15 December 1998 GST/HST Interpretation HQR0001413 - Tax Status of a Municipality or Public Service Body

The following are our responses to the questions asked by XXXXX as reported by XXXXX in XXXXX dated XXXXX[.] We understand that you will be coordinating the final report. The numbers in brackets refer to the question number on the incoming document.

Q1. (1) XXXXX defines the status of a XXXXX as a municipality or public body performing the functions of Government or a municipal corporation, what is the status under the Excise Tax Act? Are XXXXX going to be treated as a municipality or public service body, or as another level of Government equal to a Provincial or Territorial Government?

A1. The status of XXXXX under the Excise Tax Act will be determined by its organizational structure and the extent to which the body meets the definitions set out in the Excise Tax Act. For example, the Excise Tax Act defines a public service body to mean a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university. In addition each of these terms is also defined. It is a question of fact whether a XXXXX will meets these definitions. However, XXXXX may be determined to be a municipality if it fulfills certain conditions and requests to be determined as a municipality.

Q2. (2) XXXXX indicates residency of XXXXX shall be defined in regulations established pursuant to XXXXX have asked that we provide the definition of residency.

A2. We understand the regulations to be established under XXXXX are not yet in place. The regulations can be established by the Government after consultation with XXXXX[.]

Q3. (6) XXXXX

Q4. (11) XXXXX consider themselves to be the same as a municipality or unincorporated body. Will they be required to charge GST on the municipal services provided? i.e. water and sewer?

A4. As explained in Q1, the status of XXXXX under the Excise Tax Act will be determined by its organizational structure and the extent to which the body meets the definitions set out in the Excise Tax Act. In turn, the status of XXXXX will determine whether certain supplies made by XXXXX are taxable (subject to GST at 7% or 0%) or exempt. For example, if a XXXXX is a municipality or is determined to be a municipality, the supply of a water distribution, sewerage or drainage system will be an exempt supply. However, if XXXXX is not a municipality but is a non-profit organization, this supply may be taxable at 7%.

Q5. (20) A consultant with XXXXX indicated it was their understanding that GST will not apply to purchases made by XXXXX[.] Is this true?

A5. Under current legislation, XXXXX will pay tax on taxable supplies acquired by them. However, to the extent that these supplies are acquired for use in commercial activities, XXXXX may be eligible for an input tax credit for the tax paid or payable. Where a XXXXX acquires a supply for use in other than a commercial activity, XXXXX may be eligible for a partial rebate of tax paid. The eligibility for rebate and the applicable component will be determined by its organizational structure and the extent to which the body meets the definitions set out in the Excise Tax Act.

Other issues:

Q6. To provide information about whether XXXXX corporations will be required to register for GST/HST.

A6. Whether a XXXXX corporation will be required to register for GST/HST will depend on the organizational structure of the XXXXX corporation and the application of the provisions of the Excise Tax Act. At this time, there are no special rules that apply to settlement corporations.

If you require further information, please call me at 954-7954.