10 September 1998 GST/HST Interpretation HQR0001060 - Application of GST/HST to Supplies Made by

Dear XXXXX

We are writing in regard to your inquiry made to XXXXX Tax Services Office on the above-noted subject. We are aware that XXXXX Tax Services Office sent you an interpretation letter, dated February 2, 1998. However, the XXXXX office requested that this office consider the tax treatment of supplies of the American program of studies made by XXXXX[.] Our comments are set out below.

On April 1, 1997, the harmonized sales (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. It is our understanding that you do not make any supplies in the participating provinces and for this reason our response will address only the GST.

Statement of Facts

XXXXX is currently being established as a private school. XXXXX will be operated as a proprietorship for profit and will be geared towards junior and senior high school students. The method of instruction will be computer based. You will not be receiving any government funding, but will charge a tuition fee. There will be two programs of study; one, having a Canadian basis and the other, having an American basis. The Canadian program will cover the secondary school curriculum as set up by the XXXXX education department. The American XXXXX program will follow a United States curriculum.

Interpretation Requested

You seek an interpretation that the supply of the American based program of studies provided by XXXXX is not taxable.

Interpretation Given

Based on the information provided, we advise you that the supply of the American based program of studies provided by the XXXXX is taxable.

As indicated in the interpretation letter of February 2, 1998, the supply of the American based program of studies is not exempt under section 9 of Part III of Schedule V of the Excise Tax Act ("the Act").

We have also considered whether these supplies would be exempt under section 7 of Part III of Schedule V ("section 7") of the Act. Section 7 exempts a supply of a service of instructing individuals in, or administering examinations in respect of, courses for which credit may be obtained toward a degree or diploma, where these supplies are made by a school authority, public college or university. "School authority" is defined as an organization that operates an elementary or secondary school in which it provides instruction that meets the standards of educational instruction established by the government of the province in which it is operated. Because XXXXX is not a "school authority", section 7 would not apply to exempt the supplies of the American based program made by it. Therefore, these supplies are taxable.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST 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/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 954-5125.

Yours truly,

Pauline Greenblatt
Tax Policy Officer
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

Encl.: