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
XXXXX
Case Number: 93372
Attention: XXXXX XXXXX
September 25, 2009
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Application of GST/HST to Ancillary Fees XXXXX
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to ancillary fees XXXXX. We apologize for the delay in responding to you.
Our understanding is as follows:
1. XXXXX.
2. XXXXX.
3. XXXXX.
4. XXXXX.
5. XXXXX.
6. XXXXX.
7. XXXXX.
8. XXXXX.
9. XXXXX.
10. XXXXX.
11. XXXXX.
12. XXXXX.
13. XXXXX.
14. XXXXX.
15. The ancillary fees mentioned in Fact #14 are not included in the base fare for the XXXXX flight. By way of example, XXXXX may have to pay some or all of the following ancillary fees with respect to round-trip XXXXX flights:
(a) Air carrier charges such as:
i. NavCan surcharges imposed by air carriers to recover the user charges that air carriers are required to pay under the Civil Air Navigation Services Commercialization Act for air navigation services;
ii. fuel surcharges imposed by air carriers to offset their fuel costs;
iii. insurance surcharges imposed by air carriers to offset their aviation insurance costs; or
iv. excess baggage charges imposed by air carriers where passengers' baggage exceed the limits for weight, size or number of pieces allowed by air carriers.
(b) Airport improvement fees imposed by airport authorities for the right to use of their airports.
(c) The air travellers security charge imposed under the Air Travellers Security Charge Act (hereafter, "the ATSCA") on air transportation services that include chargeable enplanement(s).
(d) An administration fee of $XXXXX imposed by XXXXX for its services.
(e) A change fee of $XXXXX imposed by XXXXX for amending a ticket, voucher or reservation.
16. In addition to the ancillary fees mentioned in Fact #15, XXXXX may also have to pay some or all of the following ancillary fees with respect to round-trip XXXXX flights that are performed either wholly or partly within the United States:
(a) Passenger facility charges of either of $XXXXX, $XXXXX, $XXXXX, $XXXXX, or $XXXXX imposed by public agencies in the United States under XXXXX of the United States Code (U.S.C.) XXXXX of the Code of Federal Regulations (C.F.R.) on passengers enplaned at a commercial service airport controlled by a public agency.
(b) Government of the United States taxes and fees such as the:
i. air transportation excise taxes (including the XXXXX% percentage tax, the $XXXXX domestic-segment tax and/or the $XXXXX use of international travel facilities tax) imposed under XXXXX of the U.S.C. XXXXX of the C.F.R. on the amount paid for taxable transportation or any transportation, as the case may be, of a passenger by air;
ii. agriculture air passenger inspection fee of $XXXXX imposed under XXXXX of the U.S.C. XXXXX of the C.F.R. on each passenger aboard a commercial aircraft who is subject to inspection upon arrival from a place outside of the customs territory of the United States;
iii. customs air passenger inspection fee of $XXXXX imposed under XXXXX of the U.S.C. XXXXX of the C.F.R. on each passenger arriving aboard a commercial aircraft from a place outside of the United States;
iv. immigration air passenger inspection fee of $XXXXX imposed under XXXXX of the U.S.C. XXXXX of the C.F.R. on each passenger arriving at a port of entry in the United States aboard a commercial aircraft; or
v. security service fee of $XXXXX imposed under XXXXX of the U.S.C. XXXXX of the C.F.R. on passengers of air carriers and foreign air carriers in air transportation and intrastate air transportation originating at airports in the United States.
17. XXXXX.
18. XXXXX.
19. XXXXX.
Interpretation Requested
You would like to know whether the ancillary fees described in Fact #16 are subject to GST/HST.
Interpretation Given
Generally, the ancillary fees described in Fact #16 are payable by passengers of air carriers in respect of real property situated in the United States, passenger transportation services performed in whole or in part in the United States, or inspection services performed in the United States, as the case may be. Generally, the applicable legislation provides that these ancillary fees are collectible by air carriers based on the passenger's itinerary at the time travel documents are issued and are remittable to the applicable public agency or the Government of the United States, as the case may be, by the air carriers.
For GST/HST purposes, the ancillary fees described in Fact #16 are neither part of the consideration for a supply of a passenger transportation service nor consideration for supplies made in Canada. Consequently, neither the applicable public agency nor the Government of the United States, as the case may be, is required to charge and account for GST/HST in respect of the ancillary fees described in Fact #16. Therefore, if, as you indicate but have not provided any documentation in support of, XXXXX acts as agent in collecting the ancillary fees described in Fact #16 on behalf of either the applicable public agency, the Government of the United States, or the air carriers who themselves collect the fees on behalf of these persons, as the case may be, then no GST/HST is collectible by XXXXX in respect of these ancillary fees payable by, and collected from, the XXXXX.
XXXXX.
XXXXX.
ADDITIONAL COMMENTS
In addition to the interpretation regarding the application of GST/HST to the ancillary fees described in Fact #16, we offer the following comments in respect of XXXXX obligations for GST/HST purposes.
1. Ancillary Fees Described in Fact #15
Ancillary fees for supplies of passenger transportation services made by XXXXX
For GST/HST purposes, the following ancillary fees described in Fact #15 are part of the consideration for a supply of a passenger transportation service and are subject to GST/HST at the same rate as the rest of the supply of the passenger transportation service (i.e., fully taxable at 5% GST or 13% HST, zero-rated, or not subject to tax, as the case may be):
• NavCan surcharges imposed by air carriers;
• fuel surcharges imposed by air carriers to offset their fuel costs;
• insurance surcharges imposed by air carriers to offset their aviation insurance costs;
• the air travellers security charge; and
• the XXXXX's $XXXXX administration fee.
XXXXX.
XXXXX.
Ancillary fees for other supplies of services made by XXXXX
For GST/HST purposes, the XXXXX's $XXXXX change fee described in Fact #15 is consideration for a separate supply by XXXXX of a service of amending a ticket, voucher or reservation for the supply of a passenger transportation service. As discussed below, the change fee imposed by XXXXX may be either fully taxable at either 5% GST or 13% HST, or zero-rated, as the case may be.
Together, paragraph 142(1)(g) and subsection 165(1) of the ETA provide that the supply by a person of a service of amending a ticket, voucher or reservation for the supply of a passenger transportation service is made in Canada, and therefore, subject to the 5% GST, where the service is, or is to be, performed in whole or in part in Canada.
Similarly, pursuant to section 4.1 of Part VI of Schedule IX to the ETA and subsection 165(2) of the ETA, the supply by a person of a service of amending a ticket, voucher or reservation for a supply by that person of a passenger transportation service is made in a participating province, and therefore, subject to the 13% HST, where the supply of the passenger transportation service would, if it were completed in accordance with the agreement for that supply, be made in the participating province.
However, section 5 of Part VII of Schedule VI to the ETA zero-rates a supply by a person of a service of issuing, delivering, amending, replacing or cancelling a ticket, voucher or reservation for a supply by that person of a passenger transportation service that would, if it were completed in accordance with the agreement for that supply, be included in section 2 or 3 (i.e., a zero-rated supply of a passenger transportation service).
The legislative provisions in Schedules VI and IX to the ETA, as mentioned above, only apply where the same person supplies both the service of amending a ticket, voucher or reservation for the supply of a passenger transportation service, and the actual passenger transportation service. Consequently, there may be a different application of GST/HST to change fees imposed by air carriers because in such situations, two persons would be supplying the services: XXXXX would be supplying the passenger transportation service to XXXXX, and the air carrier would be supplying the service of amending a XXXXX ticket, voucher or reservation for the supply of a passenger transportation service.
Airport improvement fees
Generally, the airport improvement fees described in Fact #15 are payable by enplaned passengers of air carriers in respect of airport facilities situated in Canada. As we understand it, most airport authorities have authorized air carriers to act as agent on their behalf for purposes of collecting both the airport improvement fee payable by the passenger and the applicable taxes payable by the passenger in respect of the fee, and for passing the fee and applicable taxes back to the applicable airport authority.
For GST/HST purposes, an airport improvement fee is consideration for a separate supply by an airport authority of real property made by way of licence. Consequently, registrant airport authorities are required to charge and account for GST/HST in respect of airport improvement fees payable by enplaned passengers. Therefore, if XXXXX acts as agent in collecting the airport improvement fee and applicable taxes on behalf of airport authorities, as you indicate but have not provided any documentation in support of, then GST/HST is collectible by XXXXX on behalf of the airport authority on the airport improvement fee payable by the passengers (e.g., XXXXX).
Excess baggage charges
For GST/HST purposes, the excess baggage charge described in Fact #15 is consideration for a separate supply of a service of transporting an individual's baggage, and not part of the consideration for a supply of a passenger transportation service. Therefore, if XXXXX acts as agent in collecting the excess baggage charge on behalf of air carriers, then the charge does not necessarily have the same tax status as the supply of the passenger transportation service made by XXXXX.
Baggage is generally understood to mean the personal belongings of a traveller that accompany the traveller on a voyage. Most air carriers allow a free baggage allowance with specific size, weight, and volume limits (checked and unchecked baggage). For an item to be considered baggage, it must be recognized that the item has the same flight route as the passenger and is carried on the same plane as the passenger. For checked items, this usually means that the item is given a baggage slip indicating the same flight number, connections and destination airport of the passenger.
For GST/HST purposes, the service of transporting an individual's baggage as part of the free baggage allowance is part of the supply of a passenger transportation service. However, where a separate charge is made in respect of transporting an individual's baggage (the most common being excess baggage charges where a passenger's baggage exceeds the free baggage allowance either in number, size and/or weight) the separate charge does not form part of the consideration for a supply of a passenger transportation service, but rather consideration for a separate supply of transporting an individual's baggage.
In this regard, paragraph 142(1)(g) and subsection 165(1) of the ETA provide that the supply by a person of a service of transporting an individual's baggage is made in Canada, and therefore, subject to the 5% GST, where the service is, or is to be, performed in whole or in part in Canada.
Similarly, pursuant to paragraph 4(a) of Part VI of Schedule IX to the ETA and subsection 165(2) of the ETA, the supply of a service of transporting an individual's baggage is made in a participating province, and therefore, subject to the 13% HST, where the supply is made by a person in connection with the supply by that person of a passenger transportation service made in that province.
However, paragraph 4(a) of Part VII of Schedule VI to the ETA zero-rates the supply of a service of transporting an individual's baggage where the supply is made by a person in connection with the supply by that person of a zero-rated passenger transportation service.
The legislative provisions in Schedules VI and IX to the ETA, as mentioned above, only apply where the same person supplies both the service of transporting an individual's baggage, and the actual passenger transportation service. Consequently, there may be a different application of GST/HST to the excess baggage charge imposed by air carriers because in such situations, two persons would be supplying these services: XXXXX would supplying the passenger transportation service to XXXXX, and the air carrier would be supplying the service of transporting the XXXXX baggage.
2. Disclosure of Tax
Subsection 223(1) of the ETA imposes a statutory obligation on all registrants making a taxable supply (other than a zero-rated supply) to indicate to the recipient of the supply either:
(a) the consideration paid or payable by the recipient for the supply and the tax payable in respect of the supply in a manner that clearly indicates the amount of tax; or
(b) that the amount paid or payable by the recipient for the supply includes the tax payable in respect of the supply.
The alternative methods of satisfying the statutory requirements in subsection 223(1) are as follows:
(a) in the prescribed manner (i.e., in this case of the supply of a XXXXX flight, giving clearly visible notice to the recipient of a taxable supply at the place where the supply is made);
(b) on the invoice or receipt issued to the recipient in respect of the supply; or
(c) in an agreement in writing entered into with the recipient in respect of the supply.
In other words, any recipient of a taxable supply such as XXXXX must be informed of the amount of GST/HST paid or payable. This will enable a recipient who is a registrant to determine the amount of tax paid or payable for purposes of claiming an input tax credit.
In XXXXX, you provided us with a copy of an itinerary that XXXXX issued XXXXX in respect of a round-trip XXXXX flight from XXXXX to XXXXX. For GST/HST purposes, the XXXXX flight documented in the itinerary is a taxable supply made by XXXXX, but is not a zero-rated supply. As mentioned above, XXXXX is required to comply with the disclosure rules set out in section 223 of the ETA. However, nowhere in the itinerary does XXXXX or XXXXX either disclose the GST payable by the recipient (i.e., XXXXX) or that the amount paid or payable by the recipient includes the GST payable in respect of the supply. Also, it should be noted that XXXXX registration number, and not XXXXX registration number, is disclosed on the itinerary. The use of XXXXX registration number in connection with the supply of passenger transportation services made by XXXXX is only acceptable if XXXXX acts as agent in causing or facilitating the making of the supply by XXXXX. If this is not the case, then XXXXX is misrepresenting to XXXXX that the supply is being made by XXXXX in its own right, and not by XXXXX as you indicate in Fact #11. This also gives the impression to XXXXX that any GST/HST payable by them is payable to XXXXX, and not payable to XXXXX.
XXXXX.
These matters are not in accordance with section 223 of the ETA and corrective measures need to be taken by XXXXX to comply with the disclosure provisions of the ETA.
Airport improvement fees
In addition to the above disclosure issues, there are disclosure issues with respect to airport improvement fees.
Firstly, with respect to the XXXXX details stated on XXXXX issued by XXXXX, it appears that XXXXX has a dual method of disclosing the tax payable on airport improvement fees. Specifically, it appears that the GST payable on airport improvement fees is included in the total amount of GST payable, whereas the HST payable on airport improvement fees is included in the total amount of combined taxes.
The Canada Revenue Agency's (CRA) position is that the requirements of section 223 of the ETA will be met if the tax on the airport improvement fees and the tax on the fare are shown as a single amount on a ticket and identified with a corresponding code of XG (i.e., the IATA code for the GST) or RC (i.e., the IATA code for the HST).
Alternatively, the airport improvement fees can be shown on a ticket as a tax-inclusive amount provided that there is an indication of the total of the rates at which tax is payable in respect of the airport improvement fee (i.e., 5% GST or 13% HST) or the total tax payable in respect of the airport improvement fees. The tax on the fare can be shown as a separate amount.
XXXXX disclosure methods with respect to airport improvement fees do not conform to either method.
Secondly, it is our understanding that the imposition, collection and remittance of airport improvement fees is governed by agreements between airport authorities and air carriers, under which the airport improvement fees are not tax-included amounts. In other words, if XXXXX acts as agent in collecting the airport improvement fee and applicable taxes on behalf of the airport authorities, as you indicate but have not provided documentation in support of, then XXXXX must disclose the actual GST/HST charged by the airport authority and payable by XXXXX.
Thirdly, the amounts invoiced to XXXXX in respect of the airport improvement fees are for supplies made by the applicable airport authorities, and not for supplies made by XXXXX. A registrant XXXXX would not be able to claim an input tax credit based on the information currently set out on the XXXXX. Specifically, two pieces of prescribed information that a XXXXX would require under the Input Tax Credit Information (GST/HST) Regulations (hereafter, "the Regulations") for purposes of claiming an input tax credit are the name of the supplier or the intermediary in respect of the supply, and that person's registration number. In this regard, XXXXX does not disclose either the name or the registration number of the applicable airport authority making the supply of real property by way of licence. Furthermore, XXXXX is not an intermediary for purposes of the Regulations as it does not cause or facilitate the making of the supply of real property by the applicable airport authority, and therefore, XXXXX name and registration number would not suffice for purposes of the Regulations.
Corrective measures need to be taken by XXXXX to ensure that any GST/HST collected by XXXXX on behalf of another is properly disclosed to the recipient of the supply. Please note, this could apply to excess baggage charges, as discussed above, too.
Air travellers security charge
The amount of the air travellers security charge payable by a person is set out in the ATSCA and varies, in part, based on the destination of the air transportation service and whether the GST is payable in respect of the service. Pursuant to paragraph 154(2)(a) of the ETA, the air travellers security charge is part of the consideration for a supply of a passenger transportation service. The air travellers security charge, as a specified amount under the ATSCA, is not a tax-included amount. Typically, the supplier of the passenger transportation service such as XXXXX would have to charge GST/HST extra on the air travellers security charge, because the supplier cannot say that a statutory charge of a specified amount is really a lesser amount plus applicable GST/HST, unless the enabling legislation allows for that, which in this case, it does not. Also, it is the CRA's view that the passenger (i.e., XXXXX) is the person who is legally liable to pay the air travellers security charge and any applicable GST/HST.
Lastly, we would like to bring to your attention that XXXXX incorrectly refers to the air travellers security charge as the "air transportation tax" on its XXXXX. The former air transportation tax under Part II of the ETA was eliminated effective October 31, 1998.
Corrective measures need to be taken by XXXXX to address these issues.
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 CRA 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 613-957-8224. 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,
Christopher Lewis
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Enc.: GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service
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