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: 79965
Business Number: [...]
July 19, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
GST/HST treatment of site leases in trailer park
This is in reply to your fax concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the rental of a site at [...] Park, a cottage and RV Resort (the "Resort") in [...] [City 1, Participating Province X] and to the pro-rated portion of municipal taxes charged by [...] (the "Park") in respect of the site. In particular, you have asked for a review of the ruling issued to the Park in case #[...] and request clarification on the application of the HST. We apologize for the delay in responding.
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.
In accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, CRA will not issue a ruling where the circumstances are such that all of the pertinent facts cannot be established. In this case, whether a particular supply of a trailer park site is subject to HST will depend upon the examination of the particular circumstances. As such, we are not able to provide a general ruling applicable to the supply of sites by the Park in the Resort without specific facts and details. However, we have provided a general interpretation on how the relevant legislative provisions of the ETA apply to a generic fact situation to assist you in the application of the HST to the supply of trailer park sites.
Further to the facts set out in case #[...] we understand that:
1. The Park owns and operates the Resort and is registered for HST purposes. The Resort is a seasonal waterfront cottage and RV resort which generally operates from April to Thanksgiving Day weekend. For GST/HST purposes, the Resort is not a residential trailer park as that term is defined in subsection 123(1).
2. The site plan of the Resort currently available on the Web site for the Park shows there are approximately [...] sites. Park amenities include a children's playground, recreation hall, heated pools, boat slips and docking.
3. As stated in your previous submission, 90% of trailer park sites are leased to the same tenants on a seasonal basis. The remaining sites are leased on a weekly or monthly basis. Trailer owners may leave their trailers on site year-round. Trailers must be less than [...]' long and [...]'wide.
4. Electrical, water and septic facilities are available at the sites. During the winter period, hydro and water services are shut off.
5. Seasonal site fees for 2011 range from $[...] to $[...] depending on whether it is a regular, premium, waterview or waterfront location.
6. Occupants of the Resort are generally required to enter into [...] (the "Agreement"), renewable annually, for the occupation of a specified site. In addition, an occupant has access to and use of all common areas in the Resort. The use of the site is for recreational and/or vacation purposes only.
7. As set out in the [yyyy] Agreement in respect of Site #[...] unless renewed or otherwise extended, the Agreement ends October 31st [yyyy]. Occupants are not permitted to overhold their site during the winter period unless a new Agreement is entered into.
8. As set out in the Agreement, an occupant is required to maintain comprehensive general liability insurance coverage in an amount not less than $1,000,000 as well as "all perils" insurance on the unit and all occupant improvements constructed on the site for the full replacement value.
9. There are a number of used, on-site trailer sales currently listed for sale on the Web site for the Park. There are various types of recreational units, including recreational vehicles, travel trailers and park model trailers ranging in price from $[...] up to $[...] for a two-bedroom [...]. The method and degree of physical attachment of the units on their sites vary significantly. Some photos show units which are minimally attached to the land and which could be easily removed from their site, while other units, such as the [...], are affixed to the land in a permanent manner which is conducive to long-term residential use, and include permanent additions such as additional rooms, covered decks and/or porches.
Interpretation Requested
You would like to know the application of the HST to the supply of a site at the Resort as well as to the pro-rated portion of the municipal taxes assessed in respect of a particular unit which is charged by the Park to occupants of the particular sites.
Interpretation Given
The Canada Revenue Agency (CRA) GST/HST policy statement P-104, Supply of Land for Recreational Units such as Mini-homes, Park Model Trailers and Travel Trailers, issued February 2011, sets out CRA's administrative policy regarding the application of subparagraph 7(a)(i) of Part I of Schedule V to the ETA to the supply of land (other than a site in a residential trailer park) made under a lease, licence or similar arrangement that provides for continuous possession or use of the land for at lease one month. Subparagraph 7(a)(i) exempts such a supply of land where the supply is made to an owner, lessee or person in occupation or possession of a residential unit that is or is to be affixed to the land for the purpose of its use and enjoyment as a place of residence for individuals.
For purposes of policy statement P-104, the reference to a "recreational unit" includes a mini-home, park model trailer, a travel trailer or similar unit or vehicle designed primarily for travel and recreational use, that has residential attributes similar to those of a mobile home, including plumbing, electrical/gas and heating facilities (for example, washroom and cooking facilities). It does not include a folding camp trailer, a camper van or truck, a motorhome, or similar vehicle.
The determination of whether the supply of land (other than a site in a residential trailer park) made by way of lease, licence or similar arrangement for continuous possession or use of the land for at least one month to an owner or lessee of a recreational unit is an exempt supply under subparagraph 7(a)(i) of Part I of Schedule V to the ETA depends on whether the following three conditions are met:
1. the recreational unit must be a residential unit for GST/HST purposes;
2. the unit must be affixed to the land in the context of subparagraph 7(a)(i) of Part I of Schedule V to the ETA; and
3. the unit must be affixed to the land for the purpose of its use and enjoyment as a place of residence.
Where the above conditions are met, the supply of land will be exempt under subparagraph 7(a)(i) of Part I of Schedule V to the ETA provided the supply of the land is for a period of one month or more.
Residential Unit
Subsection 123(1) defines the term "residential unit" to include a house, semi-detached house, mobile home or "any other similar premises" provided it is used, or intended to be used, in a manner set out in the definition. Whether a particular recreational unit has the same permanent residential characteristics as a house (i.e., is considered to be a "residential unit" and is affixed to the land), is determined on a case-by-case basis taking into consideration the facts and circumstances of the particular case. Factors that may indicate that a particular recreational unit is a residential unit include:
• the recreational unit is designed, or has undergone the alterations necessary, for year-round connection in a permanent way to service facilities such as water, sewer, septic tank, electricity, telephone and cable;
• the recreational unit is installed or affixed in a permanent manner, for example, on sonotubes or a cement pad;
• the recreational unit is used as an individual's place of residence;
• the recreational unit has been modified to add a room, screened porch, deck, car port, skirting, etc.;
• the recreational unit is intended to remain affixed to the land for the foreseeable future.
Affixed to Land
A recreational unit that is a residential unit is considered to be affixed to the land for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA if it is installed or affixed in a permanent manner that is conducive to long-term residential use. In determining whether a particular recreational unit is affixed to the land, consideration is given to the method and degree of physical attachment of the unit to the land, as well as the purpose for which the unit has been attached to the land. For purposes of subparagraph 7(a)(i), the degree of affixation of the recreational unit to the land must be sufficient to support long-term use of the unit as a place of residence. For example, a recreational unit that is installed in a permanent manner on sonotubes or cement pad, and is not merely resting or parked on the land or other surface, and is connected, in a permanent way, to service facilities such as municipal water and sewer system, well, septic system or electrical power distribution system is considered to be affixed to the land. All relevant factors are considered in determining whether a recreational unit is sufficiently affixed to the land for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA.
Place of Residence
A recreational unit that is a residential unit and is affixed to the land may be considered to be a place of residence based on the purpose for which it was affixed to the land, as well as the length of time and the frequency during which the unit is occupied as a place of residence during the year. While an individual may have only one primary place of residence, it is possible for an individual to have more than one place of residence. To be considered an individual's place of residence, the recreational unit should be used for purposes of regular habitation or dwelling, and cannot be used merely as a temporary abode for short-term stays of a transient nature.
GST/HST Memoranda Series 19.2, Residential Real Property sets out CRA's administrative policy with respect to the meaning of "place of residence". The meaning to be attributed to a "place of residence", as opposed to "lodging", is based on a determination of the purpose of the stay, the amount of time and frequency of the stay, and the physical presence.
Whether a particular recreational unit is used as a place of residence is a question of fact which must be determined on a case-by-case basis. Factors that may indicate that a recreational unit is used as an individual's place of residence include:
• long-term, year-round/annual leasing commitments;
• the recreational unit is permanently and directly connected year-round to service facilities including hydro, gas, underground water and sewer facilities;
• the recreational unit is designed or has undergone alterations for year-round habitation;
• the recreational unit is furnished by the occupant;
• the existence of a telephone listing and cable service for the occupant at the site.
All relevant factors are considered in determining whether a particular recreational unit is used as an individual's place of residence. No one factor alone may be determinative of the issue.
Based on the information provided and set out above, 90% of the trailer park sites are supplied under an annual licence agreement, for period of approximately six months seasonal occupancy, to persons in occupation or possession of various types of recreational units, including recreational vehicles, travel trailers and park model trailers.
In accordance with information published by the Canadian Recreational Vehicle Association on park model trailers, park models are designed for seasonal use, generally to be installed in one location, and function like a cottage, complete with sleeping, dining, cooking and bathroom facilities. These units may also be equipped with extra appliances suitable for long-term use and may be fully winterized, including a high-BTU furnace, heated tanks, upgraded insulation and double-glazed windows.
As such, the supply of land in respect of a recreational unit, such as a park model trailer, that has residential attributes similar to those of a mobile home, including plumbing, electrical/gas, and heating facilities, and is affixed to the land in a manner that is conducive to long-term residential use, would generally be exempt under subparagraph 7(a)(i) of Part I of Schedule V to the ETA where the site is supplied for continuous possession or use for a period of at lease one month, and the unit is for use and enjoyment as a place of residence. The supply of land in respect of a recreational unit that does not reflect the necessary residential characteristics, including permanency, to be considered a "similar premises" under the definition of "residential unit" under subsection 123(1) is a taxable supply and is subject to the GST/HST. In addition, as noted below, any amount charged by the Park to occupants of these sites in respect of the pro-rated portion of municipal taxes assessed is also subject to the GST/HST.
ADDITIONAL INFORMATION
Property taxes
Property taxes paid by a property owner to the municipality are generally not subject to GST/HST. The property owner generally includes an amount that represents a recovery of such taxes from the lessee either as part of the basic rent or as additional rent. Where a separate amount is paid by a lessee on account of property taxes assessed against the property owner, this amount is generally part of the consideration for the rental of the property, even if the lessee pays the amount directly to the municipality. As such, the amount will take on the same tax status as the rent. In this case, where, under subparagraph 7(a)(i) of Part I of Schedule V to the ETA, the rental of the land on which a residential unit, such as a park model trailer, is situated is exempt of GST/HST, any additional amount charged as consideration by the Corporation for a share of the municipal taxes assessed in respect of the particular unit will not be subject to GST/HST.
Tax paid in error
Under the ETA, where a person has paid an amount as or on account of tax that was not payable, the person may request a refund or credit of the amount from the supplier. A supplier may refund or credit the tax within two years after the day the amount was charged or collected. Further information on the time limitations and conditions for claiming refunds and credits is available in GST/HST Memoranda Series Chapter 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act, available on the CRA Web site.
Where a refund or credit is not issued by the supplier, the person may make an application under subsection 261(1) for a rebate of the tax paid in error by completing and submitting application form GST 189 General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST). It should be noted that a rebate application made under section 261 cannot include amounts that were paid in error more than two years before the application is filed.
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 ETA, 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 613-952-9212. 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,
Carmela Antonelli
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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