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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa, ON, K1A 0L5
Case Number: 119991
Business Number: XXXXX
April 22, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Supply of electricity to the Ontario Power Authority
Thank you for your XXXXX and attached documents of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of electricity to the Ontario Power Authority (the OPA) under its Feed-in-Tariff and Micro Feed-in-Tariff programs.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand the relevant facts as follows.
1. XXXXX, provides XXXXX services for XXXXX in energy conservation and renewable energy services.
2. In the case of renewable energy, such as solar photovoltaic power, XXXXX intend to invest in solar equipment, contract XXXXX with the OPA, connect with the local distribution company and then (subject to the terms of the agreement) sell electricity power back to the grid at a guaranteed feed-in-tariff rate.
3. A copy of the Feed-in-Tariff (FIT) contract, revised on March 9, 2010, which would be applicable to the suppliers of Energy to the OPA in the circumstances at issue, can be found on the OPA's Internet site at http://fit.powerauthority.on.ca/Storage/100/10895_10877_FIT_Contract_Version_1_3_General_Terms_and_Conditions.pdf .
4. Section 3.5 of the FIT model contract reads as follows:
"The OPA is liable for and shall pay, or cause to be paid, or reimburse the Supplier if the Supplier has paid any Taxes applicable to the Delivered Electricity and Future Contract Related Products sold hereunder which may be imposed at and from the Connection Point, and Taxes applicable to or associated with the transfer or assignment of Environmental Attributes from the Supplier to the OPA. The Contract Price does not include any Sales Tax payable by the OPA in respect of the Electricity and Future Contract Related Products purchased hereunder. If any Sales Tax is payable in connection with the Delivered Electricity and Future Contract Related Products purchased hereunder, such Sales tax shall be paid by the OPA. In the event that the Supplier is required to pay or remit such Taxes and no credit, rebate, or refund is available (or, in the event that the Supplier has assigned this Agreement, that no credit, rebate, or rebate (sic) would have been available to the Supplier had it not assigned this Agreement) in respect of such payment or remittance of Taxes, the amount thereof shall be deducted from any sums becoming due to the OPA hereunder."
Section 1.1 of that same contract states that "In addition to the terms defined elsewhere in this Agreement, capitalised terms shall have the meanings given in the attached Appendix - Standard Definitions."
"Sales tax" is not defined in the Agreement; it should therefore be given the meaning of the Appendix. The Appendix - Standard Definitions, can be found on the OPA's Internet site at http://fit.powerauthority.on.ca/Storage/99/10893_FIT_Standard_Definitions_Version_1_3.pdf .
The relevant parts and definitions (the definitions are presented in an order to facilitate the understanding of their interaction rather than in alphabetical order).
"The following terms shall have the meaning stated below when used in the FIT rules or in the FIT Contract:
217. Sales Taxes mean GST and PST.
114. GST means the goods and services tax exigible pursuant to the Excise Tax Act (Canada), or any successor thereto, including for greater certainty the "Harmonized Sales Tax" proposed in the March 26, 2009 Ontario Budget.
200. PST means the Ontario provincial sales tax exigible under the Retail Sales Tax Act (Ontario), or any successor thereto."
5. The revised Micro Feed-in-Tariff (microFIT) model contract (version 1.3, December 2009) can be found on the OPA's Internet site at http://microfit.powerauthority.on.ca/pdf/microFIT%20contract%20version%201.3%20December%2010_2009.pdf .
Section 4.1 of that contract reads as follows: "Contract Price. The contract price is $___/kWh."
Section 4.4.5 of that contract states: "Supplier shall notify OPA promptly of any changes in its Sales Tax registration status, including becoming a Sales Tax registrant or ceasing to be a Sales Tax registrant."
The definitions of certain terms used in that contract are found at Appendix A of that contract. In that Appendix:
• Sales Tax means GST or HST, as applicable;
• GST means the goods and services tax exigible pursuant to the Excise Tax Act (Canada) or any successor thereto; and
• HST means the harmonized sales tax exigible pursuant to the Excise Tax Act (Canada) or any successor thereto, including the "Harmonized Sales Tax" proposed in the March 26, 2009 Ontario Budget."6. Section 25.3 of the Electricity Act, 1998 of the Province of Ontario, provides that: "The OPA is not an Agent of Her Majesty for any purpose, despite the Crown Agency Act."
Interpretation Requested
You have asked the two following questions:
1. Whether the Ontario Power Authority ("OPA") is required to pay GST and future HST on supplies of electricity purchased from a contracted power generator (the "Supplier") under the terms of the OPA Feed-in-Tariff and Micro Feed-in-Tariff sample contracts, as on the OPA's Internet site?
2. How will the transitional measures related to the introduction of the Ontario HST apply to the supplies of electricity at issue?
We will give an interpretation for each of these questions in the order presented.
INTERPRETATION GIVEN - QUESTION NUMBER 1
Based on the information provided, the OPA has the obligation to pay GST and will have the obligation to pay HST, when applicable, on the taxable supplies of electricity (other than zero-rated) it acquires from GST/HST registrants. Under a sample contract such as the FIT and microFIT contracts between a supplier and the OPA described above, the supplier would charge tax in addition to the consideration provided for in such contracts.
Explanation to Interpretation
Schedule "A" to the Reciprocal Taxation Agreement (RTA) between Canada and Ontario lists provincial government entities that are relieved of GST/HST at point-of-purchase. As the OPA is not listed in Schedule "A" to the RTA, the OPA is not entitled to GST relief on its purchases.
In the case of the FIT sample contract, section 3.5 provides that GST/HST is not included in the amounts payable by the OPA to the supplier, which means that these amounts are treated as the consideration on which such tax applies. In the case of the microFIT sample contract, there is no mention of tax in the amount charged for electricity at section 4.1 of that contract. Therefore, under both these contracts, a GST/HST registrant would charge the OPA GST/ HST on the amounts of consideration payable for the taxable supplies of electricity.
INTERPRETATION GIVEN - QUESTION NUMBER 2
Legislation required to implement the HST in Ontario has received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA). Although the Government of Ontario has announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.
The following interpretation is based on the transitional rules for continuous supplies as announced in Notice 247 Harmonized Sales Tax for Ontario and British Columbia -
Questions and Answers on General Transitional Rules for Personal Property and Services, released by the Canada Revenue Agency (the CRA) in October 2009. This interpretation should not be taken as a statement by the CRA that the transitional rules for continuous supplies will be made in their current form.
Based on the information provided, the payments in respect of electricity delivered or made or available on or after July 1, 2010 will be subject to the Ontario HST. If a payment is attributable to electricity delivered or made available both before July 1, 2010 and on or after that date, an apportionment is to be made based on the number of days to determine which part of the payment is subject to HST and which part of the payment is subject to GST. In such a case, the total consideration multiplied by the number of days on and from July 1st 2010 to the end of the period in respect of the payment divided by the total number of days in the period will be subject to HST, and the rest of the consideration will be subject to GST.
Explanation
The HST is to be implemented in Ontario as of July 1st 2010 and will be enabled by the Provincial Choice Tax Framework Act which amended the Excise Tax Act. Section 277.1 of the amended Excise Tax Act provides for the regulatory power under which the transitional measures related to the introduction of the Ontario HST will become law. As of today, these regulations have not yet been proposed but the substance of the transitional measures have been announced and explained in Notice 247 from the CRA. The extract of that Notice relevant to the supply of electricity, which is a supply delivered or made available on a continuous basis by means of wire, is as follows:
"CONTINUOUS SUPPLIES
The HST would generally apply to any consideration that becomes due, or is paid without having become due, for a supply of property or services delivered, performed or made available (as the case may be) on a continuous basis by means of a wire, pipeline, or similar conduit, or by satellite or other telecommunications facility (e.g. natural gas, electricity, cable television or cellular telephone services) to the extent that the consideration is for property or services that are delivered, performed or made available to the recipient of the supply on or after July 1, 2010.
If the supplier cannot reasonably determine when the property or services are delivered, performed or made available, the consideration for the supply would be prorated in equal parts according to the number of days in the period to which the consideration is attributable."
The foregoing comments in respect of this interpretation represent our general views with respect to the transitional rules for continuous supplies as announced in Notice 247, released by the CRA in October 2009, as they relate to the subject matter of your request. Any change to the wording of the transitional rules for continuous supplies or any regulations regarding the HST in Ontario, if made, could have an effect on the interpretation provided herein.
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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8815. 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,
Raymond Labelle
Senior Rulings Officer
Goods Unit
General Operations and Border Issues
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
UNCLASSIFIED
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