This refers to your letter dated January 4, 1993, concerning the application of the GST to licences issued XXXXX after the announcement of the amendment to paragraph 25(f) of Part VI of Schedule V to the Act.
As you were advised, the policy statement that we prepared dealing with the distinction between lease, licence and similar arrangement is available on EIS for internal use only. It is not available to the public at this time.
We have reviewed the copy of the by-law from the City that you forwarded to us and while we are providing you with our opinion as to the GST status of some specific licences issued by the City such as bicycle licences, licences issued to Christmas lot operators and street vendors, etc., we will not be providing you with the GST status of all the licences listed in the by-law. We are, however, providing you with some comments which can be used to determine the GST status of all the other licences.
By-law no. XXXXX of the XXXXX provides for the licensing, regulating and governing of persons engaged in certain occupations and of places used for certain purposes. It also outlines the various types of licences that are issued by the City. Pursuant to subsection 20(c) of Part VI of Schedule V to the Act the supply by a municipality of a licence or other right is exempt from the GST. However, if the purpose of the licence is to give permission to someone to enter, to have access to or to use property of the government, municipality or other body the supply of the licence will be taxable pursuant to subsection 20(l) of Part VI of Schedule V. Also, pursuant to subsection 25(f) of Part VI the supply of real property made by way of licence is subject to GST regardless of the period of the supply under the licence.
It is the Department's understanding that, under common law, a licence is in the nature of a right or privilege to enter upon and use real property in a certain manner or for a specified purpose. It is a personal right between the licensor and licensee and does not create any estate or interest in the property. Therefore, where a licence is issued pursuant to an agreement entered into after September 14, 1992, giving a person the right to use real property it will normally be subject to the GST.
Please note that pursuant to section 136 of the Act, a supply by way of lease, licence or similar arrangement of the use or right to use real property is deemed to be a supply of real property and therefore potentially subject to the various provisions in the Act pertaining to real property such as section 25 of Part VI of Schedule V.
Municipalities are empowered by provincial legislation to pass by-laws for the regulation and licensing of trade and business for purposes of raising revenue and to enable the municipality to regulate, control and govern the licensed trade or business or those engaged in it. Therefore, where a licence is issued to a person that gives it the right to engage in a certain business or trade rather than the right to use real property it will be exempt pursuant to subsection 20(c) of Part VI. For example, where a licence is issued by a municipality to a person in the municipality such as a licence issued to an auctioneer, plumber, caterer, etc. which gives it the right to engage in a business or trade in the municipality rather than the right to use real property, it will be exempt pursuant to subsection 20(c) of Part VI of Schedule V. Similarly, licences issued to associations or other persons who operate farmer's markets or Christmas tree lots, street vendors and similar persons engaged in a trade or business will also be exempt pursuant to subsection 20(c) of Part VI if these licences give these persons the right to carry on a trade or business rather than the right to use real property.
It would appear from the wording in by-law XXXXX with respect to licences issued to mobile food vendors XXXXX, persons selling Christmas trees from parking or other lots XXXXX and associations operating farmer's markets XXXXX that these licences are issued for purposes of giving these persons the right to engage in their respective businesses as there is no indication in the bylaw that these licences give these persons the right to use real property. In these circumstances the aforementioned licences are exempt pursuant to subsection 20(c) of Part VI of Schedule V.
A licence issued by a municipality to a person carrying on a business or trade by using or performing work with a motor vehicle, tractor or any similar machine is not considered to be a licence allowing a person to use real property but rather a right to operate a vehicle or machine and therefore it is exempt pursuant to subsection 20(c) of Part VI.
Paragraph XXXXX of by-law no. XXXXX states that every person who owns a bicycle in the C XXXXX which is operated or used on public property within the City is required to purchase a licence for it and shall have a valid licence number plate or tag issued by the City openly displayed on the bicycle. In these circumstances it is not considered that the purpose of the licence is to give the person the right to use public property such as roads, etc. (real property) but rather it gives it the right to operate a bicycle (similar to a vehicle referred to in the previous paragraph) and, accordingly, the fee for the licence is exempt pursuant to subsection XXXXX.
Thank you for bringing this matter to my attention. If you require any further information regarding this letter please contact Neil Minken of this office at 954-4395.
Yours truly,
J.A. Venne
Director
Tax Policy - Special Sectors
Policy and Legislation
Excise/GST
| c.c.: |
J. Houlahan
S. Farber
N. Minken
XXXXX |
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