GST/HST Rulings and
Interpretations Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX K1A 0L5
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Subject:
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GST/HST INTERPRETATION
Charges Imposed by XXXXX
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Dear XXXXX
Thank you for your memo of June 25, 1997, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain charges imposed by the XXXXX
You have outlined your understanding of the facts and your corresponding interpretation with respect to the charges as follows:
Forest Renewal Charge
This charge is made to small commercial operators. The revenue generated is not used, specifically, to actually plant trees. Tree planting is done by the province on a regular basis anyway. There is no agreement between the province and these small commercial operators that the province will plant trees.
This charge is considered by you to be a grant as it is in support of a program already being run and there is no agreement between the province and the contributor that states that the money is given specifically to plant trees. In this situation, GST does not apply.
Fire Protection Charge - Forest Management Licence
This is a fire protection charge to a commercial operator and it is a separate fee from the licence. In the event of a forest fire, an area containing merchantable timber would be one of the priorities when determining areas of fire-fighting concentration. An area may not be protected as intensely if no obvious loss to anyone, in the near future, would result.
The charge made is an effort to recover the costs of fire protection of areas on which a commercial operator holds the cutting rights. These charges are taxable at a rate of 7%.
You have asked us to provide you with our comments noting that, in drafting your response, you considered the following three options: the charges constitute a grant; the charges are consideration for a taxable supply subject to tax at 7%; the charges are not consideration for a supply, in accordance with subsection 162(1) and Policy Paper P-110.
Comments
We spoke to you on September 3, 1997, and again on September 15, 1997, requesting additional information about the nature of the two charges. We had hoped to determine the legislative authority under which the charges are made and obtain any documentary evidence which might show the relationship between the charges and the supplies of licences made by the Province to the commercial operators. Without this information we are unable to provide a definitive response. Nevertheless, we can provide the following general remarks.
Technical Content
The criteria used by Revenue Canada to determine whether an amount is consideration for a supply or a transfer payment are set out in Technical Information Bulletin B-067, Goods and Services Tax Treatment of Grants and Subsidies, and Policy Paper P-061, Extension of Transfer Payment Policy. You may wish to revisit your draft response concerning the Forest Renewal Charge in light of these criteria.
Policy Paper P-110 applies, in part, where "... a registered person pays an amount for a ... forestry ... product (hereinafter referred to as a "natural resource") that is based on the units of production of the natural resource from a certain property, and that same registered person has acquired the right to explore for and exploit the natural resource on that same property ..." (emphasis added). In this case, the Province does not levy the two charges for a "forestry product", so Policy Paper P-110 does not apply. We are unable to comment any further on the possible application of subsection 162(1) without the additional information we requested.
Note that, since the charges are imposed by a province, section 154 may apply. We suggest that you consider this possibility before drafting your final response.
We are unable to comment on the possible application of any other provisions of the ETA without the additional information we requested.
Format
The correspondent is seeking assurance that it is properly charging tax in respect of the two charges. This suggests that it wants a ruling, not an interpretation. Paragraph 25 of section 1.4 of chapter 1 of the GST Memoranda Series discusses the documentary requirements that a correspondent must satisfy before we can issue a ruling. Correspondents are often unaware of these requirements, so we may have to call them and ask for additional information.
It is clear in this case that, without additional information, we cannot issue a ruling, as we do not have a sufficient understanding of the facts. It could even be difficult to issue an interpretation. Would we discuss section 154? Section 162? Part IV of Schedule V? Would we also discuss the transfer payment policy and Policy Paper P-110? Given our limited understanding of the facts, an interpretation would likely have to address all of these authorities.
We suggest that you pursue the correspondent for additional information. If the correspondent does not satisfy the requirements imposed under section 1.4 of Chapter 1 of the GST Memoranda Series for the provision of a ruling, then you should issue an interpretation instead, provided you have obtained enough information to adequately focus the discussion.
As a final remark, your outline of the facts and your corresponding interpretation closely follow the wording of a document attached to the incoming letter which the correspondent implies was part of a ruling issued by Revenue Canada in 1991. If that document is indeed part of a ruling issued by Revenue Canada in 1991, then we may have to revise it (i.e., depending on our investigation of the facts, we may have to revoke that part of the ruling pertaining to the two charges).
Should you have any further questions or require clarification on the above matter, please do not hesitate to call me at (613) 952-9588.
Yours truly,
John W. Smith
Industries Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate
Legislative References: 154; 162; VI/V
NCS Subject Code(s): I 23; 11667-4
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