24 September 1999 GST/HST Ruling HQR0001748 - Application of the GST/HST to Acting Courses Offered by a Vocational School

GST/HST Rulings and Interpretations Directorate Place de Ville, Tower A, 14th Floor 320 Queen Street Ottawa, ON K1A 0L5XXXXXAttention: XXXXX

Case: HQR0001748September 24, 1999

Subject:

GST/HST APPLICATION RULING Application of GST to XXXXX

Dear XXXXX

This is in reply to your letter of February 24, 1999, concerning the above-noted subject, which you originally sent to our XXXXX[.] The XXXXX XXXXX provided you with a partial response in a ruling dated April 12, 1999. Your inquiry has been forwarded to our office to determine the application of the Goods and Services Tax/Harmonized Sales Tax ("GST/HST") to acting courses offered by your school. Our comments are set out below.

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%. Supplies of goods and services made in a participating province are subject to tax at the harmonized rate, unless a relieving provision applies. As the supply of courses is being made in XXXXX we will address the GST implications.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX is the successor corporation to one created in XXXXX. The latter's business activity was designing computer software. This business lay dormant for a number of years. Subsequently, a partnership, trading as XXXXX and operating an acting school, was commenced. After some time, the partnership decided to incorporate, using the old XXXXX but changing the name to reflect the corporation's new activities. Consequently, on XXXXX[.]

2. XXXXX is registered with the XXXXX[.]

3. In a ruling dated April 12, 1999, Revenue Canada ruled that XXXXX is a "vocational school" within the definition set out in section 1 of Part III of Schedule V to the Excise Tax Act ("the Act").

4. XXXXX offers several different programs. XXXXX is a six month, full time course, designed to prepare a student to audition for a job as an actor in a film production. The Program is offered to individuals of all ages, but if an individual is under age 19, he or she must have completed secondary school or the equivalent in order to be admitted to the program. Tuition for the admission program is approximate XXXXX[.]

5. To complete the XXXXX student must participate for a combined total of XXXXX hours in specified courses and undergo a series of tests evaluated on a pass/fail basis. A student must pass a written examination; pass an instructor's evaluation of their performance on stage, using certain pass/fail criteria; and submit an acceptable plan of steps to be taken to obtain an audition for a part in the movie production after they complete the program. The written examination is administered to test a student's basic on-set vocabulary. Instructors grade a student's on-camera stage performance and etiquette in a cold-read audition as well as the student's display of his or her range of emotions as an actor. Students are not awarded a diploma until they pass all components tested. It may be necessary for some students to repeat specific courses in order to achieve the standard necessary to receive a diploma. The diploma received for this program indicates that the student has skills to audition for a part in a film production.

6. In addition to the XXXXX, individual courses from the XXXXX are offered to students on a part-time basis. Students who cannot afford to go to school full-time, previous students returning to school to hone their acting skills in order to prepare for auditions with casting directors, and students repeating specific courses in order to qualify to receive a diploma may take one or more courses from this program.

7. XXXXX also sponsors optional workshops that are offered to students outside of the XXXXX hires a workshop instructor (for example, a casting director, an actor, etc.) to teach the workshop. Students register for the workshop with the XXXXX registrar and make all fees payable to XXXXX[.] The workshops are held on XXXXX premises. XXXXX collects all fees from the student and pays a pre-determined amount to the workshop instructor for his or her services.

8. XXXXX has introduced an extended workshop with XXXXX who has XXXXX of teaching experience. He will teach students who have completed the XXXXX the finer details and arts of professional acting. Completing this enhanced training will enable a student to perform at a higher level when auditioning for a part in a film production. This workshop runs for a period of XXXXX. XXXXX charges its interested students an extra fee of XXXXX to participate in this workshop. (As with the optional workshops, fees are payable to XXXXX collects all fees and pays a predetermined portion to XXXXX.) XXXXX evaluates the on-stage performance of each of his students using certain pass/fail criteria. A student will then personally work on honing their acting skills according to XXXXX suggestions for improvement. In some cases a student may retake the workshop in order to achieve the skills necessary to perform at a higher level.

Ruling Requested

What is the application of the GST to the various programs offered by the XXXXX i.e. the XXXXX individual courses, workshops and extended workshops with XXXXX? That is, does the exemption is section 8 of Part III of Schedule V to the Act ("section 8") apply to any of these programs?

Ruling Given

Based on the facts set out above, our ruling is as follows:

XXXXX

The courses offered as part of the XXXXX are exempt supplies pursuant to section 8 of Part III of Schedule V to the Act.

XXXXX

Supplies of individual courses which are included in the XXXXX but may be taken on a part-time basis are exempt, pursuant to section 8 of Part III of Schedule V to the Act.

Optional Workshops

Supplies of the optional workshops offered outside the XXXXX are subject to GST at the rate of 7%.

Extended Workshops

XXXXX

Supplies of the extended workshop XXXXX are subject to GST at the rate of 7%.

Analysis

Section 8

Section 8 of Part III of Schedule V to the Act exempts:

"8. A supply, other than a zero-rated supply, made by a school authority, vocational school, public college or university of a service of instructing individuals in, or administering examination in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licenses, that attest to the competence of individuals to practise or perform a trade or vocation where

(a) the document, class or rating is prescribed by federal or provincial regulation;

(b) the supplier is governed by federal or provincial legislation respecting vocational schools; or

(c) the supplier is a non-profit organization or public institution."

Policy on Section 1

The definition of "vocational school" is defined in section 1 of Part III of Schedule V to the Act as follows:

'"vocational school" means an organization that is established and operated primarily to provide students with correspondence courses, or instruction in courses, that develop or enhance a students' occupational skills.'

As noted in Fact 3, above, XXXXX, has ruled that XXXXX is a "vocational school" for GST purposes. This office has reviewed XXXXX submission and obtained additional information on the matter during a telephone conversation with you on July 22, 1999. This office confirms that the criteria for qualification as a "vocational school", as defined in section 1 of Part III of Schedule V to the Act, has been met. Policy Statement No. P-229, entitled "Definition of Vocational School in Section 1 of Part III of Schedule V", outlines the Department's policy with respect to this provision. The criteria outlined in the policy are discussed below.

(1) Established Primarily

Policy Statement No. P-229 explains that a qualifying vocational school be established primarily to provide courses that develop or enhance a student's occupational skills.

To determine this, the Department will review the organization's governing documents. When these documents are not available or not determinative, the Department will look to the activities of the organization (i.e. the extent to which the organization provides courses that develop or enhance students' occupational skills) as evidence of the purpose of its establishment.

Also, where an organization is governed by provincial legislation respecting vocational schools, this will be considered an indication that one of the main purposes of the organization is to provide vocational training. However, registration with a province as a vocational school is not in and of itself conclusive evidence that an organization is "established primarily" as a vocational school for the purposes of the Act.

We have reviewed the documents submitted and noted that XXXXX is registered with the XXXXX, XXXXX[.] We are satisfied that this criteria has been met.

(2) Operated Primarily

The Department will consider this test to be met if more than 50% of an organization's total annual revenues are derived from tuition for courses, or may be attributed to the provision of instruction in courses, that develop or enhance a student's occupational skills.

Grants and contributions received from governments to provide occupational training courses to individuals, and revenues earned from the provision of property or services related to providing occupational instruction will be included in this revenue calculation. For example, this could include revenue from textbook sales and locker rentals.

In the telephone conversation of July 22, 1999, you advised that more than XXXXX XXXXX is derived from tuition for the XXXXX[.] Therefore, we can advise that this criteria is met.

(3) Develop or Enhance Occupational Skills

To be considered a vocational school, the courses offered by the organization must develop or enhance students' occupational skills. On this basis, "occupational courses" must have a direct link to skills that are essential for an individual to gain or retain employment. (The Department does not consider that courses in sports or hobbies develop or enhance a student's occupational skills.) The Department will examine the curriculum and promotional material of the organization to determine whether courses offered "develop or enhance occupational skills".

A review of XXXXX submission indicates that this criteria is met.

Policy on Section 8

The Department's policy with respect to section 8 clarifies the meaning of "courses leading to certificates, diplomas, licenses or similar documents, of classes or ratings in respect of licenses, that attest to the competence of individuals to practise or perform a trade or vocation." Each of the criteria is discussed below.

(1) Certificate, Diploma, License or Similar Document

To meet this requirement, the Department accepts any document that indicates that the student has successfully completed the course of study to which the document relates. Generally, courses for which some form of documentation is not issued do not satisfy this requirement.

(2) Trade or Vocation

To meet this requirement, the course must have a direct link to skills that are recognized as relating to the ability to gain or retain employment. Generally, this requirement is not met by taking courses in sport, games or hobbies or other recreational or cultural pursuits, or courses designed for personal interest.

(3) Attest to the competence of individuals to practise or perform a trade or vocation.

This requirement relates to three broad categories of courses and requirements for each category are discussed below.

(a) Courses that are part of a full-time program.

An individual course is considered to attest to competence to practise a trade or vocation if:

(i) the course is offered as a credit in a full-time program offered by the same institution; and

(ii) the full-time program is offered on a pass/fail basis, based on the evaluation of the student's performance on a single, or series of, tests, graded materials or projects.

Single courses that are a component of a full-time program are exempt when taken on their own, even where the individual is not enrolled in the full-time program. The fact that the single course may be applied towards the requirement of the full-time program is sufficient for the course to be exempt under section 8.

(b) Part-time or upgrade courses that are not part of a full-time program.

If these types of courses are not part of a full-time program, they may be exempt if they meet criteria

(1) and

(2) above and the competence of the students is evaluated on a pass/fail basis, based on a single or series of tests graded materials or projects.

Courses that assign a pass/fail mark based on attendance alone, class participation alone, or a combination of attendance and class participation, do not lead to certificates that attest to the competence of individuals to practise a trade or vocation.

(c) Preparatory courses for federally or provincially administered licenses.

Such courses will be exempt under section 8 where:

•   the course is required by federal or provincial legislation;

•   the course is not required by federal or provincial legislation, but the certificate issued by an educational institution on completion of the course is accepted by a federal or provincial licensing body in lieu of successful completion of the federally or provincially administered licensing exam; or

•   the course is not required by federal or provincial legislation, but it meets the requirements for part-time courses outlined above (i.e. the course is offered as part of a full-time program that is offered by the same institution and is exempt under section 8 or the course evaluates students on a pass/fail basis, based on evaluation of the students performance on a single, or series of, tests, graded materials or projects).

Optional Workshops

Supplies of the optional workshops, made by XXXXX to the student, are not exempt, pursuant to section 8 and its administrative policy, Policy Statement P-231, for the reasons which follow. First, students do not receive any certificate, diploma or similar document on successful completion of the workshop. Also, the criterion that documentation "attest to the competence of individuals to practise or perform a trade or vocation" is not met as the workshops are not evaluated on a pass/fail basis, based on the evaluation of a student's performance on a single, or series of tests, graded materials or projects.

Extended Workshops

Supplies of the extended workshops, made by XXXXX to the student, are not exempt pursuant to section 8 and its administrative policy, Policy Statement P-231. This is because a certificate, diploma or similar document is not issued on successful completion of the course.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9215.

Yours truly,

Pauline Greenblatt
Technical Analyst
Educational Services and Indians Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

Legislative References:	Sections 1 and 8/Part III/Schedule V
NCS Subject Code(s):	11915-7-2 XXXXX