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: 82247
August 29, 2011
Dear [Client]:
Subject:
GST/HST RULING
GST/HST treatment of trailer park seasonal site rental
This is in reply to your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the rental of a site at [...] (the Park) and the pro-rated portion of the municipal taxes that [...] (the Corporation) charges you with respect to the site rental. 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.
Based on the information provided in your letter and attached documentation, including telephone discussions with [...] of the [...] TSO and our recent telephone conversation on June 1, 2011, we understand as follows:
1. The Park is located at [...] in [...] [Community 1], in the municipality of [...], [...] [Participating Province X]. The Park is a seasonal trailer park. It has a total of [...] sites. For GST/HST purposes, the Park is not a residential trailer park as that term is defined in subsection 123(1).
2. The Park is open seasonally for a period of six to nine months. The majority of the sites are available for approximately six months seasonal occupancy from May 1st through to Thanksgiving. The water to these sites is turned off for the winter. The section of the Park that generally allows for longer stays has a winterized water system.
3. Electrical, water, and sewer or septic facilities are available to all sites. Except for a small number of sites that have utilities available year-round, the water is generally turned off at the end of October.
4. You first began renting a site at the Park in [yyyy]. You purchased your current trailer, a [...], in [mm/yyyy]. The trailer measures [...]' x [...]' and is situated on site #[...] in the Park. It is equipped with complete plumbing and electrical facilities and has propane heating.
5. The trailer was towed to the Park by the manufacturer. You indicate that the tongue has been removed, but the wheels remain in place. The trailer is placed on cement blocks, but is not anchored to the ground. There is also a [...]' deck which is not fastened to the trailer.
6. You have provided a photo of the trailer. The photo shows the trailer on its wheels, sitting on a bare site. There is no skirting around the trailer and there is no landscaping around the trailer or of the site. The photo of the trailer does not reflect any significant attachment of the trailer to the site.
7. You have access to the trailer from May 1st to Thanksgiving, during the period the Park is in operation. During this period, you indicate you use the trailer occasionally on some weekends and for stays of three to four days during your holiday period. You indicate that the hydro and water to the trailer are turned off at the end of the season.
8. Your place of residence is in [...] [City 1], Participating Province X].
9. You indicate you pay a seasonal site fee. In addition, you pay a pro-rated portion of the property tax assessment in respect of your particular site.
Ruling Requested
You would like to know whether the site rental and the amount charged to you by the Corporation in respect of your share of the municipal property taxes for your site is subject to the GST/HST.
Ruling Given
Based on the facts set out above, we rule that the site rental is a taxable supply subject to the GST/HST. The additional amount charged to you by the Corporation in respect of your share of the municipal property taxes for your unit is additional consideration for that supply and is also subject to tax.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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
In general, the supply of real property is a taxable supply and is subject to GST/HST unless specifically exempted under the ETA.
Subparagraph 7(a)(i) of Part I of Schedule V to the ETA provides that a supply of land (other than a site in a residential trailer park) made by way of lease, licence or similar arrangement that provides for continuous possession or use of the land for at least one month is exempt if 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.
The determination of whether the supply of land 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 is 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.
Subsection 123(1) defines the term "residential unit" to include a house, semi-detached house, mobile home or "any other similar premises". Whether a particular unit has the same permanent residential characteristics as a house such that it is considered to be a "residential unit", is affixed to the land, and is used as a place of residence for individuals is determined on a case-by-case basis taking into consideration the facts and circumstances of the particular case.
Recreational units, such as park model trailers, travel trailers or similar units, are generally not designed to be affixed to the land in a permanent manner. In determining whether a particular recreational unit is affixed to the land for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA, 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.
Based on the facts referred to above, the trailer is not considered to be affixed to the land for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA. For purposes of subparagraph 7(a)(i), the degree of affixation of the unit to the land must be sufficient to support long-term use of the unit as a place of residence. A recreational unit is considered to be affixed to the land if it is installed in a permanent manner that is conducive to long-term residential use. For example, the recreational unit must be bolted to sonotubes or a cement pad and not merely resting on the land or on any other surface, and must be connected, in a permanent way, to service facilities such as a municipal water and sewer system, well, septic system or electrical power distribution system.
In this particular case, the trailer is sitting on cement blocks with its wheels attached. The photo of the trailer shows little sign of permanency. It is not affixed to the land in a permanent manner. While the tongue has been removed, the wheels remain in place. The trailer does not possess the necessary characteristics of permanency to be considered to be affixed for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA. In addition, the facts do not indicate that the trailer is used as a place of residence, but rather as lodging for recreational purposes.
Since the requirements for exemption under subparagraph 7(a)(i) are not met and no other exempting provision applies, the site rental and, as noted below, the additional amount charged to you in respect of your pro-rated portion of the municipal property taxes for your site, is a taxable supply subject to GST/HST.
Additional Rent - 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 an additional rent. Where a separate amount is paid by a lessee on account of property taxes assessed against the property owner, this amount is 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, since the rental of the land on which the unit is situated is a taxable supply subject to GST/HST, the additional amounts charged to you by the Corporation for your share of the municipal taxes assessed in respect of your unit are also subject to GST/HST.
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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