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: 175153
Business Number: […]
Dear [Client]:
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 […] (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:
[…] [The Authority]
1. The Authority was established by Order in Council by the Minister of Natural Resources 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.
4. Section 21.1(3) of the CA Act states that an authority may enter into a memorandum of understanding with a municipality situated in whole or in part within its area of jurisdiction in respect of programs and services that the authority will provide on behalf of the municipality.
5. The Authority has responsibilities under the Ontario Clean Water Act, 2006 (CW Act). The purpose of the CW Act is to protect existing and future sources of drinking water by enforcing a source protection plan as defined in subsection 2(1) of the CW Act.
Subsection 4(1) states that the area over which a conservation authority has jurisdiction under the CA Act is established as a drinking water source protection area for the purposes of the CW Act. Subsection 4(2) stipulates that the conservation authority shall exercise and perform the powers and duties of a drinking water source protection authority under the CW Act for the source protection area established by subsection (1).
6. Paragraph 47(1)(a) of the CW Act provides that except where otherwise provided, the council of a single-tier municipality is responsible for the enforcement of Part IV of the CW Act, Regulation of Drinking Water Threats, in the municipality. Under subsection 48(1), the council of a municipality may enter into an agreement with a conservation authority for the enforcement of Part IV in the municipality with respect to activities identified in the agreement, and for charging the municipality the whole or part of the cost. Subsection 48(2) requires the conservation authority to appoint a risk management official and necessary risk management inspectors where an agreement under subsection (1) is in effect.
7. The Authority also has responsibilities under additional legislation in Ontario such as the Planning Act, Environmental Assessment Act (EA Act), and the Building Code Act (BC Act). The Planning Act sets out the ground rules for land use planning in Ontario. The EA Act provides environmental and planning expertise to landowners, developers, and its member municipalities. Under the BC Act, a conservation authority prescribed in the building code (Footnote 1) is responsible for the enforcement of the provisions of this Act.
The Municipality
8. The Municipality is a municipality for GST/HST purposes.
The Agreement
9. The Municipality entered into […][the Agreement] with the Authority effective [mm/dd/yyyy] pursuant to the CW Act.
10. The Agreement is entered into by the Municipality for the purpose of appointing the Authority as the agent of the Municipality to carry out enforcement and jurisdictional rights under Part IV of the CW Act, as part of implementation of the […] Source Protection Plan. The Municipality is located within the […] Region, as set out in Ontario Regulation […] .
11. […] of the Agreement states that under section 4 of the CW Act the Authority serves as the Source Protection Authority for the […] Source Protection Area. Ontario Regulation […] , under the CW Act, designates certain municipalities as “participating municipalities” for the Authority when it acts as the Source Protection Authority under the CW Act. The Municipality is one of the participating municipalities located within that Source Protection Area.
12. Under […] of the Agreement, the Municipality appoints the Authority as the agent of the Municipality to carry out enforcement under Part IV of the CW Act within the Municipality, subject to the terms of the Agreement. Under […], the Authority accepts the appointment and agrees to act as agent of the Municipality for the duties and enforcement responsibilities of Part IV of the CW Act for the lands located within the Municipality.
13. “Source Protection Authority” is defined in […] of the Agreement to mean a Conservation Authority or other person or body that, under subsection 4(2) or section 5 of the CW Act, is required to exercise and perform the powers and duties of a drinking water Source Protection Authority under the CW Act. “Source Protection Plan” is defined in the same section to mean a drinking water source protection plan prepared under the CW Act.
14. Under […] of the Agreement, the Authority is responsible for all the powers and duties of an enforcement body under Part IV of the CW Act. The duties and powers included, but are not limited to, appointing Risk Management Officials and Risk Management Inspectors necessary for the enforcement of Part IV of the CW Act; providing mapping to the Municipality and establishing protocols in consultation with the Municipality to ensure Part IV requirements are incorporated into the review of applications under the Planning Act and Building Code Act, as well as reviewing those applications; negotiating, reviewing and accepting risk assessments under the CW Act; conducting inspections; maintaining records, preparing documentation and reporting annually on activities as required under the CW Act.
15. […] of the Agreement states that the Municipality shall adhere to agreed upon protocols to ensure Part IV of the CW Act requirements are incorporated into the review of building permit applications, applications under provisions of the Planning Act, and to generally cooperate with and assist the Authority with the protection of safe drinking water.
16. Under […] of the Agreement, the Municipality is required to provide information, and data required by the Authority to carry out their powers and duties under Part IV of the CW Act. The Authority is also required to provide records related to their powers and duties under Part IV of the CW Act to the Municipality, upon request. In the event of termination of the Agreement, records will be transferred to the Municipality.
17. […] of the Agreement states that the “Municipality is responsible for the costs of the enforcement of Part IV of the CW Act. A Memorandum of Understanding (MOU) has been established between the Municipality and the Authority identifying costs and timelines for phasing of the services under […] of the Agreement, and attached to the Agreement […].
18. Under […] of the Agreement, the Municipality collects and retains all user fees payable by any person for work performed by the Authority under the Agreement. The fees will be for the purpose of cost recovery and, in accordance with sub-section 55(2) of the CW Act, the fees will not exceed the anticipated reasonable costs of the enforcement of Part IV of the CW Act.
19. Under […], the Authority will seek prior approval of the Municipality prior to any expenditure for an extraordinary cost. The Municipality will reimburse the Authority for such reasonable costs, which are directly related to the Authority executing its duties and powers under this Agreement.
20. Under […] of the Agreement, the Authority appoints the necessary Risk Management Officials and Risk Management Inspectors pursuant to subsection 48(2) of the CW Act. These officials and inspectors are required to be qualified as prescribed by the Clean Water Act Regulation .
21. […] sets out that the Agreement shall continue in force for a period of […], commencing on [mm/dd/yyyy], and […].
22. […]. The MOU provides details in regards to timing of services to be provided and the funds required by the Authority from the Municipality to complete these services. The services are phased over a […] period and will be based on a cost recovery basis. […][X] identifies the budget for completing responsibilities for each year of the Agreement. The fees include the establishing and maintaining of the risk management office, negotiating or establishing risk management plans, reviewing applications under the Planning Act and building code, reviewing and accepting risk assessment, preparing documentation and making provisions to attend Environmental review tribunal, conducting inspections and annual reporting.
23. Progress reports are submitted to the Municipality […]. The report will be accompanied by an invoice for the expenditures during the reporting period. The total of all invoices submitted by the Authority cannot exceed amounts identified in [X] without prior written authorization from the Municipality.
RULING REQUESTED
You would like to know whether the supply of the enforcement services made by the Authority to the Municipality is subject to the GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that the supply of enforcement services made by the Authority to the Municipality under the terms of the Agreement is a taxable supply and the consideration for the supply is subject to GST/HST.
EXPLANATION
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 enforcement services by the Authority, nor are there any other provisions that would relieve tax on this supply. Accordingly, the Authority’s supply of enforcement services 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 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 has failed to charge 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.
Yours truly,
Cheryl Nazareth
Senior Rulings Officer
Municipal Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 Building code refers to regulations made under section 34 governing standards for the construction and demolition of buildings.
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