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: 175147
Business Number: […]
Subject: GST/HST RULING
Application of the GST/HST to supplies of services made by a determined municipality to a regional 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 (“GST”)/Harmonized Sales Tax (“HST”) to supplies made by the […][…] Conservation Authority and the Regional Municipality […]. 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 […] Conservation Authority (the “Authority”) was established by Order in Council by the Minister of Natural Resources (“Minister”) under the Ontario Conservation Authorities Act (the “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 […]
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.
4. Conservation authorities act in accordance with the provincially approved policy document, Policies and Procedures for Conservation Authority Plan Review and Permitting Activities. This document summarizes the activities of conservation authorities as follows:
The fundamental provincial role for all CAs focuses on water related natural hazard prevention and management and includes flood and erosion control. CAs may undertake the following roles and activities:
i. Regulatory Authorities - Under Section 28 of the CA Act, subject to the approval of the Minister of Natural Resources and in conformity with the Provincial Regulation 97/04 governing the content, CAs may make regulations applicable to the area under its jurisdiction to prohibit, restrict, regulate or give required permission for certain activities in and adjacent to watercourses (including valley lands), wetlands, shorelines of inland lakes and the Great Lakes-St. Lawrence River System and other hazardous lands.
ii. Delegated ‘Provincial Interest’ in Plan Review - As outlined in the Conservation Ontario/ Ministry of Natural Resources (MNR)/Ministry of Municipal Affairs and Housing (MMAH) Memorandum of Understanding (MOU) on CA Delegated Responsibilities (Appendix 1), CAs have been delegated responsibilities from the Minister of Natural Resources to represent the provincial interests regarding natural hazards encompassed by Section 3.1 of the Provincial Policy Statement, 2005 (PPS, 2005). These delegated responsibilities require CAs to review and provide comments on municipal policy documents (Official Plans and comprehensive zoning by-laws) and applications submitted pursuant to the Planning Act as part of the Provincial One-Window Plan Review Service.
iii. Resource Management Agencies - In accordance with Section 20 and 21 of the CA Act, CAs are local watershed-based natural resource management agencies that develop programs that reflect local resource management needs within their jurisdiction. Such programs and/or policies are approved by the CA Board of Directors and may be funded from a variety of sources including municipal levies, fees for services, provincial and/or federal grants and self-generated revenue.
iv. Public Commenting Bodies - Pursuant to the Planning Act, CAs are ‘public commenting bodies’, and as such are to be notified of municipal policy documents and planning and development applications. CAs may comment as per their Board approved policies as local resource management agencies to the municipality or planning approval authority on these documents and applications.
CAs may also be identified as commenting bodies under other Acts and Provincial Plans as outlined under Section 2.0 of this document and Appendix 4.
v. Service Providers - Individual CAs may enter into service agreements with federal and provincial ministries and municipalities to undertake regulatory or approval responsibilities and/or reviews (e.g. reviews under the Fisheries Act Section 35; septic system approvals under the Ontario Building Code).
CAs may also perform a technical advisory role to municipalities, as determined under the terms of service agreements. These services may include, matters related to policy input and advice, the assessment or analysis of water quality and quantity, environmental impacts, watershed science and technical expertise associated with activities near or in the vicinity of sensitive natural features, hydrogeology and storm water studies.
vi. Landowners - CAs are landowners, and as such, may become involved in the planning and development process, either as an adjacent landowner or as a proponent. Planning Service Agreements with municipalities have anticipated that as CAs are also landowners this may lead to a conflict with the CA technical advisory role to municipalities. This potential conflict of interest is addressed by establishing a mechanism for either party to identify a conflict and implement an alternative review mechanism as necessary.
5. Consistent with the regulatory function summarized in item i. in fact 4 above, the Authority made Ontario Regulation […] Generally, among other things, the regulation […] [ensures written permits are required for activities] in or on certain areas within the Authority’s jurisdiction […].
6. Pursuant to paragraph 21(1) (m.1) of the CA Act, which provides the Authority the power to charge fees for services approved by the Minister, the Authority implemented a Planning and Development Fees Policy and Schedule. You provided us with a version of the policy and schedule […]. The schedule lists a multitude of fees, which fall under the following three categories:
a. Applications made under the Planning Act
b. Applications made under the Conservation Authorities Act and […]
c. Applications made under the Conservation Authorities Act and […]
From more current information available on the Authority’s website, the most recent schedule […] organizes the fees into the following […] categories:
- Applications made under the Conservation Authorities Act and […]
- Large Fill Proposals
- Applications made under the Planning Act
- Environmental Compliance Approval (ECA) Review
- Technical Review (Non-Application)
7. In addition to the above user fees, the Authority also derives funding through municipal levies and provincial grants. […]
The Regional Municipality […]
8. The Regional Municipality […] (the “Region”) is an upper-tier municipality […]. The Region is a municipality for GST/HST purposes.
9. The Region is […][a member municipality] of the Authority. It has many large and complex capital, transportation, water, and wastewater infrastructure projects falling within areas under the Authority’s jurisdiction. Therefore, it must frequently use the Authority’s services and apply to the Authority for various permits.
10. […], the Authority and the Region entered into a Service Agreement (the “Agreement”) […]. In general, the parties agreed that the Region would provide the Authority with additional funding, and the Authority would dedicate a team of qualified and properly trained staff to meet the Region’s requirements on a timely basis within agreed upon service delivery standards.
11. According to […], the purpose of the Agreement is to define […][the roles and responsibilities of the parties under the Agreement]
13. […] of the Agreement provides, in part, that “(The Authority) shall commit a staff team to review and process Regional Applications”. “Regional Applications” is defined […] as “…applications under […][the Authority’s Regulation] and other such applications as (the Authority) is legislated to review.” […].
14. […] of the Agreement also provides that “(The Authority) shall make adequate […][staff] available as required to meet (the Authority’s) obligation to meet the Service Delivery Standards set out in […][the Agreement]
15. […] to the Agreement delineates the service standards […].
16. […][Information under the Agreement about] the amount payable to the Authority by the Region […].
17. In addition […] the Agreement provides that the Region will pay “…all reasonable application review fees as charged by the Authority as per (the Authority’s) approved fee schedule […] noted in fact 6 above.
18. […] of the Agreement states that, “Nothing in this Agreement shall be construed as a contract of employment between the Region and (the Authority) or its [staff].
You would like to know whether the supply of the Service made by the Authority to the Region is subject to the GST/HST.
Based on the facts set out above, we rule that the supply of the Service made by the Authority to the Region is subject to GST/HST.
Generally, every recipient of a taxable supply (other than a zero-rated supply) made in Canada is required to pay GST/HST on the value of the consideration for the supply pursuant to subsections 165(1) and 165(2). An exempt supply is not subject to GST/HST and is included in Schedule V.
To determine the GST/HST treatment of a supply, it is necessary to clarify and properly characterize the nature of the supply. In this case, the Authority had been providing technical input and advice and processing the Region’s applications for permits in the ordinary course of its activities. It had been funding these activities through user fees and municipal levies. However, the Region was only one of many stakeholders requiring the Authority’s services, and the timeliness and quality of the services were subject to the limits of the Authority’s funding.
To improve the timeliness and enhance the quality of the services provided by the Authority to the Region, the two parties agreed that the Region would provide the Authority with additional funding, and the Authority would dedicate a staff team […] that would provide services and process Regional permit applications within agreed upon service standards (i.e., the Service Delivery Standards). The Authority would continue to charge fees in respect of the services under its standard fee schedule where applicable (e.g., where the Authority issued a permit to the Region).
In short, the additional funding would enable the Authority to hire and train additional staff and form a team of qualified staff dedicated exclusively toward servicing the needs of the Region. This in turn would enable the Authority to meet the agreed upon service delivery standards. As a result, in our view, the additional funding paid by the Region to the Authority under the Agreement is not consideration for a supply of technical input and advice or the processing of Regional permit applications. Rather, it is consideration for a supply of a service of ensuring there is a dedicated staff team to exclusively address the needs of the Region within agreed upon service delivery standards. As there is no exemption that would apply to this supply, the supply is subject to the GST/HST.
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 that none of the above issues 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