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File 11710-1(SB), 11860-1, 11865-6
XXXXX October 5, 1995
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This is in response to your October 13, 1994 letter to Mr. H.L. Jones in which you inquired as to whether the XXXXX (the Association) was making a single supply of an occupational vision care and eye protection program or was supplying three different services. I apologize for the delay in replying to your letter.
Facts
• As agent of its members, the Association enters into Occupational Vision Care and Eye Protection Agreements (the Agreement) with employers to provide certain optometric services to the employers.
• Each employee has the right to select the optometrist of his/her choice to provide the optometric services (Clause 3 of the Agreement).
• An employee must obtain an authorization form from the employer to be entitled to optometric services (Clause 4 of the Agreement).
• From time to time, the Association sets a fee schedule for the optometric services (Clause 6 of the Agreement).
• The Association establishes a Price List of optical supplies and laboratory services (Clause 7 of the Agreement).
• The optometrist bills the employee for the basic occupational vision examination and additional diagnostic fee (Clause 10 of the Agreement).
• All other fees for optometric services, optical supplies and laboratory services are chargeable and payable by the employer (Clause 10 of the Agreement).
• The optometrists forward to the Association the accounts for their own services and for the laboratory services, for verification purposes (Clause 9 of the Agreement).
• The Association submits to the employer a summary of such accounts on a monthly basis. The employer pays these accounts to the Association who then pays the optometrists and the laboratories (Clause 9 of the Agreement).
• The employer pays to the Association a monthly administration fee for verifying the fees billed by the optometrists and the laboratories (Clause 8 of the Agreement).
QUESTION
In your letter, you asked us the following question. "Is the provision of the rebilling of the optometrist's services and lab's services and the billing of the administration charge considered to be multiple supplies or a single supply of an occupational vision care and eye protection program?"
ANSWER
In the present case, it is necessary to determine the nature of the supplies, by whom these supplies are made and to whom they are made.
Based on the conditions of the sample agreement, it appears that the optometrists and the laboratories are making supplies of optometric services, laboratory services and optical supplies directly to the employers. This determination is based on clause 10 of the agreement according to which the employers are liable to pay the consideration payable in respect of optometric services, laboratory services and optical supplies. Therefore, the employer is the recipient of these supplies, pursuant to the definition of recipient included in subsection 123(1) of the Excise Tax Act (ETA).
The optometrists and the laboratories are not making supplies of optometric services, laboratory services and optical supplies to the Association. They transmit their billings to the Association for verification purposes only and the employer is the person liable to pay for the optometric services, the laboratory services and the optical supplies provided by the optometrists and the laboratories. Similarly, the Association is not supplying optometric services, laboratory services and optical supplies to the employers.
Consequently, the amounts paid by the employers to the Association in respect of optometrist services, laboratory services and optical supplies are not consideration paid in respect of supplies made by the Association to the employers. These amounts rather constitute consideration paid in respect of supplies made to the employer by the optometrists and the laboratories. In fact, the Association is receiving these amounts as agent of the employer, on behalf of whom it is verifying the billings submitted by the optometrists and the laboratories. Therefore, when the Association reimburses the same amounts to the optometrists and the laboratories, it is not paying consideration for supplies made to the Association. It is rather paying these amounts to the optometrists and the laboratories on behalf of the employer in consideration for supplies made to the employer by the optometrists and the laboratories.
In summary, the Association is only making a single supply to the employer of verifying the optometrists and the laboratories billings. Therefore, given that the Association is not making supplies of optometric services, laboratory services and optical supplies to the employer, policy P-077 is not applicable to the present situation.
Please note that we have consulted with the Health Care Unit regarding your inquiry.
They have emphasized that, pursuant to section 9 of Part II of Schedule V of the ETA, supplies of eyeglasses or contact lenses are zero-rated only when the supply is made to a consumer. Pursuant to the Agreement between the Association and the employers, it is the employer who is the recipient of the supplies made by the optometrists and the laboratories. Pursuant to clause 10 of the Agreement, the employees are only the recipients of diagnostic services and are not the recipients of the optical supplies provided by the optometrists or the laboratories. Therefore, it appears that the optical supplies provided pursuant to the Agreement are not zero-rated. It would be advisable to confirm this interpretation with Mr. Lance Dixon, the Health Care Specialist, at (613) 952-9264.
I hope that the above information will be useful to you. If you need to discuss this issue further, please do not hesitate to contact me at (613) 952-9580.
Serge Bernier
XXXXX
A/Senior Policy Officer
Taxing Provisions
General Applications Division
GST Rulings and Interpretations
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