29 May 1998 GST/HST Interpretation HQR0000577 - Plan Review Fees

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

Dear XXXXX

Thank you for your letter of January 27, 1997 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below. We apologize for the delay in our response.

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows.

Statement of Facts

1. XXXXX is part of XXXXX and it is part of the XXXXX

2. Building Permits are issued from the XXXXX No construction or building can commence before a Building Permit is issued.

3. Prior to issuing a Building Permit, it is a legislated requirement that the XXXXX r perform a Plan Review. The Plan Review is an examination, either paper or on-sight, of blue prints or other building plans to ensure that the designs and proposed plans meet national building, plumbing and fire codes.

4. Although the Building Permit fee and the Plan Review fee are shown on the same document issued from the XXXXX , they are accounted for and itemized separately.

5. The two fees are also determined in different manners. The Building Permit fee will vary depending on the valuation of the work to be performed. If the work to be performed does not exceed $ XXXXX , the fee is $ xx . For work valued between $ XXXXX and $ XXXXX , the fee is $ xx on the first $ XXXXX and $ x on each additional $ XXXXX of valuation or part thereof. For work in excess of $ XXXXX , the fee is $ XXXXX on the first $ XXXXX and $ xx on each additional $ XXXXX of valuation or part thereof. This is compared to the Plan Review fee which is set at $ XXXXX per $ XXXXX of valuation or part thereof.

6. The Building Permit can be issued at the time that the Plan Review is completed or it can be issued at a later date.

7. The Building Permit fee and the Plan Review fee can either be paid at the same time or at different times.

Transactions

1. A Plan Review is obtained and paid for and a Building Permit is not subsequently issued as construction does not proceed;

2. A Plan Review is complete, a fee is charged and then at a future date the permit is issued and a fee is charged; and

3. A Plan Review is done, a Building Permit is issued and both fees are paid at the same time.

Ruling Requested

Under these three scenarios, are the Plan Review fees subject to the imposition of tax in accordance with subsection 165(1) of the Excise Tax Act (ETA)?

Ruling Given

Based on the facts set out above, we rule that in each of these three scenarios, the Plan Review fees are subject to the imposition of tax in accordance with subsection 165(1) of the ETA.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST 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 transactions for which you requested a ruling.

Explanation

The service of performing the Plan Review is a separate supply from the issuing of the Building Permit. Although they may be incidental to one another, they are not provided for a single consideration and as a result, the Plan Review must be taxed based on its own merits.

The Plan Review is a supply from a government of a service of testing or inspecting property to certify that particular standards are met. Due to this fact, section 146 of the ETA will deem this supply to be made in the course of a commercial activity and it will therefore be subject to the imposition of tax in accordance with subsection 165(1) of the ETA.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact the undersigned at (613) 952-6329 or Donna Harding, Manager, Governments Unit at (613) 954-3551.

Yours truly,

Mike Godwin
Governments Unit Unit
Public Service Bodies and Governments Division Division
GST/HST Rulings and Interpretations Directorate