11849-7
XXXXX 11847-7
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Subject:
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GST APPLICATION RULING
Provincial/Infrastructure Projects
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Dear XXXXX
Thank you for your letter of July 10, 1995 in which you requested a Goods and Services Tax (GST) application ruling concerning services provided by municipalities to XXXXX under road construction agreements. A "Construction Agreement" was provided as a sample of the agreement that will be entered into by XXXXX with municipalities for the purposes of acquiring services to construct local roads, primary highways and secondary highways located in the province. We apologize for the delay in this response.
Our understanding of the facts is as follows:
Statement of Facts
1. XXXXX was amended September 1, 1995. XXXXX of the XXXXX states that "The title to all roads in a municipality, other than a city, is vested XXXXX[.]
2. Under section XXXXX as represented by the XXXXX may enter into an agreement with a town or village for the construction of a primary highway within its boundary.
3. Under section XXXXX may enter into an agreement with a rural municipality for the construction of secondary highways within its boundaries.
4. Under section XXXXX may enter into an agreement with an urban or rural municipality for the construction of any street or road, other than a highway, within the boundaries of an urban or rural municipality.
5. Pursuant to the sample agreement (Agreement) between XXXXX and a Municipality, the Municipality undertakes the construction of a project to be described therein.
6. The preamble to the Agreement states that "Ownership of the said (Street/Road/Secondary Highway/Primary Highway) is vested XXXXX XXXXX[.]
7. Pursuant to section XXXXX of the Agreement, XXXXX agrees to pay the costs incurred by the Municipality in respect of the project to a maximum amount identified therein.
8. Paragraph XXXXX of the Agreement states that "The Municipality will include in the last billing for the project, a fee for administrative services XXXXX XXXXX The fee shall be charged at the rate of XXXXX per day and the billable time shall not exceed one and one-half days ..."[.]
9. Neither a joint venture or principal-agent relationship exists between XXXXX and the Municipality for purposes of the Agreement.
10. It is our understanding that for purposes of acquiring road construction services from municipalities, XXXXX will fund up to XXXXX of project costs, depending upon the particulars of the agreement under which the funding is given.
Ruling Requested
Does the transaction described in the sample Agreement between XXXXX and the Municipality, and in all future agreements that are similar in nature, constitute a taxable supply of road construction services for which the Municipality is entitled to claim full input tax credits?
Ruling Given
Based upon the facts set out above, we rule that the transaction described in the sample Agreement between XXXXX and the Municipality constitutes a taxable supply of road construction services provided that XXXXX pays the Municipality XXXXX of the project costs and an administrative fee.
This ruling is subject to the general limitations and qualifications outlined in the GST Memoranda Series Section 1.4. We are bound by this ruling provided that none of the above issues are presently under audit, objection or appeal, there are no relevant changes in the future to the Excise Tax Act, and provided that you have fully described all necessary facts and transactions for which you requested a ruling.
Should you have any questions in this regard, please call Donna Harding, Acting Manager, Governmental Sectors at (613) 954-3551 or Lynn Renner, Policy Officer at (613) 954-7952.
Yours truly, signed by
J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations
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Manager, Governmental Sectors
Lynn Renner
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11870-5
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