12 October 2005 GST/HST Ruling 49332 - Tax Status of Supplies Made by [a Municipality]

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 letter is in response to your letter XXXXX.

All legislative references are to the ETA and the regulations therein, unless otherwise specified.

Statement of Facts

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Rulings Requested

(a) XXXXX

(b) XXXXX

Rulings Given

Based on the above set of facts, we rule that:

XXXXX

XXXXX

These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by these rulings provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect their validity, and all relevant facts and transactions have been fully disclosed.

Explanation

There is no exemption in the ETA that applies to the supplies made by XXXXX.

The small supplier threshold for persons who fall within the meaning of "public service body" as defined in subsection 123(1) is $50,000. This definition includes organizations that have been determined to be a municipality for purposes of paragraph (b) of the definition of "municipality" in subsection 123(1). As a determined municipality for purposes of the ETA, XXXXX is a registrant if its total worldwide revenues from taxable supplies in the last four consecutive calendar quarters and in any single calendar quarter are more than $50,000. If XXXXX is a registrant, the consideration for these supplies is subject to the GST/HST at the rate of 7%.

If XXXXX worldwide revenues from taxable supplies are $50,000 or less over the last four consecutive calendar quarters and in any single calendar quarter, it is a small supplier for purposes of the ETA and it does not have to register for GST/HST.

If, during any one calendar quarter, XXXXX total worldwide revenues from taxable supplies are more than $50,000, it will immediately stop being a small supplier and will be required to start collecting GST/HST on its taxable supplies made in Canada from the date of, and including, the supply that caused it to exceed the $50,000 threshold, even if XXXXX is not yet registered.

If XXXXX does not exceed the small supplier threshold amount in one calendar quarter, but does so over four consecutive calendar quarters, it will be considered to be a small supplier for those four calendar quarters and a month following those quarters. It would have to start collecting GST/HST on its taxable supplies made in Canada following that month.

Generally, provincial and territorial governments, which include departments or ministries, and certain of their Crown corporations, boards, commissions, and agencies, do not pay GST/HST on their taxable purchases if they provide certification. They are immune from the payment of tax by virtue of section 125 of the Constitution Act, 1867. We note that all provincial ministries are part of the XXXXX. XXXXX would not charge GST/HST on taxable supplies made to these persons if an authorized official provides evidence that they are a provincial or territorial department or entity. Such evidence could include a certification clause signed by an authorized official of a provincial or territorial government. This is a statement on provincial or territorial purchase documents that certifies that a provincial or territorial government is purchasing the goods or services with Crown funds. As the supplier, XXXXX must keep the purchase documents with the certification clause for audit purposes. Note that employees of a provincial government who make official business purchases in their own name have to pay GST/HST.

Similarly, supplies of services for real property on reserve made to First Nations are relieved of GST/HST where documentary evidence is provided. Please refer to the enclosed GST/HST Technical Information Bulletin, B-039R, GST Administrative Policy Application of the GST to Indians for detailed information regarding these supplies.

Although GST/HST may not be collected on supplies made to provincial and territorial governments and First Nations, XXXXX includes its revenue from these supplies in its calculation of total worldwide revenues from taxable supplies to determine whether it is a GST/HST registrant.

Other Information: Supplies Made to XXXXX

To ensure a complete response to your ruling request, we are providing the following additional information regarding the tax status of XXXXX supplies made to its member municipalities.

In our review of XXXXX activities and the provisions of the ETA that generally apply to municipalities, we identified paragraph 28(a) of Part VI of Schedule V as the exemption that would apply to the supplies made by XXXXX, which includes supplies made under the XXXXX. This provision exempts a supply between a municipal body and any of its para-municipal organizations.

A "municipal body" is defined in section 1 of Part VI of Schedule V as a municipality or provincially established designated body. "Para-municipal organization" is also defined in that section to include an organization (other than a government) of a municipal body that is owned or controlled by the municipal body. Where the municipal body is a municipality, the organization is established by the municipal body and the organization is determined under paragraph (b) of the definition "municipality" in subsection 123(1) be a municipality. The definition of "para-municipal organization" also sets out criteria for owned or controlled by a municipality as follows:

•   the municipal body owns all or substantially all of the organization's shares or assets, or it controls the disposition of the organization's assets such that the assets are vested in the municipal body in the event that organization is wound-up or liquidated, or

•   the organization is required to submit its periodic operating and, where applicable, capital budget to the municipal body for review and approval and a majority of the members of the organization's governing body are appointed by the municipal body.

On the basis of the facts set out above in this letter, we accept that XXXXX falls within the meaning of "para-municipal organization" of XXXXX, as that phrase is defined in the ETA. That is, XXXXX was established by a municipal body as demonstrated by XXXXX municipalities fall within the meaning of "municipal body" as defined in the ETA. With respect to the legislative criteria in the definition of "para-municipal organization" that XXXXX be owned or controlled by the municipal body that established it, we note the following:

•   XXXXX

•   XXXXX

XXXXX

Finally we note that XXXXX is determined under paragraph (b) of the definition "municipality" in subsection 123(1) to be a municipality.

XXXXX

As noted above, paragraph 28(a) of Part VI of Schedule V exempts a supply between a municipal body and any of its para-municipal organizations. Accordingly, the supplies made by XXXXX to the "municipal body"; XXXXX are exempt under paragraph 28(a) of Part VI of Schedule V. Please note that this ruling applies only to the extent that XXXXX continues to meet the legislative criteria with respect to the definition of "para-municipal organization". If there are any changes to the facts upon which this ruling was given, XXXXX this ruling may no longer apply.

XXXXX

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761. We also encourage you to contact XXXXX at our XXXXX GST/HST Rulings office at XXXXX if you require other information regarding XXXXX obligations and entitlements under the GST/HST.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Government Division
Excise and GST/HST Rulings Directorate

2005/10/25 — RITS 53126 — Sale of Vacant Land