1 June 1999 GST/HST Interpretation HQR0001739 - Application of the GST/HST to the Supply of Aptitute Tests and Transcripts

This is in response to your e-mail of April 12, 1999, regarding the application of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) to supplies of aptitude tests and transcripts.

Facts

It is our understanding that the XXXXX[.] The performance by XXXXX on the XXXXX is considered by universities in determining which students are accepted to XXXXX XXXXX a given scholastic year. After administering the examination, the XXXXX determines each student's result on the XXXXX and prepares transcripts reflecting the results. The XXXXX then forwards the transcripts, by mail, to a maximum of five universities of the student's choosing. The provision by XXXXX of the supplies of the XXXXX marking of examinations, and preparation and forwarding of five transcripts, are provided to students for a single consideration of XXXXX[.] An additional XXXXX consideration, per transcript, is charged to students requiring more than five transcripts.

It is also our understanding that the XXXXX does not currently charge GST/HST for these services, as a result of advice received during an audit in 1996. At that time the auditor determined that the supply of the testing service was exempt under Part III of Schedule V to the ETA.

Interpretation Requested

1. What is the tax status of the supply, by XXXXX of the testing service, preparation and transmission of 5 transcripts, and provision of additional transcripts?

Interpretation Provided

It is our opinion that the administration of the XXXXX and the preparation and supply of the initial five transcripts constitutes a single supply of a service pursuant to Policy Statement P-077R Multiple and Single Supplies. The supply of additional transcripts for a separate consideration is a supply of tangible personal property that is taxable unless otherwise exempted by the Excise Tax Act (ETA).

Where these supplies are determined to occur in one of the three participating provinces of Nova Scotia, New Brunswick or Newfoundland, the harmonized tax rate of 15% will apply to the supply. Where the supply is determined to occur elsewhere in Canada, the GST rate of 7% will apply.

We recommend that the XXXXX be informed of the correct tax status of their supplies, as discussed below.

Analysis

The Supply of the Testing Service and Preparation and Provision of 5 Transcripts

As noted above, the supply of the testing service and the first five transcripts is considered a single supply of a service. Part V of Schedule IX to the ETA sets out the rules used to determine the province in which the "Canadian element" of a supply of a service is made. Generally, Part V of Schedule IX to the ETA provides that a service is considered to be supplied in a particular province if either (a) all or substantially all of the Canadian element of the service is performed in that province, or (b) the place of negotiation of the supply is located in the province, unless all or substantially all of the service is performed outside that province.

The "Canadian element" of a service is the portion which is performed in Canada. Where this is not determinative of the place of supply, the supply may be regarded as being made in a participating province where:

•   the place of negotiation for the supply is located in Canada, if the Canadian element of the service is to be performed primarily in the participating provinces. The supply of the service is considered to be made in the participating province in which the greatest proportion of the Canadian element is to be performed; or

•   the place of negotiation for the supply is located outside Canada, if all or substantially all of the service is to be performed in Canada, and it is to be performed primarily in the participating provinces, the supply is considered to be made in the participating province in which the greatest proportion of the services to be performed in the participating provinces are to be performed.

Please note that the phrase "place of negotiation" is defined in section 1 of Part I of Schedule IX to the ETA, as the place where the individual principally involved in negotiating for the supply ordinarily works or reports. For the purposes of establishing the place of negotiation, "negotiating" includes the making or acceptance of an offer.

If the supply of a service is not determined to be made in a participating province in the above-noted circumstances, it may nevertheless be regarded as being made in a participating province if it is a deemed or prescribed supply pursuant to Part IX of Schedule IX to the ETA.

Finally, section 3 of Part I of Schedule IX to the ETA provides that where an agreement for the supply of a service is entered into, but the service is never performed, the place of supply is deemed to be where the service was to be performed under the terms of the agreement between the supplier and the recipient.

Based on the information you provided, the place of supply of the XXXXX testing services is in the province where the testing of the applicant is performed. Again, where the testing is performed in a participating province, the supply of the service is subject to the HST at 15%. Where the testing is performed in a non-participating province the supply is subject to the GST at 7%.

The Supply of Additional Transcripts

As noted above, the supply of additional transcripts for a separate consideration is a supply of tangible personal property that is taxable unless otherwise exempted by the Excise Tax Act (ETA). To determine whether the supply is subject to tax at 7% or 15%, it is important to determine whether or not the supply is made in a participating province. With regard to the supply of tangible personal property, please refer to Technical Interpretation Bulletin B-078 Place of Supply Rules under the HST, and Policy P-078R Meaning of the phrase "delivered or made available in (or outside) Canada to the recipient", which sets out the place of supply rules relating to tangible personal property.

By way of summary, these publications outline that supplies by way of sale of tangible personal property are made in a province if the supplier delivers the property or makes it available in that province to the recipient of the supply.

For example:

Where an agreement for a supply of tangible personal property is entered into, but the property is never delivered to the recipient, the place of supply is deemed to be where the property was to be delivered under the terms of the agreement between the supplier and the recipient.

Tangible personal property is deemed to be delivered in a particular province, and not to any other province, if the supplier ships the property to a destination in the particular province that is specified in the shipping contract for the property, or otherwise transfers possession of the property to a common carrier or consignee retained by the supplier on behalf of the recipient to ship the property to such a destination in the particular province on behalf of the recipient.

Under section 144.1 of the ETA, one refers to the rules set out in Schedule IX to the ETA to determine the province in which a supply is made. Where these rules do not specify a particular province, the supply is considered to be made in a non-participating province. Therefore, unless a supply is specifically determined to be made in a particular province under Schedule IX to the ETA, it is considered to be made in a non-participating province.

Therefore where a transcript, which has been purchased separately from the supply of the testing service, is mailed to a university in a participating province the supply is considered to be made in the participating province and the supply is subject to the HST at the rate of 15%.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-1175.