GST/HST Rulings and Interpretations Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5
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XXXXX
XXXXX
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Case: HQR0001098
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June 26, 1998
Dear XXXXX
This is in response to your letter of November 12, 1997 (with attachments), sent to the XXXXX Tax Services Office, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the activities of XXXXX Your request was forwarded to our division by the XXXXX TSO for a response.
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%. It is our understanding that you do not make any supplies in the participating provinces and for this reason our response will address only the GST.
Statement of Facts
Our understanding of the facts from documentation submitted and from conversations with a representative of XXXXX is as follows:
1. XXXXX is incorporated as a non-profit organization under the XXXXX
2. The following programs are provided to children attending XXXXX
• grades 1, 2 and 3 (6 years of age and older);
• kindergarten (5 years of age);
• junior kindergarten (4 years of age); and
• preschool (3 years of age).
3. With respect to its program of grades 1, 2 and 3, XXXXX is registered as a private school under subsection 22(1) of the XXXXX . It is in the process of applying to be an accredited private school in accordance with subsection 22(2) of the School Act. Once accredited, XXXXX will be entitled to receive funding from the XXXXX
4. The XXXXX has issued curriculum programs for grades commencing at grade 1. XXXXX
5. XXXXX kindergarten program is regarded as an XXXXX in accordance with XXXXX the XXXXX and is receiving funding from the XXXXX as an XXXXX under the XXXXX
6. Pursuant to XXXXX
"(1) A board or, with the approval of the Minister, a person may provide an early childhood services program to
(a) a child who, as of September 1, is younger than 6 years of age, if the parent of the child agrees, or
(b) a student, if the parent of the student and the board are of the opinion that the program will benefit the student.
(2) A person or board that provides an early childhood services program may charge fees in respect of the program from the parent of a child referred to in subsection (1)(a) who attends the program.
(2.1) If a child referred to in subsection (1)(a) attends a program under this section, the child is not, by reason of attending that program,
(a) a resident student of the board, or
(b) entitled to any of the rights or benefits given to a student under this Act...."
7. Pursuant to XXXXX "student" means an individual who is (i) enrolled in a school, or (ii) required under section 8 to attend school."
8. The junior kindergarten program was originally set out as a separate program; however, currently, the preschool and junior kindergarten programs are combined into one program.
9. With respect to its preschool and junior kindergarten programs, XXXXX currently receives no funding from the XXXXX . It is required to be licensed under the XXXXX and is in the process of doing so as a nursery school.
10. The tuition fee for preschool, junior kindergarten and kindergarten programs are as follows:
| Full day students |
XXXXX per month / 5 days |
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XXXXX per month / 3 days |
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XXXXX per month / 2 days |
| [i]* Half day students |
XXXXX per month / 5 half days |
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XXXXX per month / 3 half days |
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XXXXX per month / 2 half days |
11. The tuition fee for Grades 1 to 3 is XXXXX per month.
12. Children attending XXXXX pay a registration fee of XXXXX which may or may not be paid (depending on income of family) and may or may not be refundable. It is used to process documentation and will also reserve a position in a program. The fee is separately identified in a statement provided to parents.
13. All children attending XXXXX pay the following fees (which is separately identified on a statement to parents) for books and supplies:
| Full day students |
XXXXX per year |
| Half day students |
XXXXX per year. |
14. Families with more than one full time child enrolled in XXXXX pay the following:
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First child
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XXXXX of tuition
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Second child
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XXXXX of tuition
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Third child
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XXXXX of tuition.
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15. Fees ranging from XXXXX to XXXXX per child are paid to XXXXX for field trips.
Ruling Requested
1. What is the GST status of tuition fees for the following:
• grades 1, 2 and 3;
• kindergarten;
• junior kindergarten; and
• preschool.
2. What is the GST status of the registration fee?
3. What is the GST status of the fee for books and supplies?
4. What is the GST status of the fee for field trips?
Ruling Given
Based on the facts set out above, we rule that
1. Tuition fees for the following are exempt:
• grades 1, 2 and 3;
• kindergarten;
• junior kindergarten; and
• preschool.
2. The registration fee is taxable.
3. The supply of the materials and books is taxable if XXXXX charges GST and the consideration before tax equals or exceeds the direct cost of the supply without reference to the GST. The supply of the materials and books is exempt if XXXXX does not charge GST and the consideration does not exceed the direct cost of the supply, including GST.
4. The fee for field trips is exempt.
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 (ETA), or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.
Explanation
1. Pursuant to section 2 of Part III of Schedule V to the ETA, a supply made by a school authority in a province of a service of instructing individuals in a course that is provided primarily for elementary or secondary school students is exempt.
Pursuant to section 1 of Part III of Schedule V to the ETA, an "elementary or secondary school student" means "an individual who is enrolled in a school that is operated by a school authority in a province and in (a) courses that are at the elementary level of education, or (b) courses for which credit may be obtained toward a diploma or certificate issued or approved by the government of the province or courses equivalent to such courses".
A "school authority" for GST/HST purposes means "an organization that operates an elementary or secondary school in which it provides instruction that meets the standards of educational instruction established by the government of the province in which the school is operated".
XXXXX falls within the meaning of school authority in subsection 123(1) of the ETA as it operates a private elementary school under the authority of the XXXXX and provides instruction that meets the standards of educational instruction from Kindergarten to Grade 3 established by the XXXXX Department of Education. Therefore, service of instruction in its programs of Kindergarten and Grades 1, 2 and 3 are exempt under section 2 of Part III of Schedule V to the ETA.
Section 1 of Part IV of Schedule V to the ETA, exempts a supply of child care services, the primary purpose of which is to provide care and supervision to children 14 years of age or under for periods normally less than 24 hours per day is exempt.
Since XXXXX Preschool and Junior Kindergarten programs are regulated under the XXXXX rather than XXXXX fees to attend the Preschool and Junior Kindergarten programs are exempt under section 1 of Part IV of Schedule V to the ETA, as a supply of a child care service.
Pursuant to subsection 259(2) a qualifying non-profit organization is entitled to a rebate with respect to its non-creditable tax charged (i.e., tax paid on purchases for which an input tax credit is not available). A "qualifying" non-profit organization is a non-profit organization that receives at least 40% of its annual revenues in the form of "government funding" in either its current fiscal year or over its two immediately preceding fiscal years.
"Government funding" means an amount of money that is readily measurable and is paid or payable to a non-profit organization by a grantor (e.g. government or municipality) for the purpose of:
(i) financially assisting the organization in carrying out its objectives and not as consideration for supplies made by the organization, or
(ii) payment for exempt supplies of property or services provided to persons other than the grantor or a person related to the grantor.
A school authority that is established and operated otherwise than for profit is entitled to a 68% rebate of non-creditable tax charged.
Pursuant to subsection 259(4) of the ETA, a qualifying non-profit organization that is also a selected public service body (e.g. a non-profit school authority) is entitled to:
(i) a 68% rebate for GST paid on its purchases to the extent the purchase is to be used in activities related to operating its elementary or secondary school, and
(ii) a 50% rebate for its non-creditable tax charged related to activities other than operating an elementary or secondary school.
It is apparent then that XXXXX will be required to allocate its purchases in determining its rebate entitlements. As indicated above, it will be entitled to a 68% rebate for purchases related to operating its elementary school activities (including kindergarten). For purchases related to its other exempt activities (junior kindergarten and preschool), it will be entitled to a 50% rebate for any fiscal years in which it is a "qualifying non-profit organization." The Academy may use any method of allocating its purchases, so long as it is a reasonable measure of how a purchase is used or consumed.
2. The registration fee is regarded as consideration for a supply of a service. Since there is no exemption for such a supply in the ETA, the fee is taxable.
3. Paragraph 6(a) of Part VI to Schedule V to the ETA provides that where a public service body (e.g. non-profit organization) does not charge an amount as tax, the supply will be exempt if the charge to the recipient does not exceed the direct cost of the supply.
Example:
A non-profit organization acquires books for $1000 plus 7% GST. The direct cost of the books is $1070.
It sells the books for $1070 and does not charge an amount as tax.
In this situation, the resupply of the books is exempt under paragraph 6(a) of Part VI of Schedule V to the ETA as the amount charged does not exceed the direct cost of the supply.
Paragraph 6(b) of Part VI to Schedule V to the ETA states that where a public service body charges an amount as tax, the supply will be exempt only if the consideration is less than the direct cost of the service without reference to the tax.
Example:
A non-profit organization acquires books for $1000 plus 7% GST. The direct cost of the books is $1070.
The non-profit organization sells the books for $1000 plus $70 of GST.
The resupply in this situation is taxable.
4. Pursuant to section 3 of Part III of the ETA, a supply of food or beverages (other than food and beverages from a vending machine ) services or admissions, made by a school authority primarily to elementary or secondary school students during the course of extra-curricular activities organized under the authority and responsibility of the school authority is exempt.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0420.
Yours truly,
Lorrie Grannary
Charities and Non-profit Organizations Unit
Formerly Charities, Non-profit Organizations and
Educational Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate
| c.c.: |
D. Jones, A/Director
J.M. Place
P. Labbe
XXXXX
L. Grannary |
Legislative References: Part II, Part III of Schedule V.
NCS Subject Code(s): 11905-1
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