zero-rated, exempt, or supplied outside Canada, if purchased separately by the customer, such as zero-rated passenger transportation services. The cost of the taxable portion of the tour package is prorated as a percentage of the total cost of the tour package to determine the total tax payable on the selling price of the tour. The taxable portion of the tour package is subject to GST at the rate of 5% and the non-taxable portion is taxable at the rate of 0%. Please see pages 16-18 of the GST/HST Guide RC4036 for more information on calculating the tax on tour packages.
Determining the tax status of a passenger transportation service (Questions 2 to 6):
A passenger transportation service supplied to a non-resident travel provider will be zero-rated if both of the following conditions are met:
• the travel provider resells the transportation service to an individual or group of individuals as part of a continuous journey under which all transportation services are zero-rated; and
• the individual or group uses the transportation as part of a continuous journey under which all transportation services are zero-rated.
Whether the Company's bus transportation services are zero-rated when sold to non-resident travel providers will depend on whether the transportation services form part of a continuous journey under the conditions outlined above. You would have to provide us with detailed information on a specific journey, including itineraries and information on tickets or vouchers, for us to comment on whether a specific supply is zero-rated.
The first step is to determine whether all the passenger transportation services included in a journey are provided under a single ticket or voucher, or two or more tickets or vouchers. This is necessary to determine whether the conditions for a continuous journey are met. If the passenger transportation services are part of a continuous journey, the next step is to determine whether that continuous journey includes air travel. As outlined above, the conditions under which a passenger transportation service is zero-rated are different depending on whether the continuous journey includes air travel or not.
If the Company determines that a sightseeing trip is a tour package that includes passenger transportation services that would be zero-rated if provided separately, it must prorate the cost of the tour package between the taxable portion and the non-taxable portion.
The Company must maintain evidence to support that there is a continuous journey that has an international element that meets the conditions set out earlier in this letter if it supplies a passenger transportation service on a zero-rated basis or in a tour package that includes a passenger transportation service in the non-taxable portion.
Required Evidence:
The supplier of a passenger transportation service must obtain proof from a travel provider purchasing the transportation service that the transportation service was resold as part of a continuous journey under which all transportation services were zero-rated. Acceptable proof includes a passenger list, tour itinerary, and a certificate of zero-rated entitlement. The passenger list must contain the names and addresses of the individuals. However, the supplier can agree that the travel service provider can keep the passenger list and provide it on request. Please see page 16 of the GST/HST Guide RC4036 for an example of information required on a certificate of zero-rated entitlement.
The supplier must also obtain similar proof when the passenger transportation service is sold as part of a tour package.
Consideration for GST (Question 7):
Every recipient of a taxable (non-zero-rated) supply made in Canada is required to pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply. When the consideration for a supply is expressed in money, the value of the consideration for the supply is equal to the amount of the money.
When the Company charges travel providers XXXXX% less than the retail price for taxable (non-zero-rated) supplies of return bus transportation from XXXXX Airport XXXXX, the GST applies to the price charged to the travel providers, XXXXX $XXXXX.
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 Excise Tax Act, 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) 952-7909. 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.
Yours truly,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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