19 July 2007 GST/HST Ruling 59119 - Temporary Importation of a 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 the supply of materials by XXXXX (the College) to students enrolled in the XXXXX and XXXXX programs. We apologize for the delay in our response.

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

Statement of Facts

We understand that

1. The College is located in XXXXX and meets the definition of "public college" in subsection 123(1).

2. The College is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act, and given that it is also a public college, it meets the definition of "public institution" in subsection 123(1).

3. The College is a GST/HST registrant XXXXX.

4. The programs offered by the College include XXXXX and XXXXX.

5. The College has several campuses, one of them being the XXXXX. According to the College's XXXXX Certificate is a XXXXX-week program XXXXX. The program consists of XXXXX courses. The calendar states that XXXXX.

6. According to the same calendar, the XXXXX Certificate is a XXXXX-week program XXXXX. The program consists of XXXXX courses. The calendar also states that XXXXX.

7. Students taking either of these programs are required to pay a tuition fee of approximately $XXXXX. Both programs require the extensive use of relatively expensive materials. Students cannot complete either program without purchasing the materials required. However, they are not required to purchase the materials from the College.

8. In accordance with the XXXXX (the Ministry) regulations, the materials fee cannot be mandatory. Accordingly, the materials fee cannot be included in the tuition charged to the students. Although it is not mandatory that the materials be purchased from the College, as a practical matter it is difficult for students to purchase the materials elsewhere such that all students, who have enrolled in these programs to date, have purchased the required materials from the College.

9. The materials fee is approximately $XXXXX for the XXXXX program and approximately $XXXXX for the XXXXX program.

10. The materials needed to complete the XXXXX program include XXXXX and other various supplies while the materials needed to complete the XXXXX program include XXXXX and other various materials.

11. The materials fee is an all-inclusive charge for the materials needed to complete the particular program; the materials are not separately billed. The amount charged by the College for the materials is their purchase price plus an administrative charge.

12. If a student withdraws from the program by a certain date he/she may qualify for a refund of the tuition fees. However, once the student buys the materials from the College they become the property of the student and no refunds for the materials will be provided by the College even if the student withdraws before the end of the program.

13. You have indicated that you are of the view that either of the exemptions in sections 6, 8 or 16 of Part III of Schedule V could apply to exempt the service of instruction leading to the XXXXX Certificate or the XXXXX Certificate.

Ruling Requested

The College is making a single supply of an exempt college course leading to certification pursuant to section 6 of Part III of Schedule V to the ETA and the materials fee is solely an element of this exempt supply.

Ruling Given

Based on the facts set out above, we rule that the supply of the materials package is a separate supply from the supply of the instruction leading to the XXXXX Certificate and the XXXXX Certificate.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Given that it is not mandatory for students to purchase the materials from the College, the tuition fees and material fees are separately identified on invoices, and if a student withdraws from either program the materials fee is not reimbursed by the College, we are of the opinion that the supply of the materials is a separate supply from the supply of the instruction. This conclusion is based on our review of the facts and the direction given in GST/HST Policy Statement P-077R2 Single and Multiple Supplies.

Interpretation

Tax status of the materials:

Although the supply of the materials is a separate supply from the supply of the instruction, that does not necessarily mean that the supply is taxable. We are providing you with an interpretation as to the tax status of the material.

If the materials consists of property donated to the College or used by another person before its acquisition by the College the supply of the materials may be exempt under section 2 of Part VI of Schedule V to the ETA. If the materials consist of new tangible personal property acquired for the purpose of making a supply and neither donated nor used by another person before its acquisition by the College, the supply would not be exempt under section 2 of Part VI of Schedule V due to the exclusion found in paragraph (e).

If the supply of the materials is not exempt under section 2 of Part VI of Schedule V to the ETA, the supply of the materials may be exempt under section 6 of that same Part (the "direct cost" exemption).

Under the direct cost exemption, if no GST/HST is charged for the materials, the supply will be exempt if the charge for the materials is equal to or less than the cost of the materials (including GST/HST and provincial sales taxes less recoverable non-Québec provincial sales taxes, but excluding any administrative charge). If GST/HST is charged, the supply of the materials will not be exempt if the consideration for the materials is equal to or more than the cost of the materials (including provincial sales taxes, but excluding GST/HST and any administrative charge).

Tax status of the instruction:

You have indicated that either of the exemptions in sections 6, 8 or 16 of Part III of Schedule V would apply to exempt the service of instruction leading to the XXXXX Certificate or the XXXXX Certificate. In order for a supply of instruction to be exempt under section 6 of Part III of Schedule V to the ETA, the supply must be of a service of instructing individuals in courses leading to, or for the purpose of maintaining or upgrading, a professional or trade accreditation or designation recognized by a regulatory body. A "regulatory body" is defined in section 1 of Part III of Schedule V to the ETA to mean a body that is constituted or empowered by an Act of Parliament or of the legislature of a province to regulate the practice of a profession or trade by setting standards of knowledge and proficiency for practitioners of the profession or trade. We were unable to identify a body that is constituted or empowered by an Act of Parliament or of the legislature of a province to regulate the XXXXX or XXXXX trade.

Although probably not exempt under section 6, the supply of the service of instructing individuals in courses leading to the XXXXX Certificate and the XXXXX Certificate may be exempt under either sections 8 or 16 of Part III of Schedule V to the ETA.

A supply made by a public college of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation are exempt under section 8 of Part III of Schedule V to the ETA. If the instruction that leads to the XXXXX Certificate and the XXXXX Certificate attests to the competence of individuals to practise or perform that trade or vocation, the supply will be exempt under section 8.

Under section 16 of Part III of Schedule V to the ETA a supply made by a public college of a service of instructing individuals in, or administering examinations in respect of, courses (other than courses in sports, games, hobbies or other recreational pursuits that are designed to be taken primarily for recreational purposes) that are part of a program that consists of two or more courses and that is subject to the review of, and is approved by, a council, board or committee of the college established to review and approve the course offerings of the college is exempt.

The foregoing comments represent our general views with respect to the subject matter of your request. 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. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4206.

Yours truly,

Carol A. Gaudet
Charities, Non-profit organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/07/19 — RITS 64638 — [Application of the GST to the Supply of a Society, Whether a Public College]