11 May 2007 GST/HST Interpretation 77586 - XXXXX

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 supplies made by XXXXX. You are requesting clarification of the GST/HST ruling issued in a letter XXXXX, as it relates to the application of paragraph 20(c) of Part VI of Schedule V to the Excise Tax Act (ETA) to a variety of XXXXX services supplied to XXXXX other persons, and to services in respect of applications for subdivision approvals.

Please note that we are providing you with an interpretation regarding paragraph 20(c) of Part VI of Schedule V rather than a formal ruling because of the proposed amendments to this provision that were announced on November 27, 2006, by the Department of Finance. Please note that the Canada Revenue Agency ("CRA") does not issue rulings on proposed or draft legislation, draft regulations, federal budget proposals, or Notices of Ways and Means Motions. The CRA may issue interpretations based on these documents.

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

Interpretation Requested

You would like to know whether the services supplied by XXXXX to XXXXX of processing and approving subdivision applications submitted by landowners in its capacity as a XXXXX would be exempt under paragraph 20(c) of Part VI of Schedule V.

In addition, you would like to know whether other services supplied by XXXXX would fall within the scope of paragraph 20(c) of Part VI of Schedule V. Some of these other services are supplied to XXXXX and consist of consultative, planning, and advisory services on day-to-day matters, assisting them with their responsibilities in managing land use and development within their XXXXX, assisting them in how to make decisions on future applications for development permits and subdivision approvals, mapping, studies, providing reports, and providing training in planning processes and responsibilities. XXXXX supplies other services pursuant to individual project contracts with private landowners, developers, school authorities, public colleges, XXXXX and non-profit organizations involving policy and planning, developing plans to assist XXXXX and providing private landowners with plans and land-use bylaw designations, general research in land use planning and land use regulation.

By way of background, we note that XXXXX is an unincorporated membership organization and its membership consists solely of XXXXX. XXXXX has been determined by the Minister of National Revenue to be a "municipality" for purposes of paragraph (b) of that definition in subsection 123(1). Other information relevant to your interpretation request, which was assembled from your letter, the information previously provided relating to the XXXXX GST/HST ruling, our telephone conversation XXXXX, and a review of the XXXXX is as follows:

•   XXXXX supplies services to both its members as well as to non-member XXXXX. These services include processing subdivision applications as well as the other consultative, planning and advisory services noted above. In addition, XXXXX will provide its client XXXXX with subdivision reports and recommendations. Other services include informing the applicant and other agencies of decisions, representing the XXXXX client at appeal hearings, and endorsing registerable documents.

•   XXXXX

Interpretation Given

Section 165 imposes the GST/HST on all taxable supplies made in Canada. In accordance with subsection 123(1), a taxable supply means a supply that is made in the course of a commercial activity. This same subsection defines a commercial activity to be a business carried on by the person except to the extent to which the business involves the making of exempt supplies.

Section 20 of Part VI of Schedule V sets out a number of supplies involving regulatory functions that are exempt when made by a municipality or a government, or by a board, commission or other body established by a municipality or a government. The current wording of paragraph 20(c) of Part VI of Schedule V exempts a supply of a licence, permit, quota or similar right and any service in respect of an application for such a right when made by such persons; i.e., fees for making an application for one of these rights. However, the Department of Finance issued a News Release on November 27, 2006, announcing that a Notice of Ways and Means Motion containing proposed amendments to the ETA was tabled in the House of Commons. Included are the following proposed amendments to paragraph 20(c):

A supply (other than a right or service supplied in respect of the importation of alcoholic beverages) of

(i) A licence, permit, quota or similar right,

(ii) A service of processing an application for a licence, permit, quota or similar right, or

(iii) A right to have access to, or to use, a filing or registration system to make application for a licence, permit, quota or similar right.

The proposed amendments clarify that under paragraph 20(c) of Part VI of Schedule V, a supply of a licence, permit, quota or similar right and a supply of a service of processing an application for a license, permit, quota or similar right are exempt and that the exemption does not extend to other services, such as inspection, research, survey, consultation, planning and advisory services that may be related to the application. In addition the proposed amendments extend the exemption to a supply of a right to have access to, or to use, a filing or registration system to apply for a licence, permit, quota or similar right.

The Notice of Ways and Means Motion provides that the proposed amendments to paragraph 20(c) will be deemed to have come into force on December 17, 1990. The coming into force provisions also provide that the proposed amendments to paragraph 20(c) will not impact transactions made before November 28, 2006 to the extent that a supplier did not charge or collect any GST/HST or where a supplier charged or collected the GST/HST and either the purchaser filed an application for a rebate of tax paid in error pursuant to subsection 261(1) or an adjustment, refund or credit under subsection 232(1) was made by the supplier to the purchaser before that date.

With respect to subdivision applications submitted by landowners, the approval of these applications is made pursuant to a regulatory function of XXXXX in accordance with the XXXXX.

It is our view that when a municipality or a board, commission or other body established by a municipality, in its capacity as a XXXXX makes a supply of an approval of an application for subdivision in accordance with the XXXXX, this approval given to a landowner to subdivide land represents the supply of a right similar to a licence, permit or quota described in paragraph 20(c) of Part VI of Schedule V.

XXXXX.

With respect to the services that are the subject of your request, please note that the exemption in paragraph 20(c) of Part VI of Schedule V would be limited to supplies of subdivision application approvals and services of processing subdivision application approvals made by a municipality in its capacity as a XXXXX. Therefore, when XXXXX has been established as the XXXXX, a supply made by XXXXX in the capacity of a XXXXX of the approval of a subdivision application and of services of processing a subdivision application as set out in the XXXXX would fall within paragraph 20(c) of Part VI of Schedule V. We understand that the services of processing an application for subdivision approval would be receiving, processing and reviewing subdivision applications submitted by landowners for a fee.

All other services that XXXXX supplies, such as the consultative, planning, and advisory services on day-to-day matters XXXXX supplied to XXXXX, including assisting them with their responsibilities in managing land use and development within their XXXXX, mapping, providing studies and reports, and training in planning processes and responsibilities are not exempt under paragraph 20(c) of Part VI of Schedule V. In addition, the additional services that XXXXX may request from XXXXX, such as subdivision reports and recommendations, representing XXXXX at appeal hearings and endorsing registerable document, do not fall within the scope of this exempting provision. We recognize that these other supplies assist XXXXX in their overall policy and planning activities relating to the management of land use and may be related to the subdividing of land; however, they are separate supplies that are not exempt under paragraph 20(c) of Part VI of Schedule V.

Similarly, the other services supplied by XXXXX pursuant to individual project contracts with private landowners, developers, school authorities, public colleges, XXXXX and non-profit organizations are not supplies described in paragraph 20(c) of Part VI of Schedule V.

The foregoing comments represent our general views with respect to the proposed amendments to the ETA as they relate to the subject matter of your request. Any change to the wording of these proposed amendments or any future proposed amendments to the ETA, 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 GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-6761.

Yours truly,

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

XXXXX

2007/04/25 — RITS 83134 — Application of GST/HST to XXXXX