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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 118212
May 18, 2011
Dear [Client]:
Subject:
GST/HST RULING
Supplies of Wigs Made to Individuals
Thank you for your letter of September 29, 2009, concerning the application of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) to the supply of wigs. We apologize for the delay in providing this response.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Based on the information you provided, we understand the facts to be as follows:
1. [...] is operated under the business name [...] [(the Company)]. You are in the business of selling wigs, clip-on ponytails, clip-on bangs, hair pieces, and eyebrows made from synthetic or human hair. You are also in the business of selling head scarves, fur hoods, hand-knitted scarves, jewellery, and designer handbags.
2. [The Company] is registered for GST/HST.
3. Your customers purchase wigs and other hair pieces for medical reasons, e.g., after hair loss from chemotherapy; and as a fashion accessory. Customers who are purchasing wigs and other hair pieces for medical reasons generally provide you with a written order from a medical practitioner (physician).
4. Customers do not have the option of custom ordering a wig to meet their specific needs, e.g., selecting the colour, style, type of hair and length, but have many different wigs and other hair pieces to choose from [...].
5. The selection of wigs and other hair pieces made available to customers at [the Company] are manufactured and marketed in the same way for customers who are purchasing these products for medical purposes or for cosmetic purposes.
6. Wigs and other hair pieces are manufactured and sold in the professional beauty industry and are made available to the public through wig boutiques, salons, specialty shops and online vendors.
7. Suppliers of wigs and other hair pieces, including [the Company], advertise wigs as a fashion accessory and not as a medical device.
8. We understand that to sell a medical device in Canada, manufacturers must meet the regulatory requirements as defined in the Medical Devices Regulations. Manufacturers of wigs and other hair pieces are not regulated under these Regulations (http://www.hc-sc.gc.ca/).
Ruling Requested
You would like to know whether the supply of wigs and other hair pieces by [the Company] to its customers is subject to the GST/HST.
Ruling Given
Based on the facts set out above, we rule that supplies of wigs and other hair pieces by [the Company] are not zero-rated under the GST/HST. Therefore, where supplies of wigs and other hair pieces are made in [...] [Participating Province X], they are subject to the HST at the rate of [...]%.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
The general rule in section 165 is that every recipient of a taxable supply made in Canada shall pay tax at the rate of 5%, 12%, 13%, or 15% (depending on the place of supply) on the value of the consideration for the supply unless the supply is zero-rated and taxed at the rate of 0%.
A zero-rated supply is defined in subsection 123(1) as a supply that is included in Schedule VI. Part II of Schedule VI contains the medical and assistive devices that are zero-rated for GST/HST purposes. Medical and assistive devices that are not listed in Part II of Schedule VI are not zero-rated and therefore supplies of such devices fall under the general rule in section 165.
In addition, section 1.2 of Part II of Schedule VI states that medical and assistive devices provided for cosmetic purposes and not for medical or reconstructive purposes are not zero-rated and therefore are generally subject to GST/HST.
Section 25 and 36 of Part II of Schedule VI are the relevant provisions in the ETA which were considered to determine if the sale of wigs and other hair pieces is zero-rated.
Section 25 of Part II of Schedule VI
Section 25 zero-rates a supply of a medical or surgical prosthesis, or an ileostomy, colostomy or urinary appliance or similar article that is designed to be worn by an individual. For GST/HST purposes, the Canada Revenue Agency (CRA) regards a medical or surgical prosthesis to be an artificial device that replaces a missing body part, corrects a physical deformity or malfunction, or supports a weak or deformed part of the body. The prosthesis can either be worn externally by an individual or implanted and worn internally for purposes of zero-rating.
Prosthetics is a branch of medicine or surgery that deals with the production and application of body parts. The term "prosthesis" in the legislation is qualified by the phrase "medical or surgical". The term "medical" is commonly understood to mean as relating to the science, study or the practice of medicine. The term "surgical" is commonly understood to mean pertaining to surgery.
Based on our review, wigs and other hair pieces are more likely to be considered as cosmetic, beauty and personal care products and not be part of the medical device industry. Suppliers of wigs and other hair pieces, including [the Company], advertise wigs as a fashion accessory and not as a medical device. Although wigs and other hair pieces may be used by an individual experiencing hair thinning or hair loss as a result of a medical condition, the same products are made available to the general public through wig boutiques, salons, specialty shops and online vendors.
In addition, as indicated above, manufacturers of medical devices must meet the regulatory requirements as defined in the Medical Devices Regulations to sell a medical device in Canada. We understand that the manufacturers of wigs and other hair pieces are not regulated under the Medical Device Regulations. Therefore, wigs and other hair pieces are not medical or surgical prostheses.
Section 36 of Part II of Schedule VI
Section 36 zero-rates a supply of clothing that is specially designed for use by an individual with a disability when the clothing is supplied on the written order of a medical practitioner for use by a consumer named in the order.
Therefore, for wigs and other hair pieces to be zero-rated under section 36, the wigs and other hair pieces must be specially designed for use by an individual with a disability and supplied on the written order of a medical practitioner.
For purposes of this section, it is the type of clothing that must be examined to determine whether this section would apply to a particular type of clothing. The phrase "specially designed" attaches to the type or category of clothing. For example, burn pressure garments are specially designed for individuals with burns. Clothing that is custom made for a particular individual is not equated with clothing that is specially designed for an individual with a disability.
Wigs and other hair pieces are generally considered to be fashion accessories or costume accessories and not a type or category of clothing that is specially designed for use by an individual with a disability. Although wigs and hair pieces may be worn by individuals for medical purposes, the same wigs and hair pieces are also marketed to and worn by the general public. Therefore, wigs and other hair pieces are not zero-rated under this section regardless of whether an individual presents a written order from a medical practitioner at the time of purchase.
The CRA is responsible for the administration of the ETA and its Regulations, as passed by Parliament. An amendment to the ETA would be required to treat the sale of wigs and other hair pieces as zero-rated. Legislative amendments are a matter of tax policy, which falls within the responsibility of the Department of Finance. We will advise officials of that Department of your concerns regarding the tax status of these products.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7952. 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,
Alison Jones
Municipalities and Health Care Services Unit
Public Services Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
Email this Content