Axelrod – Tax Court of Canada finds that a dentist providing a crown or implant was supplying an exempt health care service rather than a zero-rated artificial tooth

Dr. Axelrod, a dentist, provided dentures, bridges, crowns and implants, which the parties agreed constituted artificial teeth within the meaning of Sched. VI, Pt. II, s. 11, which zero-rated “a supply of artificial teeth.” Dr. Axelrod took the position that when he provided an artificial tooth to a patient, he was thereby making a zero-rated supply. CRA reassessed him on the basis that he was making the supplies of artificial teeth, as acquired by him from the laboratory, to the patients as zero-rated supplies pursuant to Sched. VI, Pt. II, s. 11, and making supplies of health care services (regarding diagnosis, preparation work, such as measuring and taking impressions, and installation) that were exempted pursuant to Sched. V, Pt. II, s. 5. Sommerfeldt J instead found that Dr. Axelrod was making a single supply of exempt services pursuant to Sched. V, Pt. II, s. 5, so that his appeal was dismissed.

Before so finding, Sommerfeldt J first found that Dr. Axelrod was making a single supply to such patients, stating:

It is difficult to imagine that a patient of Dr. Axelrod would have wanted to acquire dentures, a bridge, a crown or an implant without Dr. Axelrod having first done all of the preliminary work necessary to ensure that the particular prosthesis would fit and function properly in the patient’s mouth, and without Dr. Axelrod actually installing the prosthesis in the patient’s mouth. Similarly, all of the dental services rendered by Dr. Axelrod would have made no sense if they had not related to the prosthesis desired by the patient.

He went on to indicate that, to determine the character of the single supply, it was necessary to determine “which element caused the payment of the consideration,” and then stated that in light of the importance of the professional services provided by Dr. Axelrod, “the predominant element of the supply made by Dr. Axelrod to a patient was his professional dental services, and not the prosthesis per se.”

Sommerfeldt J further found that if, contrary to his single-supply analysis, Dr. Axelrod were regarded as making supplies that came within both provisions, “the exempt status of the supplies will preclude Dr. Axelrod’s dental practice (which is a business) from being a commercial activity, by reason of the exception at the end of paragraph (a) of the definition of the term “commercial activity” in subsection 123(1) of the ETA.” In other words, the exclusion from the definition of commercial activity for a business of making exempt supplies had the effect of making the exempting provision (Sched. V, Pt. II, s. 5) paramount over the zero-rating provision (Sched. VI, Pt. II, s. 11) to the extent of any overlap.

Neal Armstrong. Summaries of Axelrod v. The King, 2022 TCC 157 under ETA Sched. VI, Pt. II, s. 11, Sched. V, Pt. II, s. 34 and s. 123(1) – commercial activity.