7 December 1998 GST/HST Ruling HQR0000703 - Application of the GST/HST to the Provision of Transit Services

Dear Mr. XXXXX

Thank you for your fax of January 27, 1997 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the payments received by XXXXX from XXXXX (Township) for the provision of transit services in the Township.

Statement of Facts

1. XXXXX has been determined to be a municipality and is a transit authority for purposes of the Excise Tax Act. It is the only provider of municipal transit services in the Township (as well as in XXXXX[).]

2. Neither XXXXX or the Township is required by law to provide, nor does either provide, a public transportation service in the Township.

3. Under XXXXX the province may subsidize expenditures in respect of agreements between a municipality and a public utilities commission for the supply of public transportation. The Act also provides that a municipality may contribute toward the cost of any public transportation service provided within the municipality.

4. Under XXXXX a council of a local municipality may pass by-laws, including one for entering into an agreement with an adjoining municipality with respect to the terms upon which public bus transportation shall be furnished by the municipality in the adjoining municipality.

5. XXXXX entered into a Transit Agreement dated XXXXX with the Township to provide public bus transportation services in the Township, linking with XXXXX existing routes in XXXXX[.]

6. The following facts are drawn from the Transit Agreement:

•   XXXXX provides: buses, equipment, route information, manpower, licenses and permits, supervision, and maintenance.

•   XXXXX has the sole right to establish fares and passes for routes.

•   XXXXX is responsible for insuring against liability arising from its areas of responsibility which include bus operation.

•   XXXXX is empowered to, and does in fact, seek operating cost subsidies from the province to support the provision of public bus transportation services in the Township.

•   XXXXX is responsible for promotion of public transit.

•   XXXXX agrees to invoice the Township monthly for the costs of operating the public bus transportation services net of fare box revenue and any provincial subsidy, based on XXXXX budget. Any increase in the amount charged will be tied to the Consumer Price Index.

•   The Township has the exclusive right to determine the service areas, routes, frequency and the associated levels of service.

•   The Township agrees to provide for, locate and maintain bus stops, shelters and benches.

•   The Township agrees to pay for the public bus transportation services provided by XXXXX[.]

Rulings Requested

1. Is the municipal transportation subsidy provided by XXXXX for the provision of public transportation services in the Township subject to GST/HST?

2. Are the payments made by XXXXX pursuant to the Transit Agreement of XXXXX subject to the GST/HST?

Rulings Given

Based on the facts set out above, we rule that:

1. The municipal transportation subsidy provided by XXXXX to the XXXXX for the provision of public transportation services in the Township are grants that are not subject to the GST/HST.

2. The payments made by XXXXX pursuant to the Transit Agreement of XXXXX are grants that are not subject to the GST/HST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7947.

Yours truly,

Darlene Wladyka
Senior Rulings Officer
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate