20 February 2006 GST/HST Interpretation 64222R2 - Review of GST/HST ruling XXXXX - Application of GST/HST to hotel accommodations

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 further to your XXXXX message XXXXX and your letter XXXXX, as well as your letter of XXXXX, and our letters XXXXX, from our XXXXX Tax Services office, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your supplies of psychological assistant services made to two psychologists.

You are requesting that we review the GST/HST ruling XXXXX which found that your supplies of psychological assistant services to the psychologists XXXXX are taxable at the rate of 7% on the value of the consideration for these supplies pursuant to subsection 165(1) of the Excise Tax Act (ETA).

After careful consideration of your arguments as well as a further review of the exempting provisions, we are confirming the GST/HST ruling that your supplies of psychological assistant services to the psychologists identified above do not fall within the exemptions in paragraph 7(j) or section 10 of Part II of Schedule V to the ETA. In addition, we reconsidered whether the proposed amendment to the ETA to exempt certain services rendered in the practise of the profession of social work would apply to your supplies. As explained below, your supplies would not fall within the proposed amendment. As no other exemptions apply, your supplies are taxable at the rate of 7%.

The general rule under the ETA in section 165 is that all supplies of goods and services made in Canada are subject to the GST/HST at the rate of 7% or 15%. There are exceptions for certain health care services that are specifically identified as being exempt from the GST/HST, such as the exempting provisions noted above. We recognize that you contribute to the psychological services provided by the psychologists to their patients. However, for purposes of the ETA, the services you supply to the psychologists are distinct supplies from the services the psychologists supply to their patients, even though part of the psychologists' services may include activities performed by you. Accordingly, in order for your supplies made to the psychologists to be exempt, they must be described in a specific exempting provision in the ETA. As noted above, there is no exempting provision in the ETA for your supplies made to the psychologists.

As explained in the GST/HST ruling, paragraph 7(j) of Part II of Schedule V to the ETA exempts the supply of a psychological service rendered to an individual when the supply is made by a person who practises the profession of psychology and has the appropriate licence or certification in the province in which the service is supplied to practise that profession. As you are not a licensed or certified psychologist, this exempting provision does not apply to your services.

Section 10 of Part II of Schedule V to the ETA exempts certain prescribed laboratory, radiological or other diagnostic services generally available in a health care facility; and the administration of drugs, biologicals or related preparations in conjunction with the provision of these services, when these services are made on the order of a practitioner. Prescribed diagnostic services are serological tests, urinalysis, echocardiography, fluoroscopy, and diagnostic imaging such as x-ray, CT scanning, magnetic resonance imaging, mammography and ultrasound. A diagnostic service is comprised of the technique, test or study procedure, together with the report of findings and interpretation of results; i.e., the diagnosis.

You stated that you were trained by the psychologists to assist them in their collection of psychological test and other assessment data, standard history taking, and some routine treatment procedures. The psychologists delegated these activities to be carried out by you in their offices and under their direct supervision to assist them in making their diagnosis and providing psychological services to their patients. We understand that it is generally accepted that these activities may be carried out by an assistant under the direction of a psychologist. You also advised that the psychologists are legally responsible for all work you perform under their direction. In addition, we were informed that in carrying out these activities, you are functioning as an extension of the psychologists without any independent professional responsibility or status.

Your supplies of psychological assistant services made to the psychologists are not prescribed diagnostic services for purposes of section 10 of Part II of Schedule V and therefore, this exempting provision does not apply to these supplies. With respect to your activities related to psychometric testing, it is our view that these activities are not discrete diagnostic services. Rather, we understand that psychometric testing activities are limited to collecting data for the psychologists; these activities do not involve diagnoses. Rather, providing a diagnosis is a licensed act that can only be rendered by a licensed or certified psychologist. That is, the psychologist is the person responsible for interpreting test results and making a diagnosis.

We provided information in the GST/HST ruling on the proposed legislative amendment included in the Notice of Ways and Means Motion introduced on October 3, 2003, to exempt certain services rendered in the practice of the profession of social work. The proposed amendment will apply to services supplied by a person who practises the profession of social work, as it requires that these services be rendered within a professional-client relationship between the person and an individual and that the person be licensed or otherwise certified to practise the profession in the province in which the service is supplied. Where no such licensing or certification is required in the province, then the proposed amendment stipulates that the person must have the qualifications equivalent to those necessary to be so licensed or certified in a province where such a requirement exists.

The proposed amendment covers only certain social work services, which are described as services rendered to an individual within a professional-client relationship between the supplier and the individual, where those services are provided for the prevention, assessment or remediation of a physical, emotional, behavioural, or mental disorder or disability of the individual, or to assist the individual in coping with a disorder or disability, or to assist another person to whom the individual is related or to whom the individual provides care or supervision otherwise than in a professional capacity.

We understand that you are a registered social worker; however you advised that the services you supply to the psychologists are not services rendered in the practice of the profession of social work. Rather, you assist the psychologists by performing certain delegated activities under their direction and supervision. The information you submitted states that the psychologists are directly responsible and accountable for the activities you perform and, as noted above, that you are functioning as an extension of the psychologists without any independent professional responsibility or status.

Further, the activities you perform are considered to be psychological services for which the psychologists are directly responsible and accountable and are activities that are provided and billed by the psychologists in their names. We note that you provided us with a copy of a letter XXXXX that states that this is the appropriate treatment of your services as it relates to XXXXX services to XXXXX patients, and that this treatment flows from the XXXXX interpretation of the work of ancillary personnel working for a psychologist.

The totality of the information provided suggests that your supplies made to the psychologists are not services rendered in the practice of the profession of social work within a professional-client relationship with an individual. The services performed by you, which are directed and supervised by the psychologists, are not indicative of a professional-client relationship between you and the psychologists' patients. Therefore, the proposed amendment to exempt certain services rendered in the practice of the profession of social work would not apply to these services.

The Canada Revenue Agency is responsible for issuing interpretations and rulings to clients, such as businesses and tax professionals, on the application of the ETA and it Regulations, as passed by Parliament. To provide a ruling that your supplies are exempt from the GST/HST would entail an amendment to the ETA. With respect to the questions in your XXXXX letter about re-categorizing your services in a manner that would allow your supplies made to

XXXXX to be exempt under the ETA, please note that it is a question of fact as whether a supply falls within an exempting provision. You explained that you assist XXXXX in the course of XXXXX making supplies of psychological services to his patients. As noted in this letter, there is no exempting provision in the ETA that would apply to your supplies of psychological assistant services made to a psychologist and therefore, these services are taxable.

For further information on how the GST/HST ruling affects your business, you may contact GST/HST Rulings, XXXXX. You may also call toll-free 1-800-959-8287.

Yours truly,

Danielle Laflèche
Director
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/02/07 — RITS 64501 — Tax Status of Memberships