14 July 2004 GST/HST Interpretation 53036 - Application of the GST/HST to potential out-of-court settlement

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:

Thank you for your letter XXXXX, with attachments, concerning the application by the XXXXX for designation both as a "hospital authority" and as a "municipality" for the provision of municipal services for purposes of the Goods and Services Tax (GST) / Harmonized Sales Tax (HST).

XXXXX

XXXXX

XXXXX

XXXXX

You also provided the following documents:

•   XXXXX, Statement of Housing Program Expenditures for the Year Ended XXXXX.

•   XXXXX, Non-Consolidated Financial Statements for the Year Ended XXXXX.

•   XXXXX, Statement of Housing Program Expenditures,

XXXXX.

•   XXXXX, Non-Consolidated Financial Statements,

XXXXX.

We have reviewed your submission but as discussed with you XXXXX, we have not been provided with sufficient information to determine whether XXXXX is eligible for designation as a "hospital authority" or as a "municipality" for the provision of municipal services. To provide you with additional direction concerning this matter, I have referred to your submission and discuss the additional information required for each designation request.

Request for designation as a "hospital authority"

As previously discussed, in order to be designated as a hospital authority, XXXXX must demonstrate that it operates a public hospital that meets the criteria set out in GST/HST Memoranda Series 25.2 Designation of Hospital Authorities. I have enclosed a copy of the memorandum for your reference.

In addition, I have reproduced the criteria below and provided explanation about how the criteria may be supported.

•   Established and operated otherwise than for profit.

Generally, an organization that is established and operated other than for profit will include objectives that support this position in the documents that establish the organization. Therefore, documents that attest to the establishment and mandate of the XXXXX may support that the organization meets this criterion.

Based on the information available, XXXXX we are prepared to accept that XXXXX meets the above criterion.

•   Recognized as a public hospital by the government of the province in which it is located.

We consider public hospitals to be facilities that receive provincial/territorial funding and are accountable for spending public money. In addition, these facilities provide services to the public. Public hospitals are recognized and regulated by the provincial or territorial government. Public hospital facilities may be identified in the provincial legislation that applies to hospitals, in regulations, by ministerial orders or in other official instruments. Therefore, where XXXXX is operating facilities that are public hospitals, it should provide the documents that support that the facilities are recognized as public hospitals by the provincial government.

•   Operated for the medical or surgical treatment of the sick or injured.

We consider that a facility that is established for the purpose of providing medical and/or surgical treatment would have available an organized medical staff comprised of licensed physicians and surgeons, surgical facilities, clinical laboratories and radiological facilities providing x-ray and other diagnostic services, a pharmacy and the maintenance of medical records on each patient. Evidence that this criterion has been met may include medical bylaws and publications (pamphlets, financial statements, etc.) that describe the facilities and services available at each hospital site.

•   Provides and maintains in-patient beds and services.

We consider that a facility that provides and maintains in-patient beds and services would have available accommodation in the facility, nursing services by registered nurses on a 24-hour basis and dietary services directed by qualified personnel to provide food for patients. Evidence that this criterion has been met may include admission criteria for patients, standards for the provision of nursing services and information about the food services available to patients.

Request for designation as a "municipality" for purposes of section 259(4) of the Excise Tax Act.

As previously discussed, the Minister may designate a person to be a municipality in respect of certain activities specified in the designation that involve the making of supplies (other than taxable supplies) of municipal services. Generally, the delivery of supplies of 'social housing' such as the supply of long term accommodation on a rent geared-to-income basis for which government subsidy is received may be an 'activity specified in the designation'.

In your letter you state that XXXXX is XXXXX.

I have reviewed the Statements of Housing Program Expenditures. Both statements refer to 'housing program expenditures' which are represented as a list of "projects" with certain types of expenditures (Property Taxes, Fuel Costs, Utility Costs, Contract Services, Ordinary Repairs and Maintenance, Major Repair Works and Replacements ) recorded beside each project as well as the total expenditure for each project. The Financial Statements identify 'housing ' as a program area of responsibility. However, there are no details about the program.

In order to determine whether XXXXX may be designated as a municipality for purposes of subsection 259(4), we require additional information about the activities undertaken by XXXXX that are the delivery of social housing. The following list of questions may aid you in ascertaining the additional information required. This information may be included in program documents, in copies of agreements between XXXXX and housing operators or between XXXXX and individuals benefiting from the housing accommodation.

Under what authority and to what extent is XXXXX responsible for social housing?

What are terms and conditions that apply to the social housing program?

How is the delivery of social housing program funded?

Does XXXXX own or lease residential complexes so that it supplies long term accommodation on a rent geared-to-income basis?

Does XXXXX enter into landlord-tenant agreements with individuals?

Does XXXXX enter into operating agreements with operators of residential complexes who in turn enter into landlord-tenant agreements with individuals?

Is there government subsidy? - to the operator? - to the individual? How is the subsidy calculated?

Should you have further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4390.

Yours truly,

S. Leclaire
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2004/06/03 — RITS 33953 — Tax Application of Road Construction Services Provided by the City of XXXXX to the Province XXXXX