23 June 1997 GST/HST Interpretation HQR0000719 - Supplies Made by

Dear XXXXX

This letter is in response to your letter of March 5, 1997 to the Minister of National Revenue concerning the application of the Goods and Services Tax (GST) to the charges made by XXXXX to its members.

In order for the Department to provide a ruling that pertains to specific existing circumstances, all relevant documents and information outlined in the enclosed GST Memoranda Series 1.4 Goods and Services Tax Rulings, September 1994, must be provided. Unfortunately as all relevant documents have not been provided, I am unable to provide you with a ruling on this matter. However, as discussed during our telephone conversation of June 3, 1997, I am able to provide you with an interpretation concerning the application of the GST to the charges made by XXXXX to its members based on the information outlined below.

Based on our telephone conversations on the 3rd and 18th of June 1997, my understanding of the facts of this case is as follows:

Statement of Facts

1. XXXXX is a corporation incorporated under the XXXXX owns a parcel of property which it operates as a recreational campground facility in XXXXX (the "Campground").

XXXXX

2[.] XXXXX is neither a condominium corporation nor a cooperative housing corporation.

3. Persons wishing to use the Campground purchase a share in the capital of XXXXX. The holders of such shares (i.e., "Members/Shareholders") are all individuals (singles, couples or families) who gain the right to the exclusive use of a specified site in the Campground ("Campsite") for the purpose of a placing a vehicle or trailer designed for recreational use (i.e., "Trailer") on a specific Campsite. This right is contained in the share provisions themselves. The right to use a Campsite will last as long as the Member/Shareholder is a shareholder in good standing (i.e., s/he complies with the rules and regulations of the Campground share provisions of XXXXX retains ownership of the Campsites provided to Members/Shareholders.

4. The Campground owned and operated by XXXXX consists of a piece of land that is exclusively composed of XXXXX Campsites which are provided to XXXXX Members/Shareholders in occupation or possession of a Trailer situated, or to be situated, on the Campsite and other land reasonably necessary for the use and enjoyment of the sites by Members/Shareholders residing in or occupying Trailers, situated or to be situated, on those sites.

5. All or substantially all of the Campsites in XXXXX campground are provided to its members under which continuous possession or use of a Campsite is provided for a period of at least 12 months, and if the Campsites were occupied by mobile homes, would be suitable for use by individuals as places of residence throughout the year. (The water lines, sewer lines and electricity and gas line provided by XXXXX to its Members/Shareholders are suitable for year round use. The Trailers must however, have winterized connections in order to use these utilities. The sauna, whirlpool and swimming are available all year long. There is also year round security and access to the Campground).

6. The Trailers are not permanently affixed to the Campsite. They are placed on cement piers and there is a system of cement tubes used to level out the Campsite so that the Trailers can be placed thereon. The Trailers are not bolted down or fastened or strapped down with hurricane straps.

7. The consideration for the share in XXXXX is the going market rate for a particular Campsite which ranges between $XXXXX and $XXXXX depending on its location.

8. The share provisions set out that the Members/Shareholders of the XXXXX shares must pay their pro rata share of the costs incurred by XXXXX in operating the Campground including wages, property taxes, insurance, maintenance and other costs. Each year the directors of XXXXX set a budget to estimate costs involved in running the Campground for the year. These costs are then equally divided among the Members/Shareholders of XXXXX irrespective of the value of their share in XXXXX capital. These payments (the "Pro Rata Payments") are paid by the Members/Shareholders as assessed annually by XXXXX board of directors.

9. The costs involved in running the Campground for the year are related to supplies which are made directly to XXXXX rather than to XXXXX Members/Shareholders.

10. XXXXX is directly liable to the various suppliers for the costs incurred in operating the Campground. XXXXX Members/Shareholders are liable to XXXXX for the charge assessed by XXXXX[.] However, XXXXX Members/Shareholders are not liable to the various suppliers for the costs related to operate the Campground for the year.

11. To date, XXXXX has been collecting and remitting GST on the yearly Pro Rata Payments received.

Interpretation Requested

1. What is the application of the GST to the provision of a Campsite by XXXXX to its Members/Shareholders?

2. How does the GST apply to the Pro Rata Payments made by the Members/Shareholders to XXXXX[.]

Interpretation Provided

1. The supply of a Campsite by XXXXX to its Members/Shareholders is an exempt supply by virtue of subparagraph 7(b)(ii) of Part I of Schedule V to the Excise Tax Act (the "Act").

2. The Pro Rata Payments made by Members/Shareholders to XXXXX would be considered as periodic rental payments related to the supply referred to in No. 1; that is, a supply of a Campsite by XXXXX to its Members/Shareholders which is exempt under subparagraph 7(b)(ii) of Part I of Schedule V to the Act. Consequently the Pro Rata Payments are also exempt from GST pursuant to that same subparagraph.

Analysis/Explanation

1. The Application Of The GST To A Supply Of A Campsite By XXXXX To Its Members/Shareholders

The determination of whether the rental of a particular site for a mobile home or travel trailer is exempt from the application of the GST depends on whether the site is in a "residential trailer park" (as defined below). Paragraph 7(b) of Part I of Schedule V to the Act exempts the rental of a site for a period of at least one month relating to the use of a travel trailer, motor home or similar vehicle (i.e., referred to as a Trailer for purposes of our discussion) or a mobile home in a "residential trailer park".

For purposes of the GST, subsection 123(1) of the Act defines a "residential trailer park" to be a trailer park comprised of at least two sites where all or substantially all of the sites in the trailer park are leased, or are intended to be leased for a period of at least one month in the case of mobile homes or residential units and twelve months in the case of trailers. Further, the sites must be suitable for use by occupants of a mobile home (whether or not the park in fact has mobile homes) as a place of residence of individuals throughout the year. Essentially, this means the sites must be able to be serviced and accessible for use by a mobile home throughout the year.

For purposes of the GST, subsection 123(1) of the Act defines a "trailer park" as an area of land that consists solely of one or more sites, each of which is intended to be leased to persons who will place a mobile home or Trailer on the site. Included in the definition is any other land that is reasonably necessary for the use and enjoyment of the sites by the occupants and land that is reasonably necessary for the operation of the park.

Although the sale of shares in XXXXX may be considered a supply of a "membership" as defined in subsection 123(1) of the Act, this does not necessarily preclude the application of the exemptions found in Schedule V of the Act if the specific exemption therein applies. In this regard, the Members/Shareholders gain certain rights to use XXXXX XXXXX facilities including the right to the exclusive use of a Campsite as long as the Members/Shareholders are in good standing, together with the right to use common facilities (such as the swimming pool).

If the Campground is a "residential trailer park" as defined in subsection 123(1) of the Act, the exemption in relation to such supplies found in Part I of Schedule V to the Act may apply.

Based on my understanding of the facts, I believe that the Campground satisfies the definition of a residential trailer park. My reasons for this conclusion are as follows:

1. All or substantially all of the Campsites are intended to be leased to individuals residing in or occupying Trailers (the facts indicate that none of the sites are intended to be leased to individuals residing in or occupying by mobile homes). This is supported by the fact that all of the Campsites are currently in the possession of individuals residing in or occupying Trailers and the Campsites are provided for a long-term basis (i.e., for at least 12 months).

Although the exclusive right to use a particular site in the campground is derived from acquiring a share in the capital of XXXXX[.] I believe that XXXXX is supplying real property by way of an arrangement similar to a lease or licence. The arrangement in question does result in the Member/Shareholder gaining the use of a Campsite. Although such supply is not by way of lease or licence, it can be said to be a similar arrangement to a lease in that it allows the Members/Shareholders to occupy a Campsite so long as they are in good standing which includes their making Pro Rata Payments (unless they are unable to make such payments due to special circumstances such as an illness) which is equivalent to a periodic rent. (Please see discussion concerning the application of the GST to pro-rata payments below). Further the Members/Shareholders do not acquire ownership of the Campsites. Accordingly, the supply of the share in XXXXX can be viewed as part of a lease-like arrangement.

2. All or substantially all of the Campsites are to be leased (or provided under a similar arrangement to a lease) for a term of at least twelve months to Members/Shareholders who place Trailers thereon.

This is supported by the fact that the Members/Shareholders acquire the right to use a specific Campsite provided that they continue to remain a member/shareholder in good standing.

3. In all cases, the Campsites are serviced and accessible throughout the year. This claim is substantiated by the fact that the Campsites are serviced with year round utilities, including winterized water lines, municipal sewage connections, year round road maintenance and security.

Consequently, in this particular case, the supply of a Campsite can be viewed as part of a lease-like arrangement and, therefore, an exempt supply of a site in a residential trailer park by virtue of subparagraph 7(b)(ii) of Part I of Schedule V to the Act.

The legislation does not make reference to the necessity of a Trailer being permanently affixed to a site in a residential trailer park in order for the rental of that site to be exempt. A Trailer must merely be situated, or intended to be situated, on the applicable site and meet the other requirements in order for the exemption to apply.

2. The Application Of The GST To The Pro Rata Payments Made By The Members/Shareholders To XXXXX

Many leasing arrangements provide that the tenant is required to pay an appropriate share of maintenance and operating costs of the leased property. Such payments are often referred to as additional rent. In this particular case, we have already explained that the supply of the Campsites by XXXXX to its Members/Shareholders would be considered as a supply which is similar to an arrangement by way of lease. As the Pro Rata Payments are related to the supply of the Campsites and are required under the share provisions which entitle a Member/Shareholder to the right to exclusive use (but not ownership) of a particular Campsite, we would therefore regard the Pro Rata Payments made by the Members/Shareholders to XXXXX as periodic rent payments and part of the consideration paid for the exclusive use of a specific Campsite under a lease-like arrangement. The Act does not differentiate between, basic, additional or other kinds (e.g., percentage) rents paid by the tenant to the landlord. Insofar as the Pro Rata Payments form part of the consideration paid to XXXXX for the supply of the right to use a specific Campsite, the Pro Rata Payments will not be subject to GST by virtue of subparagraph 7(b)(ii) of Part I of Schedule V to the Act.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST Memoranda Series. If you require further clarification of the above, please call me at (613) 957-8226.

Yours truly,

Costa Dimitrakopoulos
Senior Rulings Officer
Financial Institutions and Real Property Division

GST/HST Rulings and Interpretations encl.