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
Case Number: 175140
Business Number: […]
Subject: GST/HST RULING
Application of the GST/HST to supplies of services made by a determined municipality
Thank you for your telephone enquiry of [mm/dd/yyyy], and your subsequent correspondence providing additional information, concerning the application of the goods and services tax /harmonized sales tax (GST/HST) to supplies made by the […]Conservation Authority (Authority) to […][the City]. […]. We apologize for the delay in our response.
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 the facts as follows:
1. The Authority was established by Order in Council by the Minister of Natural Resources (Minister) under the Ontario Conservation Authorities Act (CA Act). The Authority is a registered charity. It was determined to be a municipality for GST/HST purposes under paragraph (b) of the definition of “municipality” in subsection 123(1) […]. It is registered for GST/HST purposes and operates under Business Number […].
2. According to section 20 of the CA Act, the objects of a conservation authority are to provide programs and services designed to further the conservation, restoration, development and management of natural resources, other than gas, oil, coal and minerals, in the area over which it has jurisdiction.
3. Section 21 of the CA Act lists the powers granted to conservation authorities for the purpose of accomplishing their objects. These powers generally enable conservation authorities to perform all such acts as are necessary to further their objects. In particular, paragraph 21(1)(a) allows conservation authorities to study watersheds and determine services whereby the natural resources of the watershed could be managed, paragraph 21(1)(j) allows conservation authorities the power to control the flow of surface waters in order to prevent floods or pollution or to reduce the adverse effects thereof, and paragraph 21(1)(n) allows conservation authorities to collaborate and enter into agreements with municipal councils.
4. The authority to provide services to further its objects is provided in paragraph 21.1(1)(3) of the CA Act. Under section 23, the Minister may require a conservation authority to carry out flood control operations.
5. The City is a municipality for GST/HST purposes. It is one of the member municipalities of the Authority.
6. The City owns land adjacent to watercourses that are located in the jurisdiction of the Authority. These watercourses are urban creeks that are prone to overflowing and can lead to flooding. The watercourses need to be monitored by the Authority to determine how and when flooding occurs and how it can be mitigated. The data obtained from the Authority from monitoring these watercourses is useful to the City, as it may build infrastructure on this land in the future.
7. The City does not have the staff expertise (i.e., hydrologists) to perform monitoring activities, such as generating accurate data regarding water levels, the rate of flow and other hydrometric data. As a result, the Authority and the City entered into [the Agreement] on [mm/dd/yyyy].
8. According to […], the purpose of the Agreement is to define […][the roles and responsibilities of the parties under the Agreement]
9. […] of the Agreement provides that the term of the Agreement shall be for an initial term of […]. The parties may renew the Agreement […], subject to […] approval for the continued provision of the Services by the City and the Authority.
10. […] of the Agreement outlines the scope of the Service. It provides that the Authority shall commit to the annual operation and maintenance of […] flow gauge stations […]
11. The Authority owns the monitoring equipment which is used for data management and calibration. This equipment comprises physical instruments inside the […] flow gauge stations. […].
12. […] of the Agreement states that the Authority is responsible to provide [personnel] that have the relevant educational background and experience in the appropriate field(s). As outlined in […], the Authority shall ensure that the [personnel] receive appropriate training on all aspects of the Service to be provided to the City.
[Personnel] is not defined in the Agreement. However, you confirmed that the term means the provision of the Authority’s staff to deliver the monitoring service required under this Agreement.
13. The City’s responsibilities are outlined in […] of the Agreement and include:
- providing payments to the Authority,
- allowing the Authority’s staff continuous access to City property on which the flow stations are located, and
- providing assistance when requested by the Authority with watercourse maintenance and debris removal at […] flow stations.
14. […] of the Agreement states that water level and provisional flow information will be provided to the City in near real time via the Authority’s web portal. Data generated through this Agreement will be the joint intellectual property of the City and the Authority and can be reported, distributed or released by either party.
15. According to […] of the Agreement, starting in [yyyy], the annual cost of providing the Service is $ […] and may be subject to annual increases subject to inflationary costs. The Authority invoices the City in […][month X] of each year of the term of the Agreement.
You would like to know whether the supply of the Service provided by the Authority to the City is subject to GST/HST.
Based on the facts set out above, we rule that the supply of the Service made by the Authority to the City is a taxable supply and the consideration for the supply is subject to GST/HST.
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. Exempt supplies are not subject to the GST/HST and are included in Schedule V.
Certain supplies made by a municipality are exempt under Part VI of Schedule V. However, there are no exempting provisions in Part VI of Schedule V (or any other Part of Schedule V) that would exempt the supply of the Service by the Authority, nor are there any other provisions that would relieve tax on this supply. Accordingly, the Authority’s supply of the Service in Ontario is subject to the GST/HST.
Uncollected GST/HST – Retroactive invoicing of the GST/HST
Where a supplier makes a taxable supply (other than a zero-rated supply) in Canada, the supplier is required to report and remit the tax in its GST/HST return for the reporting period in which the tax was payable by the recipient (generally, the period in which an invoice for the consideration payable on the supply was issued by the supplier). The requirement to report and remit the tax in the proper reporting period does not change regardless of whether the supplier actually collected the tax in that period.
Where a recipient is liable to pay the GST/HST in respect of a taxable supply made by a GST/HST registrant and the supplier is required to collect the GST/HST, the recipient's liability is not discharged by the fact that the supplier fails to charge and collect the tax.
The disclosure requirements set out in the ETA require, in part, that a registrant making a taxable supply (other than a zero-rated supply) must clearly indicate to the recipient in the invoice, receipt or agreement in writing, the consideration paid or payable in respect of the supply and the applicable amount of tax, or that the amount of tax payable by the recipient for the supply is included in the consideration payable for the supply. In addition, upon request by the recipient of a taxable supply, the supplier is required to provide in writing such particulars of the supply as may be required by the recipient to substantiate its claim for an input tax credit or rebate in respect of the supply. For details on what information the supplier must provide under these circumstances, please refer to GST/HST Memorandum 8.4, Documentary Requirements for Claiming Input Tax Credits.
A supplier may issue an amended invoice or an additional invoice to account for the uncollected tax and to meet the disclosure requirements in the ETA. Where there are no contractual or common law restrictions to prevent the issuance of amended or additional invoices, the Canada Revenue Agency (CRA) will accept that the disclosure of an amount of tax payable may be met after the fact.
For information on the obligations of a GST/HST registrant, please refer to GST/HST Guide RC4022, General Information for GST/HST Registrants under the heading “Collecting the GST/HST”, and GST/HST Memorandum 3.1, Liability for Tax.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 416-659-5550. 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.
Senior Rulings Officer
Municipal Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate