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: 85885
Business Number: [...]
May 30, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
GST/HST treatment of trailer park site rental
Thank you for your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of a site at the [...] (the Park) and the pro-rated portion of the municipal taxes that [...] (the Corporation) charges to occupants of the Park under the occupancy agreement for the site. 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, we understand as follows:
1. The Park is located [...] in the municipality of [...] [Participating Province X]. The Park is a seasonal trailer park. It has a total of [...] sites. [...] of the sites are for transient campers. 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. You indicate that as per municipal by-laws, only travel trailers or [...]' wide park model trailers are allowed in the Park. Mobile homes and manufactured homes are not allowed.
4. You have provided an excerpt of two pages from the Municipality of [...] Zoning By-Law [...] of [yyyy]. Under Section [...] you have highlighted the definition of "Campground" and "Campsite". The definition of "Campground" provides, in part, that [...]. The definition of "Campsite" defines the term to mean [...].
5. Section [...] of the zoning by-laws [...] provides [...].
6. Electrical, water and sewer facilities, and phone service are available to all sites. In addition, cable TV is available or individuals may put up their own satellite dish. Some occupants asked for mail delivery at the Park and the [...] Post office installed post office boxes at the entrance to the Park.
7. You indicate that occupants of the Park are required to sign an occupancy agreement for the site. You have provided a copy of an [...] agreement (the Agreement) which states that the Park is a seasonal park and that the season runs for nine months at the longest. You indicate that you do not monitor whether people are living in their trailers for the entire season, but that you charge extra to anyone who uses their trailer before the beginning of the season. Some issues have arisen with people trying to live year-round at the Park and you have advised occupants that you do not want year-round occupants in the Park.
8. You have provided a sample copy of an Agreement dated [mm/dd/yyyy], entered into between the Corporation and [...] in respect of Lot [...]. Section [...] of the Agreement provides that [...]. In addition, Section [...] specifies that actual use of the Park is to be for seasonal or temporary periods of time only, and that during any use of the Park, occupants are to provide an address elsewhere than at the Park. In particular, section [...] of the Agreement states that [...]. It is noted that the address set out in the Agreement is the Park address; that is [...]
[Participating Province X].
9. Section [...] of the Agreement provides that occupancy of the site at the Park shall be limited to [...].
10. The licence fee is billed each year prior to the commencement of each season. Section [...] of the Agreement provides, in part, that the licence is automatically renewed from year to year unless it is terminated by either party on or before [mm/dd] of each calendar year.
11. You indicate that you are also engaged in the sale and set up of park model trailers. A number of used, on-site trailer sales are currently listed for sale on the Web site for the Park. There are photos and descriptions of recreational vehicles/travel trailers and park model trailers, and the site number on which these units are situated. Based on the photos and descriptions of the park model units (e.g., Lot [...]), these park model trailers generally provide [...] bedrooms, living area, kitchen and bathroom facilities. For example, the unit on Lot [...] is described as [...]. Sale prices for these units range from $[...] to $[...]. The photos reveal that these units are fully enclosed around the perimeter and include permanent additions such as Florida rooms, covered decks and/or porches. The roofs are shingled and extend over the permanent additions. Photos of these sites show extensive landscaping including trees, shrubs and other plants around the perimeter of the unit and the site itself, as well as hard landscaping, including fencing, railings, flagstone patios and walkways.
12. While the park model trailers described above generally appear to be installed in a permanent manner and have permanent residential characteristics similar to a house, photos and descriptions for other recreational vehicles/travel trailers (e.g., Lots [...]) do not reflect the same residential characteristics, including permanency, as a house. Sale prices for these units range from $[...] to $[...]. The method and degree of physical attachment of these units on their sites as reflected in the photos show a minimal degree of attachment to the land. Some of the units appear to have their undercarriage intact, including tow tongues and wheels, while others may not. While some of these units appear to have some skirting, with attached decks and/or covered porches, the photos demonstrate only a minimal degree of attachment to the land. The recreational vehicles/travel trailers depicted in these photos of the sites referred to above are lacking the necessary residential characteristics, including permanency, similar to a house.
Interpretation Requested
You would like to know the application of the HST to the supply of a site at the Park as well as the pro-rated portion of the municipal taxes assessed in respect of a particular unit which is charged by the Corporation to occupants of the particular site.
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 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 folding camping trailers, camper vans or trucks, motorhomes, or similar vehicles.
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 an exempt supply 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 of the stay, and 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 (as opposed to seasonal);
• 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, except for the [...] sites which are supplied by the Corporation to campers for transient use, the majority of the sites are supplied under an annual licence agreement, for periods of six to nine 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.
Based on the listing descriptions and photos available on the Web site for the Park under [...], the park model trailers referred to in paragraph 11 above exhibit the necessary residential characteristics, including a degree of permanent affixation to the land as a house, to be considered as a "similar premises" under the definition of "residential unit" under subsection 123(1). As such, the supply of land in respect of these recreational units or recreational units similar to those described in paragraph 11, 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.
In contrast, the listing descriptions and photos of the recreational units referred to in paragraph 12 above do not reflect the necessary residential characteristics, including permanency, to be considered a "similar premises" under the definition of "residential unit" under subsection 123(1). As such, the supply of land in respect of these recreational units, or recreational units similar to those described in paragraph 12, is a taxable supply and is subject to GST/HST. In addition, as noted below, any amount charged by the Corporation to occupants of these sites in respect of the pro-rated portion of municipal taxes assessed is also subject to 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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