20 November 1998 GST/HST Ruling HQR0001416 - Tax Status of Drug & Alcohol Level Determination

Dear Mr. XXXXX

At your request, XXXXX TIS Centre has transferred your file to our directorate for further review and a written response with respect to the subject matter.

Statement of Facts

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

1. XXXXX is a Canadian-controlled private corporation that is in the business of providing occupational-health programs for your clients (i.e., companies).

2. XXXXX is a GST/HST registrant, having Business Number XXXXX[.]

3. XXXXX provides it's clients with the following services: education and training; records retention; medical referral and arranges for laboratory testing. XXXXX issues separate invoices for each of the different services provided.

4. From time to time, clients may request XXXXX to arrange for laboratory testing for drug and/or alcohol levels in urine samples obtained from specific employees of the client. This testing is performed by an independent laboratory on the order of a medical practitioner.

Transaction(s)

The independent laboratory invoices XXXXX for determining drug and/or alcohol levels in the samples submitted XXXXX in turn invoices it's client for the fee charged for laboratory testing, shipping, handling administration costs and an appropriate mark-up.

Ruling Requested

Amounts charged to XXXXX by the private laboratory to determine drug and/or alcohol levels in urine samples and those charges by XXXXX to its clients for laboratory testing, shipping, handling, administration costs and an appropriate mark-up are exempt of the GST/HST under section 10 of Part II of Schedule V to the Excise Tax Act (ETA).

Ruling Given

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

Amounts charged by private laboratories to XXXXX to determine drug and/or alcohol levels in urine samples are subject to the GST/HST. Amounts charged by XXXXX to it's client companies for arranging for the testing of urine samples, shipping, handling, administration and an appropriate mark-up are subject to the GST/HST.

On April 1, 1997, the harmonized sales tax (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%, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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.

Explanation

In general terms, most health care services are exempt of the GST/HST where the service is medically necessary for the purpose of preventing disease in, or diagnosing or treating an injury, illness or disability of, an individual. While the exempting categories are quite wide ranging, they are still very specific. If a particular service does not fall within the listed exemptions found in Part II of Schedule V to the ETA, it is taxable unless provided by a small supplier, or exempt under some other provision in the ETA.

Section 10 of Part II of Schedule V to the ETA exempts the supply of a prescribed diagnostic, treatment or other health care service, when made on the order of a medical practitioner or practitioner. For purposes of the ETA, the word prescribed means prescribed by regulation or determined in accordance with rules prescribed by regulation. The Health Care Services (GST) Regulations have prescribed laboratory, radiological and other diagnostic services generally available in a health care facility. Consequently, if a medical practitioner or practitioner (as defined in section 1 of Part II of Schedule V to the Act) order such diagnostic services, the consideration charged for the testing procedures is exempt of the GST/HST pursuant to section 10 of Part II of Schedule V to the ETA.

For example, if the medical review officer (MRO) orders a laboratory, radiological or other diagnostic test for an individual, the consideration for the supply of this service is exempt whether billed to an individual patient, XXXXX or other entity. It is important to note the exempting provision applies only to those services that are diagnostic in nature such as routine urinalysis which may include microscopic examination of centrifuged specimens plus any of S.G., pH, protein, sugar, hemoglobin, ketones, urobilinogen, bilirubin, LAPA chest x-ray or sonography).

DORLAND'S ILLUSTRATED MEDICAL DICTIONARY defines "diagnostic" to mean:

"pertaining to or subserving diagnosis; distinctive of or serving as a criterion of a disease, as signs and symptoms."

HEALTH CARE TERMS - Vergil N. Slee MD & Debra A. Slee, JD defines "diagnostic" to mean:

"done for the purpose of assisting in the making of a diagnosis"

Based on the information provided to this office, we understand the intent of your drug and/or alcohol testing program is to help maintain a drug free workplace, improve productivity, reduce absenteeism, reduce accident rates, lower insurance rates etc. This testing for drug and/or alcohol levels in the course of an occupational-health program supplied by XXXXX to their clients is not ( i.e., by definition) diagnostic in nature. Consequently, consideration for such services do not meet the exempting provision of section 10 of Part II of Schedule V to the ETA and are therefore taxable.

In addition, XXXXX does not perform any laboratory, radiological or other diagnostic services. Rather, it obtains urine samples and arranges for the testing to take place in an independent testing laboratory and invoices their client for the shipping, handling, administration costs and an appropriate mark-up. There are no provisions in the ETA to exempt such activities. Consequently, such services are taxable.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-952-9264.

Yours truly,

Lance G. Dixon, MHA., CHE
Municipalities & Health Care Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate