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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 233932
Dear […]:
Subject: GST/HST INTERPRETATION
Tax status of COVID-19 testing services
Thank you for your fax of October 7, 2021, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to COVID-19 testing services.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand that:
1. Your Client will offer the following services:
A. Drive-through rapid COVID-19 testing services (Service 1)
* The test is administered by a registered nurse (RN) at the Client’s testing site.
* The customer registers, books a time slot, and pays online.
* The customer is charged a single fee for both the test kit and the administration of it.
B. Virtual consultation for COVID-19 self-testing (Service 2)
* The consultation is done with an RN. The consultation is about teaching and demonstrating to the customer how to self-administer the test.
* The customer registers, books a time slot, and pays online.
* The customer is charged a consultation service fee.
* For this service, the customer has to purchase a test kit separately, either from the Client (for a separate charge), or externally from another supplier.
C. For both Services 1 and 2, the customer has the option of choosing between “travel” or “other” as the purpose for requesting to undergo the test.
2. The Client’s services will be offered in Alberta (AB) and British Columbia (BC).
3. According to Schedule 24, Section 3 of the Health Professions Act (HPA) (Footnote 1) of Alberta, which defines the profession of RNs in AB and encompasses all the interventions which RNs provide:
“In their practice, registered nurses do one or more of the following:
(a) based on an ethic of caring and the goals and circumstances of those receiving nursing services, registered nurses apply nursing knowledge, skill and judgment to
(i) assist individuals, families, groups and communities to achieve their optimal physical, emotional, mental and spiritual health and well-being,
(ii) assess, diagnose and provide treatment and interventions and make referrals,
(iii) prevent or treat injury and illness,
(iv) teach, counsel and advocate to enhance health and well-being,
(v) co-ordinate, supervise, monitor and evaluate the provision of health services,
(vi) teach nursing theory and practice,
(vii) manage, administer and allocate resources related to health services, and
(viii) engage in research related to health and the practice of nursing,
and
(b) provide restricted activities authorized by the regulations”.
4. According to Part 2 of the Scope of practice standards (Footnote 2) , which establishes the standards, limits and conditions for registered nurses’ practice in BC, RNs are authorized to perform activities that are
“established through the legislated definition of nursing practice and are complemented by standards, limits and conditions set by the BC College Of Nurses and Midwives (BCCNM).”
Section 4 of the Nurses (Licensed Practical ) Regulation (Footnote 3) states that registrants of BCCNM may practise practical nursing. Practical nursing is defined as “the health profession in which a person provides the following services:
(a) health care for the promotion, maintenance and restoration of health with a focus on stable or predictable states of health;
(b) prevention, treatment and palliation of illness and injury, with a focus on stable or predictable disorders and conditions, primarily by
(i) assessing health status,
(ii) planning, implementing and evaluating interventions, and
(iii) coordinating health services;”
“ The Regulation does not refer to education, administration and research in the scope of practice statement for nurses or any other health professionals in B.C. However, BCCNM’s Professional Standards make it clear that clinical practice, education, administration and research are all considered part of the practice of registered nursing.” (Footnote 4)
5. Your Client contracts with a third party placement agency that supplies the RNs who provide the Service 1 and Service 2 offered.
6. The RNs are paid by the placement agency. In turn, the placement agency bills the Client for the RN hours worked.
RULING REQUESTED
You would like to know the tax status of the supply of Service 1 and Service 2 once your Client starts operating. You would also like to know the tax status of the supply of RNs to your Client by the placement agency.
As noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretation Services, a ruling provides the Canada Revenue Agency's (CRA's) position on specific provisions of the legislation as they relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented.
The CRA reserves the right not to issue a ruling where it considers that one would not be appropriate. In this case, you are seeking confirmation on the tax status of the Company's supplies once it starts operating. The GST/HST is a transactional tax and the application of GST/HST on the Company's services, as described, would be made on a case-by-case basis.
Accordingly, we trust the following interpretation of the relevant provisions of the legislation as it applies to the Company's services, as described, will be satisfactory for your purposes.
If, after reviewing this letter, you wish to obtain a ruling on a particular transaction the Company is engaged in, we invite you to follow-up in writing including all relevant agreements and supporting documentation.
INTERPRETATION GIVEN
Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Zero-rated supplies are included in Schedule VI. Exempt supplies are not subject to the GST/HST and are included in Schedule V.
Single/Multiple Supplies
Where a transaction consists of several elements, there may be a single supply or multiple supplies. This distinction is important where a combination of elements is supplied, some of which would be exempt for GST/HST purposes and some of which would not if supplied separately. It is the CRA's position that, for GST/HST purposes, the determination of whether a transaction consisting of several elements is to be regarded as a single supply, or multiple supplies, is based on a determination of fact. GST/HST Policy Statement P-077R2, Single and Multiple Supplies provides information on determining whether a single supply or multiple supplies are being provided for a transaction consisting of several elements based on the following principles:
1. Every supply should be regarded as distinct and independent.
2. A supply that is a single supply from an economic point of view should not be artificially split.
3. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply.
The characterization of a transaction as a single supply or multiple supplies considers the purpose of the transaction, the needs of the customer, the interrelationships among the various elements of the transaction, and the economic reality of the transaction. The key factor to consider in making the determination as to what, and how many, supplies are made in a particular situation is the intent of the parties, the circumstances surrounding the transaction, and the supplier’s usual business practices. From a supplier point of view, one must consider what the Client (the supplier) is providing for the consideration received whilst satisfying the request or need of their customer.
In general, two or more elements of a transaction are part of a single supply when the elements are integral components or the elements are so intertwined and interdependent that they must be supplied together. Similarly, if one element of the transaction is so dominated by another element that the first element has lost any identity for fiscal purposes, the supply is considered a single supply of the dominant element. Conversely, multiple supplies occur when one or more elements of a transaction can sensibly or realistically be broken out from the other elements, or the elements are not reliant on each other to achieve their purpose.
When performing an analysis, it is important that the analysis be confined to the transaction at issue, rather than referring to other possible transactions containing the same or similar elements. This process should not involve artificially splitting something that commercially is a single supply. The following explains how the single/multiple supply analysis would apply to the Client’s offered services.
Service 1: Drive-through testing
The supply of the drive-through testing made by the Client is composed of two elements: the test kit and the administration of the test kit by the RN. The first step in determining the tax status of this supply would be to determine if the Client is making a single supply or multiple supplies consisting of each of the elements.
The Client is being requested to supply rapid COVID-19 testing. So, both the test kit and the administration of it are integral components of the Client’s supply because each of these components is specifically organized to work together to create the overall testing service. Both elements are so interdependent to perform the testing that they must be supplied together. Additionally, the Client offers this service as a bundled package consisting of both the test and the administration of it for a single consideration. In such a case, the supply of the test and the administration of it can be viewed as elements that form part of a single supply of a rapid COVID-19 drive-through testing service.
Service 2: Virtual consultation with an RN
The virtual consultation service consists only of an RN explaining and showing customers how to use the kit in order for an individual to self-administer the rapid COVID-19 test. Though the consultation is supplied for a separate fee, the way in which the consideration for a transaction is set out does not in itself determine whether there are one or more supplies. In this case, the main activity performed by the RN is that of teaching and conferring of knowledge which would constitute a single supply of a service.
Following the characterization of each of the Client’s supplies, in order to establish the tax status of each supply, a determination of the nature and of the purpose of each supply is necessary.
Nursing services
Section 6 of Part II of Schedule V (subject to sections 1.1 and 1.2 of that Part) exempts a supply of a nursing service rendered to an individual by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, if the service is rendered within a nurse-patient relationship.
Given the preceding, there are three criteria that the supply must meet to be exempt under section 6 of Part II of Schedule V. That is, it must be a service that:
(A) is rendered by a registered or licensed nurse;
(B) falls within the scope of nursing services; and
(C) is rendered to an individual within a nurse-patient relationship.
Accordingly, regardless of whether an activity may be characterized as a nursing service, the supply of that service must meet all the criteria of section 6 of Part II of Schedule V to be exempt. The three criteria are discussed below.
(A) Rendered by a registered or licensed nurse
In determining whether a supply is rendered by a registered or licensed nurse, the provincial legislation of the nursing profession is considered for purposes of administering the ETA. As such, a registered or licensed nurse is considered to be an individual who meets certain standards of education, clinical competence and registration or other licensing requirements as set out by provincial legislation governing the nursing profession.
Since the services in question will be supplied in AB and BC, the CRA considers the manner in which the nursing profession is regulated by the laws of each of these provinces. Registered Nurses in (Province A) are regulated under Schedule 24 of the Health Professions Act (HPA) and the Registered Nurses Profession Regulation (RNPR), and are governed by The College and Association of Registered Nurses of Alberta (CARNA). Registered Nurses in BC are regulated under the Nurses (Registered) and Nurse Practitioners Regulation (NNPR), and are governed by the British Columbia College of Nurses and Midwives (BCCNM). The provincial legislation establishes the legal framework for nursing as a self-regulating profession.
In addition, the CARNA and the BCCNM have been delegated the authority under the respective provincial legislation for the regulation and registration of individuals who are qualified to practice the nursing profession in AB and BC respectively.
(B) Scope of nursing services
The term “nursing service” is not defined in the ETA, however the CRA has developed an administrative position for purposes of the GST/HST. A nursing service is generally understood to be the skilled practice of nursing involving procedures, treatments, drug administration and other interventions, which are acts performed on patients by nurses as part of a care plan or on the order of a physician. Nursing services are patient care services that pertain to the curative, restorative and preventative aspects of nursing.
Nurses are authorized to perform various controlled acts when rendering nursing care to their patients. Core nursing services generally focus on the diagnosis and treatment of health problems of a patient, administration of medications and other interventions.
The CARNA and the BCCNM are responsible for establishing the scope of nursing practice in AB and BC respectively, and in this regard have published in AB the Scope of Practice For Registered Nurses, and in BC the Registered Nurses Scope of Practice: Standards, Limits, Conditions.
(C) Rendered to an individual within a nurse-patient relationship
A registered or licensed nurse establishes and maintains a nurse-patient relationship by using nursing knowledge and skills to render patient care services involving supportive, therapeutic, palliative and rehabilitative services to assist the patient in attaining or maintaining optimal function, such as treating the health problems of a patient, administering medications and performing other interventions. Thus, we interpret this criterion in section 6 of Part II of Schedule V to mean nursing services that involve personal interaction between a nurse and an individual who is a patient where there is an established or ongoing relationship between the nurse and the patient and the nurse is a direct care provider of the patient.
Accordingly, when an RN, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, renders nursing services to an individual in the capacity of a care provider, that is, in a professional nurse-patient therapeutic relationship, these nursing services may be exempt. If the service does not involve a relationship between the RN and the individual and the nurse is not a care provider of the individual, this would indicate that there is no nurse-patient relationship. Accordingly, a service provided by a licensed or registered nurse will not be exempt for GST/HST purposes even if the service is provided within the scope of a nursing practice if that service is not within the context of a nurse-patient relationship.
Service 1: Drive-through testing
In consideration of the facts pertaining to the drive-through rapid COVID-19 testing services that your Client provides, the supply of such testing is that of a supply of a service that is performed in the presence of the individual to whom it is rendered. The RN is contracted to administer the test and therefore acting within the nursing scope of practice in the province in which the service is offered. The RN is acting within her capacity as a care provider to the individual in the context of a nurse-patient relationship. Hence, the service can be characterized as a nursing service supply when it meets all of the three required criteria.
Service 2: Virtual consultation with an RN
In consideration of the facts pertaining to the virtual consultations with an RN that your Client provides, the supply of such virtual consultations is that of a supply of a service that is performed in the virtual presence of the individual to whom it is rendered. The RN is contracted by the Client to perform technical training to individual users on how to self-administer the test kit. The RN is therefore using her knowledge to explain the procedures of testing and to provide care and support. Moreover, since the Client only contracts with RNs to offer such consultations, and since the services are within the scope of nursing practice in the province in which they are offered and that the RN is acting within the capacity of a care-provider in the context of a nurse-patient relationship, the virtual consultation service can be characterized as a nursing service supply when it meets all of the three required criteria.
As previously stated, a supply of a nursing service is an exempt supply for purposes of the GST/HST pursuant to section 6 of Part II of Schedule V. However, it is necessary to determine if this supply is excluded from the exemption because it is a cosmetic service supply or because it is not a qualifying health care supply pursuant to sections 1.1 and 1.2 of Part II of Schedule V.
Qualifying health care supply
It is important to note that the application of section 6 of Part II of Schedule V is limited by sections 1.1 and 1.2 of that Part (Footnote 5) . Sections 1.1 and 1.2 deem supplies that are made for cosmetic purposes and supplies that are not qualifying health care supplies to not be included in Part II of Schedule V.
A qualifying health care supply is defined in section 1 of that Part to mean a supply of property or a service that is made for the purpose of:
a) maintaining health;
b) preventing disease;
c) treating, relieving or remediating an injury, illness, disorder or disability;
d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability; or
e) providing palliative health care.
Read together, the provisions provide that the exemption under section 6 of that Part is dependent upon the purpose for which the supply is made. For the exemption to apply, the supply has to be made for at least one of the enumerated qualifying health care supply purposes and not be a cosmetic service supply.
In the present case, no further consideration was given to section 1.1 of Part II of Schedule V as the Client’s offered services are clearly not cosmetic service supplies or in respect of cosmetic service supplies. On the other hand, additional consideration was given to section 1.2 of Part II of Schedule V as it plays an important and determinant role in limiting the exemption of section 6 (nursing services) as explained below.
Services 1 and 2: Drive-through testing and Virtual consultation with an RN
Based on the facts, when booking online for either a drive-through test or a virtual consultation the Client’s customers have a choice of selecting between “travel” or “other” as the reason for testing. In the application of section 1.2 of Part II of Schedule V, the purpose of a supply is the reason why the supply is being made and has to be the direct purpose. The fact that an individual may ultimately receive health care benefits as a result of the supply does not necessarily make this the purpose of the supply. It is important to note that a link between a supply and the receipt of health care benefits is not always indicative that the purpose of the supply was to provide health care services (and as a result, the purpose of the supply is not necessarily one that meets the purposes set out in the definition of the term "qualifying health care supply").
Hence, a supply of a drive-through testing service or a supply of a virtual consultation that is made for the purpose of satisfying the requirements of travel conditions or as a requirement for entering a workplace would not be a qualifying health care supply as defined in section 1 of Part II of Schedule V. In one instance, the purpose of the supply is to help determine the suitability of an individual to travel, in the other instance, the purpose of the supply is to assist the employer in making a decision on whether or not to allow an individual to physically come into the workspace.
Where the purpose of the supply of Service 1 and Service 2 is not included in paragraphs (a) to (e) of the definition of "qualifying health care supply" in section 1 of Part II of Schedule V, the supply would not be an exempt nursing service.
For more information on the expression "qualifying health care supply", please refer to GST/HST Notice 286, Draft GST/HST Policy Statement – Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.
Nursing service or nursing personnel
The Client requires the services of a placement agency that provides it with the personnel it needs. At the time of the request, the Client had a verbal agreement set-up with a third-party placement agency for the provision of RNs in which it is agreed that the agency will provide competent personnel for the positions that the Client must fill to perform the required tasks.
Where a placement agency supplies nurses to a facility such as that of your Client’s, the agency’s supply must be analyzed separately from any supply ultimately made by the operator of the facility (the Client). While certain activities performed by a registered nurse to the facility may, in certain circumstances amount to a nursing service supplied by the operator of the facility to an individual and rendered within a nurse-patient relationship, this does not necessarily translate to a supply of a nursing service made by the agency to the facility.
Under a transactional tax system such as the GST/HST, exempt status applies to the supply and not to the supplier. The end use of a registered or licensed nurse by the clients of the placement agency does not define the supply made by the agency to its clients. Whether the agency's supply of nurses to your Client is a nursing service or not depends on the facts, which would include the terms of the agreement between the parties and the degree of the Client’s responsibility to their patient customers for the nursing care provided. No documentation of any written contract or agreement has been provided for the analysis of the situation as it pertains to your Client. For more information, please refer to the Excise and GST/HST News – No. 89 (Summer 2013), Supplies of nursing services versus a supply of nursing personnel.
ADDITIONAL INFORMATION
Registration
Subsection 240(1) states, in part, that every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada must register for the GST/HST, except where the person is a small supplier. Exempt supplies are not considered to be made in the course of a commercial activity.
Generally, a person is a small supplier if their total revenues and those of its associates from taxable supplies are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter. For additional information on registration, please refer to GST/HST Memorandum 2.1, Required registration and GST/HST Memorandum 2.2, Small suppliers.
Input tax credits
Generally, a GST/HST registrant is eligible to claim input tax credits (ITCs) for the GST/HST payable or paid on property or services acquired for consumption, use or supply in the course of the registrant's commercial activities. Exempt supplies are not considered to be made in the course of a commercial activity. For more information on the general rules for claiming ITCs and methods for calculating ITCs, see GST/HST Memorandum 8.1, General Eligibility Rules.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-4626. 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,
Amal Khorchid
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 RSA 2000, c. H-7 | Health Professions Act | CanLII:
https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-h-7/latest/rsa-2000-c-h-7.html
2 Scope of Practice for Registered Nurses (bccnm.ca): https://www.bccnm.ca/Documents/standards_practice/rn/RN_ScopeofPractice.pdf
3 B.C. Reg. 224/2015 as amended.
4 Part 1 of the Basis for Scope of Practice: Standards, Limits, Conditions for Registered Nurses in BC. https://www.bccnm.ca/Documents/standards_practice/rn/RN_ScopeofPractice.pdf
5 Section 1.1 of Part II of Schedule V provides that, "For the purposes of this Part, other than section 9, a cosmetic service supply and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in this Part."
A "cosmetic service supply" is defined in section 1 of Part II of Schedule V to mean, "a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes".
Section 1.2 of Part II of Schedule V provides that, "For the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a qualifying health care supply is deemed not to be included in this Part."
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