1996 GST/HST Interpretation 12000-3[2] - Taxi Business and Licences

                                                                        File: 12000-3 (TA)

                                                                        Doc: 1542

This is in response to your electronic mail dated December 13, 1995, to XXXXX in which you request clarification of factors involved in evaluating whether a person is carrying on a taxi business.

Firstly, I will comment on the conclusion in the draft application ruling written by Mr. XXXXX. I agree with the conclusion that, given the facts as described in that draft, Mr. XXXXX is not required to be registered under subsection 240(1.1) of the Excise Tax Act. XXXXX XXXXX is in the business of leasing intangible personal property (a licence) and not carrying on a taxi business.

Secondly, I have a caution on such de-registrations. In some cases, the conditions of a taxi licence include the right of a licence owner to take over operation of the taxi licence at any time. If, at some future time, XXXXX were to exert that right and commence to operate a taxi business using that licence, then he would be required to register immediately. This possibility creates an enforcement risk for the Department.

XXXXX XXXXX

Thirdly, I will try to clarify for you the significance of various questions that were asked by XXXXX concerning status of XXXXX[.] Whether a person owns or operates the taxi meter and collects GST-included fares are indeed pertinent questions but they are not the only questions that should be asked in determining if a person is carrying on in a taxi business. The definition of taxi business in the Excise Tax Act does not refer to taxi meters as was suggested by your comment that owning or operating the taxi meter is the pertinent question.

For example, if the terms of the taxi licence combined with the terms of the lease of that licence by XXXXX do not give XXXXX XXXXX the right to take over use of the licence from the lessee at any time during the life of the lease, then it is clear that XXXXX XXXXX cannot carry on a taxi business using that licence and is only in the business of leasing a licence (assuming no other activities). In this case, you would not even get to the question of who owns or operates the taxi meter since the conditions of the licence and lease make that question irrelevant.

Consider another example. Assume XXXXX leased the licence and had the right to take over the use of the licence under certain conditions. Also assume that he owned a vehicle that could be used as a taxicab and that there was an understanding that, when the lessee took holidays, XXXXX would use the licence and operate the taxi using a taxi meter he would rent from the lessee. In this case, there is a clear intention of XXXXX. XXXXX to operate a taxi business at some point. Since XXXXX is currently a registrant, it may not be efficient to de-register him if he will have to be registered again in a few months.

Also note that, once it is established that a person is not carrying on a taxi business, de-registration will be executed under the authority of subsection 242(2) instead of subsection 242(1) which means that Minister does not have an option to not de-register a person who qualifies under that subsection.

Having said that, you will see that it is very important to establish if a person is carrying on a taxi business. It is with that in mind that questions about car ownership, car insurance and the right to revoke or make use of a licence that is being leased become very relevant.

I have attached a copy of a letter, dated August, 22, 1995, sent to the XXXXX office which outlines some of the criteria that courts have considered in examining whether a taxi driver is employed or self-employed. A taxi driver being self-employed would imply that the taxi driver is carrying on a business of providing taxi services. In addition, I have attached a list of questions (in an Appendix) that Source Deductions uses to determine the employment status of taxi drivers. One should not fix on one factor as being determinative (e.g., owning or operating a taxi meter). Instead, one must consider all the criteria and all the facts in each situation.

XXXXX mentioned to XXXXX that the letter, dated July 25, 1995, to XXXXX from this unit dealt with essentially the same facts as the situation of XXXXX XXXXX[.] The description of the facts we have received were not the same. If the facts are the same, that letter may apply. However, notice in that letter that the question posed was very specific and used the facts as background. The focus of the response was to make the point that leasing a licence alone was a business of leasing and not carrying on a taxi business. The interpretation in the letter to XXXXX does not detract from the idea that all the facts must be taken into consideration when evaluating whether a person is carrying on a taxi business.

If you have any comments or questions, please do not hesitate to contact XXXXX Tax Policy Officer at (613) 952-9218.

Enikö Vermes
Manager
Health Care, Goods and Services Unit
Special Sectors
GST Rulings and Interpretations
Attachments (Appendix & letter)