18 November 1998 GST/HST Ruling HQR0001385 - Prepaid Funeral Agreement

Dear XXXXX

Thank you for your letter of October 5, 1998 concerning the application of the Harmonized Sales Tax (HST) to the transaction described below.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. A client entered into a prepaid funeral agreement with your company in August of 1990.

2. In 1990, the person paid $800.00 before discontinuing payment for financial reasons.

3. In February of 1998 the person's family resumed making payments on the person's behalf.

The following additional facts were provided in our telephone conversation of October 28, 1998:

1. The prepaid funeral agreement in question was entered into in writing.

2. The funds were held in trust by XXXXX who is responsible for acquiring funeral services for the individual named in the agreement.

3. At the time the agreement was entered into it was reasonable to expect that all of the funds would have been able to be advanced to the trustee XXXXX prior to the named individual's death.

4. The individual named in the agreement is still alive.

Ruling Requested

Is HST now applicable to the agreement because payment was suspended between 1990 and February 1998 when the family assumed responsibility for payment on the person's behalf?

Ruling Given

Based on the facts set out above, we rule that pursuant to the provisions of subsections 344(2)(3) and 360(2)(3) of the Excise Tax Act (ETA) there is no GST or HST payable in respect of the supply of funeral services provided by the trustee under the agreement.

Explanation

For GST purposes, the contract meets the transitional criteria for supplies of funeral services entered into before September of 1990. The suspension of payment by the client after 1990 and the subsequent resumption of payment by the client's family in February, 1998 does not change the tax status under section 344 of the ETA. Therefore, the supply will not be subject to the GST.

Section 360 provides the same treatment with respect to the provincial component of the HST for contracts entered into before the implementation date, April 1, 1997, for HST in the participating provinces.

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) 954-9700.

Yours truly,

Fred Adair
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Analysis

SUBJECT: Individual under a prepaid funeral agreement. There has not been a material alteration in the contract such as a transfer of trustee under the agreement. The provisions of subsection 344(2) that would grandfather a contract entered into before September 1990 have been met. Therefore, the supply is still not subject to GST.

Section 360 of the ETA parallels the provisions of section 344 with respect to supplies made before the implementation date for HST on April 1, 1997. The facts related to this case do not affect the tax status of the supply and the provincial component of the HST is not exigible.