2 February 2006 GST/HST Ruling 63274 - Supplies of tickets to an event

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 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to hotel accommodations. Your letter, in which you request a review of the ruling issued XXXXX regarding GST paid in respect of your stay at XXXXX (the "Hotel") XXXXX, was forwarded to the Excise and GST/HST Rulings Directorate for consideration.

You question whether GST was appropriately charged in respect of a consecutive series of weekly room rentals. In essence, it is your view that GST is not applicable on the supply of the hotel accommodations in question, that the GST paid by you in respect of the hotel accommodation was paid in error, and that, as such, you are entitled to a rebate for tax paid in error. A thorough review has been undertaken of all of the facts and information provided in this case, together with the ruling previously issued, and we are pleased to provide you with the results of our review.

All legislative references are to the Excise Tax Act (the "Act") and the regulations therein, unless otherwise specified.

Summary of Facts

You have provided a series of ten receipts issued to you by the Hotel. Each receipt is for a one-week stay at the Hotel. The receipts are dated from XXXXX. Each receipt is in the amount of $XXXXX. Two of the receipts bear a GST number.

A copy XXXXX of the classified section of the XXXXX newspaper XXXXX, has been provided. The column XXXXX contains an ad for the Hotel, showing a daily rate of $XXXXX and weekly rate of $XXXXX.

Information provided at the time by XXXXX the general manager of the Hotel confirmed that room rentals were limited to a maximum period of one week. The Hotel's practice was to provide accommodation for a duration of up to a week at any one time, depending on room availability.

In a recent telephone conversation with XXXXX, he confirmed that the weekly room rate at the time was $XXXXX. He further confirmed that the amount of $XXXXX reflected on the receipts provided to you includes 7% GST and a XXXXX% provincial room tax.

Application of GST/HST to the supply of residential accommodation

A supply of the use or right to use real property by way of lease, licence or similar arrangement is treated for GST purposes as a supply of real property. As a general rule, the supply of real property is subject to GST, unless the supply is specifically exempted. Most exemptions that affect the supply of real property are listed in Part I of Schedule V to the Act. In particular, section 6 of Part I of Schedule V exempts the supply of:

(a) a residential complex or a residential unit in a residential complex by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by an individual, where the period throughout which continuous occupancy of the complex or unit is given to the same individual under the arrangement is at least one month; or

(b) a residential unit by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by an individual, where the consideration for the supply does not exceed $20 for each day of occupancy.

Subject to the conditions set out therein, paragraph 6(a) of Part I of Schedule V exempts the supply of a "residential complex" or a residential unit in a residential complex. The definition of "residential complex" in subsection 123(1) of the Act excludes a building, or that part of a building, that is a hotel, a motel, an inn, a boarding house, a lodging house or other similar premises and all or substantially all of the leases, licences or similar arrangements, under which the residential units in the building or part are supplied, provide, or are expected to provide, for periods of continuous possession or use of less than sixty days.

Generally, the phrase "all or substantially all" is interpreted as meaning 90% or more. Accordingly, if at least 90% of the supplies of rooms in a hotel are for periods of less than 60 days, the building will be excluded from the definition of "residential complex". Under such circumstances, the hotel is not a "residential complex" within the definition under subsection 123(1), and the supply of the hotel rooms, regardless of the duration of the stay, will be taxable (unless exempted under another provision), as the exemption in paragraph 6(a) does not apply to a building that is not a "residential complex".

Alternatively, if it is determined that a particular hotel comes within the definition of a "residential complex", then the tax status of each supply of a hotel room must be determined in light of the conditions set out in paragraph 6(a). Supplies of accommodation in a hotel that meets the definition of residential complex will be exempt provided all the conditions for exemption under paragraph 6(a) are met.

Based on all of the facts and information provided in this case, the Hotel is not a "residential complex" as that term is defined under subsection 123(1) of the Act. As a result, the exemption under paragraph 6(a) of Part I of Schedule V is not applicable to the supply in question.

In addition, even in a situation where it was determined that the Hotel was not excluded from the definition of "residential complex", the supply of the hotel room in question would not be exempt under paragraph 6(a) since the remaining conditions therein are not met. The facts in this case indicate that the Hotel supplied the hotel room in question for a maximum rental period of one week. Although a hotel guest could, at the end of a given week, rent a room for an additional week, the supply of the hotel room under the particular arrangement was for a period of one week. The fact that during your stay at the Hotel XXXXX, a room was supplied to you for a consecutive series of weekly rentals does not alter the fact that each weekly supply of the hotel room constitutes a separate supply of hotel accommodation under an arrangement for less than one month. As a result, the supply of the hotel room in question is outside the scope of the exemption under paragraph 6(a) of Part I of Schedule V to the Act.

However, as noted above, paragraph 6(b) of Part I of Schedule V provides that the supply of a residential unit by way of lease, licence or similar arrangement for occupancy as a place of residence or lodging by an individual is exempt provided the consideration does not exceed $20 for each day of occupancy. In essence, rents charged for the use of a residential unit that is not within a residential complex are usually taxable, regardless of the period of occupancy, unless the unit is rented for $20 or less per day. A hotel that is not a residential complex must charge GST/HST on the rental of a unit for a period of continuous occupancy by an individual, regardless of duration, if the accommodation is provided at more than $20 per day.

The facts in this case indicate that the weekly room rate was $XXXXX. This amounts to a rate of $XXXXX per day. Given that the consideration for the room rental does not exceed $20 for each day of occupancy, the supply by the Hotel of the room in question is an exempt supply under paragraph 6(b) of Part I of Schedule V.

Where a person has paid an amount as or on account of tax that is not payable, the person may claim a rebate of that amount under subsection 261(1) of the Act. We have contacted XXXXX at the Summerside Tax Centre responsible for processing general rebate claims. A copy of this letter together with the background information on your claim has been forwarded to the Summerside Tax Centre for processing. Given that you initially contacted the Canada Revenue Agency XXXXX with respect to this matter, I am pleased to inform you that your rebate application will be dated effective XXXXX, the date of receipt of your letter. It is expected that your claim will be processed and a rebate cheque issued to you in the new year. In the meantime, please feel free to contact XXXXX should you wish to enquire about the status of your rebate.

We apologize for the delay in providing you with this positive response. If you require clarification with respect to any of the issues discussed in this letter, please call Marcel Boivin, Manager, directly at (613) 954-3772.

Yours truly,

Ivan Bastasic
Director
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2006/02/20 — RITS 64222R2 — Supplies of Psychological Assistant Services