25 July 2005 GST/HST Interpretation 60361 - GST on supplies made by tour operators

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 subsequent to our telephone conversation XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to monitoring services provided to Indians.

During our conversation you provided the following information with respect to XXXXX. XXXXX. XXXXX. Correspondence on issues that were previously made to XXXXX are now to be directed to XXXXX.

Background

As discussed during our telephone conversation, the Canada Revenue Agency (CRA) wishes to provide current information to XXXXX on the subject of providing monitoring services to Indians.

The following is background information as to what has occurred since 1991 for GST/HST purposes on this issue. On XXXXX, a letter was written to XXXXX with respect to the tax status of monitoring services provided to Indians. Where the equipment used in providing the monitoring services was located off a reserve, the services were taxable. On XXXXX, a letter was issued that revoked the original position taken in the XXXXX letter, and provided the CRA's revised position on the subject. The revised position treated monitoring services the same as telephone and hydro, which are relieved of tax when provided to Indians and the hook-up is on a reserve. However, upon reviewing the subject, the position taken in the XXXXX letter is not the current position held by the CRA.

The purpose of this letter is to revoke the position taken in the XXXXX letter, and to provide the CRA's present position on the tax status of monitoring services when provided to Indians.

Please note that paragraph 17 of section 1.4 of Chapter 1 of the GST/HST Memoranda Series, Goods and Services Tax Rulings, states that: when the CRA issues a decision, and later finds that decision to be incorrect, the revocation may apply to those activities or transactions that take place after the date of the revocation. This letter revokes our letter of XXXXX, effective 30 days from the date of this letter and is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the above-mentioned memoranda.

Revised Interpretation Provided

The CRA's current position on the provision of monitoring services to Indians is as follows:

The physical location of the property being monitored is not the sole factor in determining the location of where a service takes place. In determining whether a service is wholly performed on a reserve, the location of the equipment involved in providing the service is taken into account.

A service supplied to an Indian is relieved of tax in accordance with Technical Information Bulletin B-039R GST Administrative Policy - Application of GST to Indians (B-039R) when the following conditions are met:

•   the service is performed totally on a reserve for an Indian who is on a reserve at the time the service is performed;

•   where the service is performed totally on a reserve for property, the property is situated on a reserve at the time the service is performed; or

•   where the service is performed off a reserve, the service is for real property interests on a reserve.

Where all aspects of a monitoring service are provided on a reserve to an Indian the service is relieved of GST/HST. Where any part of a service takes place off a reserve, the entire service is taxable at the rate of 7% in non-harmonized provinces and 15% in the harmonized provinces of New Brunswick, Nova Scotia, and Newfoundland.

Explanation

Section 87 of the Indian Act (IA) provides tax relief for "personal property of an Indian or band situated on a reserve". The administrative policy of the CRA concerning the application of GST/HST to the section 87 IA tax relief is explained in B-039R. The CRA's administrative guidelines are fully consistent with the relieving provisions affecting the personal property of an Indian situated on a reserve. In addition, the guidelines reflect governmental tax policy by extending relief to other supplies such as services acquired by Indians that meet the conditions of B-039R.

Generally, a supply of a service (other than a telecommunication service) will be seen as having been performed at least in part at a location off a reserve, and therefore not eligible for relief under B-039R, if:

•   the service requires a person to perform a task (i.e., the supplier acting through one or more of its employees), and the person performs or physically carries out the task off a reserve; or

•   the service requires the operations of the supplier's equipment (e.g. computer), and the equipment used in the task is located off a reserve at the time the service is performed.

Where any part of the service is performed off a reserve, the service is not performed totally on a reserve.

Also, B-039R provides relief on the acquisition of taxable services by Indians, whether performed on or off a reserve if the services are for "real property interests on reserve". As indicated in section 19.1 of the GST/HST Memoranda Series, Real Property, an interest is a general term to denote a claim, title, right or share in something. For example, the acquisition of legal services to draw up an agreement to lease real property on a reserve would be seen as a service acquired for "real property interests on reserve".

While a service acquired to physically protect or secure real property (e.g., monitoring services) on a reserve would be viewed as a service "in respect of real property" it would not be "for real property interests on reserve". Therefore, where a monitoring service is performed off a reserve, it would not be relieved of tax even if the service were for real property on a reserve. The supply would be taxable at 7%, or 15% if made in a harmonized province.

The foregoing comments represent our general views with respect to the subject matter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series as well as a copy of B-039R.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-7954.

Yours truly,

K. Chesterman
Aboriginal Affairs Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate

2005/06/30 — RITS 60577 — Delivery Requirements and Relief of GST on Property of an Indian or Indian Band Situated on a Reserve