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: 87088
April 4, 2011
Dear [Client]:
Subject:
GST/HST RULING
Annual lease of trailer park site
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 [...], (the "Resort") in [...] [City 1, Province X], and the pro-rated portion of municipal taxes charged to 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 supporting documentation, as well as previous telephone discussions, including most recently with both yourself and [...] [your husband] on February 8, 2011, we understand the following:
Statement of Facts
1. You first began leasing a site at the Resort in approximately [yyyy] on a one-year term, renewable annually. In [yyyy], you purchased a new unit manufactured by [...], a [...] park model trailer. The unit measures [...]' by [...]'.
2. The [...] park model trailer is a manufactured unit that was delivered to the site by a professional trailer service, using specialized equipment for its transport.
3. The unit is situated on site #[...] at the Resort on [...] Lake. The Resort is a seasonal waterfront resort generally open from May to Thanksgiving-day weekend.
4. The tongue which was originally used for transporting the unit to the site has been removed. The unit is installed on poured 12" x 12" concrete pads and affixed with metal "tie downs" for permanent long-term residential use. The unit is fully skirted and includes a deck/porch which is partly covered by the extension of the main roof which is shingled.
5. The unit is designed for year-round habitation. It consists of a bedroom, living room, and kitchen, and is equipped with propane heating. The unit is permanently and directly connected to utilities, including hydro, underground water and sewage system. The unit cannot be readily disconnected from these services.
6. You built a three-season sitting room/Florida room addition measuring [...]' x [...]' to the original unit. The site is fully landscaped, including landscaping around the perimeter of the structure. You have provided a photo of your unit.
7. You indicate that your primary place of residence is in [...] [City 2], and that up until your husband retired in [mm/yyyy], you were using the unit during the weekends and holidays regularly during the period May to Thanksgiving-day weekend, as well as for a continuous period of six weeks during the summer months.
8. You indicate that since your husband retired in [mm/yyyy], he has been residing primarily at the unit during the periods of operation, May to October, returning to the residence in [City 2] occasionally. During these same periods, you resided primarily at your place of residence in [City 2], and joined your husband at the unit on weekends, holidays and during the summer period. You indicate that once you retire, you plan to reside primarily in the unit during the period May to October when the Resort is in operation.
9. The unit is fully furnished by you and it has remained on the site year-round since you purchased the unit in [yyyy]. It is expected that the unit will remain on the site for the long-term.
10. During the winter period, you indicate that you continue to have access to the unit, but that the water and hydro are shut off.
11. You have provided a copy of an invoice dated [mm/dd/yyyy] for site #[...] which includes charges for the site rental and a trailer assessment fee for your share of the municipal taxes in respect of your unit.
12. You indicate that your situation is similar to that of other residents at the Resort, who you state are not being charged the GST/HST on their site fees.
Ruling Requested
You would like to know whether the site rental and the assessment fee for your share of municipal taxes in respect of your unit invoiced to you by the Resort under the licence agreement for the site are subject to GST.
Ruling Given
Based on the facts set out above, we rule that the amount charged for the rental of the land, including the additional amount charged to you by the Resort for your share of the municipal taxes assessed in respect of your unit located on site #[...] at the Resort, is consideration for a supply of land that is exempt of the GST/HST under subparagraph 7(a)(i) of Part I of Schedule V to the ETA, as of the lease interval beginning [mm/dd/yyyy].
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
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.
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.
Based on the facts referred to above, the unit is considered to be a residential unit. It has the necessary residential characteristics, including permanency, as a house. It is installed in a permanent manner that is conducive to long-term residential use and is connected in a permanent way to hydro, gas, water and septic facilities. As such, the unit is considered to be a residential unit that is affixed to the land.
Whether a particular unit is used as a place of residence is a question of fact. That determination is made on a case-by-case basis. A residential unit that 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 the stay during which the unit is occupied as a place of residence during the year; that is, the length of time and the frequency throughout the year that the individual occupying the unit is physically present and using the unit as a place of residence.
The meaning 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 the physical presence of the individual(s) occupying the unit. If a unit is the individual's primary place of residence, it will be considered to be for use and enjoyment of the individual as a place of residence. While an individual has 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 unit should be used for purposes of habitation or dwelling, but would not normally include an abode of a transient nature.
The facts set out above indicate that, for the period prior to [mm/yyyy], the unit was generally used for recreational purposes as a place of lodging on weekends, holidays and for the summer vacation. Following [your husband's] retirement in [mm/yyyy], he began to occupy the unit as a place of residence during the period the Resort was in operation from May to October. The facts indicate that the requirements for the exempt supply of land under subparagraph 7(a)(i) of Part I of Schedule V to the ETA were satisfied at the time [your husband] began to use the unit as his place of residence upon his retirement in [mm/yyyy].
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 residential unit is situated is exempt of GST/HST as of the lease interval beginning [mm/dd/yyyy], any additional amount charged to you for your share of the municipal taxes assessed in respect of your unit is not 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), a copy of which is included. 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.
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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