FILE: 11725-6(DRM)
Doc: 1051
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Subject:
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Bus Tours and Calculation of the "Taxable Portion"
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I refer to your letter of December 22, 1994, wherein you requested written clarification on whether provincial sales tax (PST) should be included in the taxable portion of a tour package.
Pursuant to section 154 of the Act, the consideration for a supply includes any tax, duty and fee imposed on the recipient or supplier of the supply under an Act of Parliament or legislature of a province except those taxes that are prescribe by regulation (See Regulations Prescribing Certain Taxes, Duties and Fees).
In section 163 of the Act, the formula A/B is used to determine the taxable percentage of a tour package. A is the amount reasonably attributable to the taxable portion of the tour package and B is the amount of the tour package. It is my opinion that A is equal to the consideration payable on all the goods and services that are subject to GST and B is equal to the total consideration of all the goods and services in the tour package. Since the consideration for a supply excludes PST, the calculation of the taxable percentage will be determined without reference to PST.
Assuming the tour package is made available by the first supplier, the "taxable portion" of the tour package will be determined with reference to the formula A x B in subsection 163(1) of the Act. In that formula, (A) is the taxable percentage of the tour package and (B) is the total consideration for the entire tour package. Given that the calculation of the "taxable percentage excludes PST, the determination of "taxable portion" will also exclude the PST.
Please note, the tour operator may be required to pay PST on the acquisition of the properties and services that made up the tour package. In an attempt to recover this cost, the operator will probably include in the markup of the tour package, an amount on account of PST. GST will apply on a portion of this amount depending on the calculation of the taxable portion of that tour package.
For example, a tour operator acquires accommodation in Canada which will be included in a tour package sold by the operator. The operator is required to pay a tax (prescribed pursuant to section 154 of the Act) to the original supplier on the accommodation. Assuming the accommodation is the only taxable component of the tour package, the taxable percentage of the tour package will be determined by dividing the amount of the consideration payable on that accommodation by the cost of the other elements of the tour package. Note; calculation of the taxable percentage is made without reference to an accommodation tax. Similarly, the "taxable portion" of the tour package would not include the prescribed tax. However, if the tour operator includes an amount in the markup in order to recover the accommodation tax , this amount will be subject to the GST.
If you have any questions or comments, please do not hesitate to contact Dwayne Moore, Tax Policy Officer at (613) 954-4206
A. D'Abramo
Manager, Services Unit
Tax Policy - Special Sectors
GST Policy & Legislation
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