Dear sir:
This concerns your facsimile message of January 25, 1996, concerning the GST status of supplies of R.V. sites made by way of lease, licence or similar arrangement. Our response is as follows.
Facts
1. XXXXX, granted a lease dated XXXXX, to XXXXX for a term of XXXXX years commencing on XXXXX, and registered at the XXXXX in XXXXX. Effective the same day, XXXXX assigned the lease to XXXXX, and this sublease was registered with the XXXXX[.]
2. XXXXX, granted a permit to XXXXX pursuant to XXXXX, permitting use and occupation of an area for use in creating an access road leading to the leased land.
3. The land consists of approximately XXXXX acres, which have been developed since XXXXX by XXXXX[.] The site plan indicates that lots XXXXX are for single family cottages, lots XXXXX are for R.V. sites, lots XXXXX are for single family dwellings and lots XXXXX are the creation of four-plex condominiums.
4. All of the R.V. sites are fully serviced throughout the year. None of the sites will be rented to owners of mobile homes. Only street legal recreational vehicles are to be allowed on the R.V. sites.
5. XXXXX has indicated that it intends to charge a lump sum for a lease of a site on a long term basis. The lease of each site will be for the whole of the period that XXXXX has possession of the sites, from XXXXX, even though the XXXXX date will have already been passed by the time agreements have been signed. As of the date of your facsimile message eleven lots had been supplied to various individuals in this manner.
6. Any sites which have not yet been leased on a long-term basis can be rented by owners of street legal recreational vehicles on a daily, weekly or monthly basis, with the possibility of a renewal of the short-term lease if the site has not yet been leased on a long-term basis.
7. The attached diagrams of the property in question indicate that the roadways and other common areas are available for use by all the residents of the XXXXX acre site. None of the roadways or other common areas are solely for the use of the residents of the R.V. sites. Also, it would appear that there are no areas used solely for the operation, administration or marketing of the R.V. sites.
Question
1. Is the piece of land described in the site plan as "lots XXXXX a "trailer park" as defined in subsection 123(1) of the Excise Tax Act (ETA)?
2. If that piece of land is a trailer park, does it qualify as a "residential trailer park" as defined in subsection 123(1) of the ETA?
3. Are long-term rentals of R.V. sites until XXXXX, on any of lots XXXXX exempt of tax pursuant to either paragraph 7(b) of Part I of Schedule V to the ETA, or pursuant to some other provision of the ETA, or are they taxable?
4. Are short-term supplies of R.V. sites on any of lots XXXXX exempt of tax, or are they taxable?
Response
1. The site containing lots XXXXX is a trailer park. Subsection 123(1) of the ETA defines "trailer park" of a person as
"... a piece of land that is owned by or leased to the person and that is exclusively composed of
(a) one or more sites each of which is, or is intended to be, supplied by the person by way of lease, licence or similar arrangement to the owner, lessee or person in occupation or possession of a mobile home, or a travel trailer, motor home or similar vehicle or trailer, situated or to be situated on the site, and
(b) other land that is reasonably necessary for
(i) the use and enjoyment of the sites by individuals residing in or occupying mobile homes, or travel trailers, motor homes or similar vehicles or trailers, situated or to be situated on those sites, or
(ii) the purpose of engaging in the business of supplying the sites by way of lease, licence or similar arrangement;".
Therefore, that piece of land that is made of lots XXXXX constitutes a trailer park, since it is exclusively composed of sites that are supplied, or are intended to be supplied, by way of lease, licence or similar arrangement to the owner, lessee or person in occupation or possession of a travel trailer, motor home or similar vehicle or trailer.
On the basis of the information supplied, it would appear that no additional land has been set aside as common land solely for the use and enjoyment of the lessees of the trailer park sites, or used for the business of supplying the sites by way of lease, licence or similar arrangement. For example, the roadways that can be used by residents of the trailer park can also be used by residents of the cottages. Therefore, the size of the trailer park would be limited to the piece of land contained in lots XXXXX[.]
2. Subsection 123(1) defines the term "residential trailer park" as
"... the land that is included in a trailer park of the person or, where the person has two or more trailer parks that are immediately contiguous to each other, the land that is included in those contiguous trailer parks, and any buildings, fixtures and other appurtenances to the land that are reasonably necessary for
(a) the use and enjoyment of sites in the trailer parks by individuals residing in or occupying mobile homes, or travel trailers, motor homes or similar vehicles or trailers, situated or to be situated on those sites, or
(b) the purpose of engaging in the business of supplying those sites by way of lease, licence or similar arrangement, but does not include such land and appurtenances or any part of them unless the land encompasses at least two sites and all or substantially all of the sites in the trailer parks
(c) are supplied, or are intended to be supplied, by way of lease, licence or similar arrangement for a period of at least
(i) one month, in the case of a mobile home or other residential unit, and
(ii) twelve months, in the case of a travel trailer, motor home or similar vehicle or trailer that is not a residential unit, and if the sites were occupied by mobile homes, would be suitable for use by individuals as places of residence throughout the year;".
Therefore, a trailer park that does not allow mobile homes would qualify as a residential trailer park only if all or substantially all (i.e. 90%) of the sites in the trailer park must be supplied, or be intended to be supplied, by way of lease, licence or similar arrangement for a period of at least twelve months. In the case at issue, the information you have supplied indicates that the primary intention appears to be to lease all of the R. V. sites on a long-term basis of several years, and this intention can be demonstrated by an advertising and sales campaign.
However, any sites that have not yet been leased on a long-term basis are also available for lease on a short term basis, for periods of up to one month at a time. If we were to determine that the trailer park was not a residential trailer park, because the owners are making leases of less than twelve months, all leases would be taxable until ninety percent of the sites were occupied. At that point, the trailer park would become a residential trailer park, and the owner thereof would be required to self-assess on the fair market value of the whole trailer park. Any subsequent lease of at least one month would be exempted. Leases for a period of less than one month would remain taxable. The tax status of leases that had already been made would not change.
Recognizing that such a result would be onerous for the owners of the trailer park, we are willing to consider this particular trailer park to be a residential trailer park from the time the first lease of any kind is made, because of the intention to make long-term supplies by way of lease XXXXX. However, we will only sanction this approach if all the short-term leases have terms of less than one month, so that they are all taxable. In other words, the trailer park will not be considered a residential trailer park if the operators of the trailer park make lease agreements for a period of one month, or for periods of more than one month and less than twelve months. This will ensure that short-term leases are treated the same as those made in any trailer park that is not a residential trailer park.
This decision applies to this particular case, in light of the particular facts that you have provided. The decision should not be taken as a precedent setting case for making decisions about similar situations, as we might arrive at a different decision if some of the circumstances were different.
3. The long-term rental of an R.V. site on any of lots XXXXX is exempted by paragraph 7(b) of Part I of Schedule V to the ETA, as a supply by way of lease for a period of at least one month to the owner, lessee or person in occupation or possession of a travel trailer, motor home or similar vehicle or trailer situated or to be situated on the site.
The owner of the residential trailer park can claim input tax credits in respect of any inputs that relate directly to the making of short-term supplies. If the owner wanted to also claim partial input tax credits in respect of the trailer park as a whole, he or she should be able to calculate in a reasonable manner the percentage for which the inputs were used in commercial activity, pursuant to paragraph 169(1)(c) of the ETA. If a particular cost is used at least ninety percent of the time in making exempt supplies of long term leases, the owner cannot claim any input tax credits in respect of the cost, pursuant to subsection 141(4) of the ETA.
4. As previously stated, we will only consider the trailer park to be a residential trailer park if all of the short-term leases are for less than one month, so that they are taxable. The supply of an R.V. site for a period of less than one month will be taxable because neither paragraph 7(b) nor any other exempting provision would apply.
Other Issues
In your facsimile message of January 25, 1996, you indicated that, when the "residential trailer park" was created, the Department would have received GST on the fair market value. However, the information that you provided indicates that the trailer park was created prior to the implementation of GST. There is no information as to how many of the leases were supplied to occupants of trailer park sites prior to the implementation of GST, or how transitional issues were dealt with.
As the date of implementation occurred more than four years ago, we will not ask for further clarification. However, it is not at all clear that the Department would have received GST on the fair market value of the trailer park at any point.
If you require any further information concerning this matter, please contact Mr. Don Dawson at 952-9211.
J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations
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