28 September 1998 GST/HST Interpretation HQR0000467 - Section 14 of Part III of Schedule V to the Excise Tax Act

                                                                        GST/HST Rulings and Interpretations
 Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
K1A 0L5

Dear Mr. XXXXX

This letter is in response to the memorandum of December 13, 1996 from XXXXX of XXXXX Tax Service Office, wherein she requested a Goods and Services Tax (GST) interpretation of section 14 of Part III of Schedule V to the Excise Tax Act (ETA).

As a part of the request, XXXXX included letters from XXXXX and the responses provided by the TSO. The following facts were ascertained from the information provided.

1. Students who remain for lunch at school have the option of purchasing food as part of a lunch program to provide hot lunches on a regular basis throughout the school year.

2. The food items are purchased from fast food outlets XXXXX by the schools and are in turn supplied to students as part of the lunch program.

3. The food and beverages are delivered to the schools by the suppliers, but the supplier does not serve food to the students in the school cafeteria.

Issue

Is the supply of food and beverages to a school by fast food suppliers an exempt supply pursuant to section 14 of Part III of Schedule V to the ETA?

Response

It is the Department's position that food or beverages supplied by a vendor to a school authority is an exempt supply in accordance with section 14, where the supplier has entered into a contract with the school authority to provide food or beverages in a school cafeteria (where the school does not have a cafeteria, a classroom or gymnasium may be considered as such), and the food or beverages are to be provided primarily to students of the school. Generally, the provision of food or beverages by a supplier for the school cafeteria is made pursuant to a written agreement between the supplier and the school authority. However, we will accept that in certain circumstances a written agreement for the supply of the food or beverages may not exist, but that the supply of food or beverages may still qualify for the exemption.

It should be noted that the onus is on the supplier to know where and to whom the supply is being made. The supplier must also know the purpose for which the supply is being made since the exemption does not apply to the acquisition of food or beverages for special functions, such as receptions, conferences and banquets, where the primary purpose is other than the provision of food and beverages to the students.

Consequently, in order to satisfy the requirements of section 14, the contract for the supply must indicate that the food or beverages are for consumption primarily by students in a school cafeteria. Where there is no written contract for the supply of the food or beverages, we recommend that the school authority provide a letter to the supplier wherein it indicates that the conditions necessary to exempt the supply of the food and beverages have been met.

Therefore, if a person supplies pizza or other fast foods to a school authority, the supply may be exempt of tax in accordance with section 14 if the requirements of the provision are satisfied.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4206.

Yours truly,

Dwayne Moore
Charities & Non-profit Organizations Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

c.c.:      D. Moore
K. Stevens (London TSO)