GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Vanier, Ontario
XXXXX K1A 0L5
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Case: HQR0000478
XXXXX
XXXXX File: 11890-1 (bc)
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Subject:
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GST/HST INTERPRETATION
Licence to Use Office Equipment
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Dear XXXXX
This is in reference to the letter dated December 19, 1996, from XXXXX Tax Services Office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain aspects of an "Office Rental Agreement" (Agreement) entered into between the XXXXX and the XXXXX[.] We apologize for the delay in our response.
On April 1, 1997, the HST replaced the GST and the provincial sales tax in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. XXXXX, we will not discuss the HST implications in our interpretation.
Our understanding of the facts is as follows.
Statement of Facts
1. The XXXXX is an urban municipality in the Province XXXXX and is currently registered for GST purposes.
2. The XXXXX entered into an Agreement with XXXXX of the Agreement provides that the XXXXX grants to XXXXX a licence to use (hereafter the right to use), upon request, certain office equipment owned by the XXXXX including the photocopier, fax machine and postage meter.
4. XXXXX of the Agreement provides that XXXXX shall be responsible to reimburse the XXXXX for fax machine toll charges, postage and other direct expenditures directly attributable to XXXXX together with reasonable charges per copy for photocopying and use of the fax machine, taking into account the cost of supplies and the capital cost thereof. The XXXXX shall invoice XXXXX on a monthly basis for such costs.
Interpretation Requested
Should the XXXXX charge GST to XXXXX on the amount charged for the use of the office equipment ?
Interpretation Given
Based on the information provided, the supply of a right to use certain office equipment, including the photocopier, fax machine and postage meter, is a supply of a tangible personal property (TPP) and therefore taxable at 7%. The right to use office equipment between municipalities is not an exempt supply under Part VI of Schedule V to the Excise Tax Act (ETA).
Explanation
The XXXXX did grant to XXXXX a right to use certain office equipment. Such equipment is TPP. Subsection 136(1) to the ETA states that:
"For the purposes of this Part, a supply, by way of lease, licence or similar arrangement, of the use or right to use real property or tangible personal property shall be deemed to be a supply of real property or tangible personal property, as the case may be."
Therefore the supply of a right to use certain office equipment is deemed, under subsection 136(1) of the ETA, to be a supply of TPP.
The supply of a right to use property of a municipality is deemed by section 146 to the ETA to be made in the course of a commercial activity unless it is an exempt supply. Paragraph 20(l) of Part VI of Schedule V to the ETA states that a supply of a right to use property of the municipality is not an exempt supply. Therefore a right to use certain office equipment of the XXXXX is not an exempt supply but rather a supply of TPP which pursuant to section 146 to the ETA is taxable.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613 957-8253.
Yours truly,
Bruno Charron, CA
A/Senior Rulings Officer
Industries Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate
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XXXXX
Don Gagnon
Neil Minken |
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