1 August 1996 GST/HST Interpretation 11895-1[4] - Issue of Cash Payments in Lieu of Off-street Parking (Cash Payments) Arising from a Request from (the Town)

XXXXX

I refer to the memorandum of January 20, 1995, from XXXXX addressed to Ms. Joanne Houlahan, Manager,Public Service Bodies. In his memorandum, XXXXX requested assistance on the issue of cash payments in lieu of off-street parking (cash payments) arising from a request from XXXXX (the Town). The issue is whether a taxable supply is being made under the Excise Tax Act (the Act). A copy of municipal by-law XXXXX (the by-law), an excerpt from XXXXX and a sample application for a development permit were attached to the memorandum.

Facts

1. Pursuant to subsection XXXXX of the by-law, every person before commencing any development within the municipality, shall apply for a development permit (the permit).

2. Development, as defined in paragraph XXXXX of the by-law, includes the carrying out of any building, engineering, mining or other operation in, on, or over land, or the making of any material change in the use, or intensity of the use, of any building or land.

3. XXXXX of the by-law states that upon completion of the review of an application for a permitted development or use, the development officer shall issue a development permit where the applicant conforms to all provisions of the by-law.

4. One of the conditions for the issuance of the development permit, as specified in subsection XXXXX of the by-law, requires that a certain amount of off-street parking shall be provided depending upon the particular use of the property. For example, a retail store is required to have one off-street parking space for every 46 square meters or 495 square feet of gross floor area.

5. In a situation where the applicant is able to provide the minimum number of off-street parking spaces in accordance with the by-law, the Town will issue a development permit.

6. Subsection XXXXX of the by-law allows Council, pursuant to XXXXX to exempt any person who develops a new building or use in XXXXX commercial district from the requirement of providing all or part of the off-street parking where that person pays or agrees to pay to the Town a sum of money in lieu thereof. The amount to be paid shall be determined by multiplying the number of off-street parking spaces for which the exemption is granted by XXXXX at the general municipal mill rate for that year.

7. The development permit is valid for a period of one year from the date of issue. Subsection XXXXX of the by-law requires the applicant to pay a fee of XXXXX to the Town prior to the review of the application. No other fees are specified in the by-law. The fee is refunded to the applicant where the application is rejected by the Town.

8. Funds from the cash payments are placed in reserves at the end of the year by the Town. Pursuant to subsection XXXXX, the Town may create a reserve to be used for any future development of parking lots in the downtown area.

Question

Is the cash payment made by the applicant to the Town in lieu of the requirement to provide the required off-street parking, a taxable supply?

Response

Pursuant to paragraph 20(c) of Part VI of Schedule V to the Act, a supply of a licence, permit, quota or similar right, and the supply of any service in respect of an application for such a right, is an exempt supply.

The XXXXX fee is consideration for a supply of a service in respect of an application for a development permit and is exempt pursuant to paragraph 20(c) of Part VI of Schedule V. As stated above, the fee is refunded to the applicant in the event the applicant does not make a cash payment in lieu of providing off-street parking. In the situation where the applicant makes a cash payment in accordance with the by-law requirements in order to obtain the development permit, the cash payment is consideration for a supply of the development permit and would be an exempt supply under paragraph 20(c).

The payment is not consideration for the supply of a right to use real property of the Town as suggested in the incoming memorandum. Clause 25(f)(ii) of Part VI of Schedule V provides for a taxable supply of real property made by way of licence where the supply is made by a public service body in the course of a business carried on by that body. There is no indication that the cash payments provide any right or privilege for the applicant to use real property of the Town, i.e. dedicated portion of town parking lots for use by the applicant or applicant's customers.

The suggestion was also raised that the cash payment is consideration for a supply of real property made by the Town to the applicant, and is taxable pursuant to section 25 of Part VI of Schedule V. In order for section 25 to apply, the Town must be supplying real property to the applicant. There is no indication that the Town is supplying real property to the applicant, and that the applicant is receiving any supply from the Town, other than the right to obtain a development permit.

In the memorandum, reference was made to a Question and Answer appearing in the Real Property Manual relating to cash in lieu of dedicated land. In the question it states that in order to obtain a development permit, a developer is required to make a supply of dedicated land to the municipality. In the event the developer is unable to supply the dedicated land, the developer must make a cash payment to the municipality. The transfer of the land or money to the municipality is consideration for the supply by the municipality of a right or permit to develop the land. This supply is exempt pursuant to paragraph 20(c) of Part VI of Schedule V and therefore the consideration paid for the supply, either in the form of parkland or in the form of a cash contribution, would not attract GST.

Should you have any questions, please contact Ms. Joanne Houlahan, Manager, Public Service Bodies at (613) 954-7945 or Mr. Owen Newell, Policy Officer, Public Service Bodies at (613) 954-4280.

J.A. Venne
Directo
Special Sectors
GST Rulings and Interpretations