16 November 2004 GST/HST Interpretation 49335 - Section 180 - Entitlement to Input Tax Credit

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

This is in reply to your letter XXXXX in which you request our opinion concerning the GST treatment of a site lease in XXXXX ("the Park"). We apologize for the delay in responding.

The following facts are based on your letter and our conversation XXXXX. All references are to the Excise Tax Act ("ETA").

Statement of Facts

1. The Park is located in XXXXX. It contains XXXXX seasonal campground sites and an additional XXXXX residential sites. The Park does not qualify as a "residential trailer park" as that term is defined subsection 123(1) of the ETA.

2. You and your wife reside in a unit (the "Unit") located on one of the residential sites. The Unit was manufactured by XXXXX.

3. The Unit is equipped with complete plumbing, electrical and heating facilities. The Unit was designed and manufactured to withstand environmental conditions XXXXX such that it is comfortably habitable throughout the entire year. The Unit was fully completed at XXXXX.

4. The Unit was towed to your site using a special tow vehicle and required a permit to do so. The Unit was installed on metal pylons resting on a concrete pad. The Unit's undercarriage (including the wheels) and tow tongue were then removed.

5. A three-dimensional living room module was delivered and attached to the Unit. The module was fully completed at XXXXX and required no additional construction; the only work remaining was to simply attach the module to the Unit.

6. A veranda and deck were subsequently constructed at the front of the Unit and plastic skirting was installed around its perimeter.

7. The Unit is XXXXX feet wide, has approximately XXXXX square feet of floor space, and consists of the aforementioned living room, a full bathroom, master bedroom and full kitchen.

8. The Unit is connected to the Park's plumbing, electrical and heating service facilities. All of these facilities are made available to the Unit throughout the year.

9. The water system that services your site remains in service throughout the year. The system was developed and installed at a sufficient depth to resist the occurrence of pipe ruptures during the winter months. In addition, the pipes bear heat cables that prevent the aboveground portions of the system from damage during cold weather.

10. Pursuant to a lease agreement with the Park, you may occupy the Unit for a maximum of XXXXX days per year. Under the agreement, you may choose the days during the year that are suitable to you.

11. The Unit has been your place of residence XXXXX. You reside in the Unit during the winter months and your mail is delivered to the Unit year-round. The roads in the area of the Park containing the residential sites are plowed, sanded and salted as necessary for the day-to-day enjoyment of those sites. Under the lease agreement, the Park is also responsible for plowing your site's driveway.

12. XXXXX

Ruling Requested

The lease of the site is an exempt supply.

Ruling Given

The lease of the site is an exempt supply.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Supplies of real property by way of lease are generally subject to the GST/HST unless a specific provision applies to exempt them. Section 7 of Part I of Schedule V exempts the following:

A supply

(a) of land (other than a site in a residential trailer park) made, under a lease, licence or similar arrangement which provides for continuous possession or use of the land for a period of at least one month, to

(i) the 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, or

(ii) a person who is acquiring possession of the land for the purpose of constructing a residential complex on it in the course of a commercial activity,

(b) of a site in a residential trailer park made, under a lease, licence or similar arrangement which provides for continuous possession or use of the site for a period of at least one month, to the owner, lessee or person in occupation or possession of

(i) a mobile home, or

(ii) a travel trailer, motor home or similar vehicle or trailer,

situated or to be situated on the site...

Since the Park is not a residential trailer park, only the exemption in subparagraph 7(a)(i) is relevant to the present case. For purposes of that subparagraph, a "residential unit" is defined to include a "mobile home". The latter term is defined in subsection 123(1) of the ETA as follows:

"...a building, the manufacture and assembly of which is completed or substantially completed, that is equipped with complete plumbing, electrical and heating facilities and that is designed to be moved to a site for installation on a foundation and connection to service facilities and to be occupied as a place of residence, but does not include any travel trailer, motor home, camping trailer or other vehicle or trailer designed for recreational use..."

In addition, Policy Statement P-223, The Meaning of "manufacture and assembly of which is completed or substantially completed" in the Definition of "Mobile Home (enclosed) effectively includes in the definition of "mobile home" buildings that are comprised of one or more components and that otherwise meet the remaining criteria delineated in the above definition.

The facts indicate that the Unit bears the essential attributes of a "mobile home" as specified above. Specifically, the principal unit and living room module are completely manufactured and installed on a concrete foundation. In addition, the Unit is connected to all of the required service facilities and is occupied by you and your wife as a place of residence. Further, since the Unit is manufactured to withstand the environmental conditions XXXXX throughout the course of a year, it does not fall within the standard normally attributed to a travel trailer, motor home, or camping trailer.

Given that the Unit is connected to utilities, installed on a concrete pads and skirted, left in place for an indefinite period of time, available for use on a year round basis and constitutes your place of residence, it is our opinion that the Unit is affixed to its site for purposes of subparagraph 7(a)(i) above. Consequently, the lease of the site is an exempt supply.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8816.

Yours truly,

Paul Hawtin
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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