29 January 1999 GST/HST Interpretation HQR0001335 - Application of GST/HST to Part-time Courses and Corporate Training Program Offered by the

Thank you for your e-mail of September 17, 1998 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below. Please note that while there is sufficient information to rule decisively with respect to some of the courses offered by the XXXXX there is insufficient information to rule decisively with regards to others. With respect to these latter courses, we are providing you with some guidelines with which to make a ruling once you have received the necessary information from the XXXXX[.]

Statement of Facts

1. The XXXXX was established to provide instruction in courses related to the film and animation industry.

2. The XXXXX is established and operated primarily to provide students with instruction in courses that develop or enhance students' occupational skills, and is a vocational school for the purposes of Part III of Schedule V to the Excise Tax Act ("ETA").

3. The XXXXX is registered under and governed by the XXXXX XXXXX legislation regarding vocational schools. It is also a registrant for GST purposes.

4. The XXXXX offers 6 full-time educational programs ranging from 16 to 48 weeks in length. In addition to these programs of courses, the XXXXX offers a large number of part-time courses, most of which are listed in its brochure entitled "XXXXX XXXXX["] (hereinafter referred to as the "part-time schedule"). Some additional part-time courses are listed on the XXXXX website.

5. The full-time programs offered by the XXXXX do not operate on a credit system. Students that successfully complete courses offered in the part-time schedule may receive preferential treatment in obtaining entrance to the full-time programs. However, the part-time student cannot obtain credit towards the full-time program by taking a course listed in the part-time schedule.

6. All of the courses listed in the part-time schedule are offered on a pass/fail basis.

7. The part-time courses listed directly below assess the performance of the student on the basis of a test, graded material or project evaluation. If the student obtains an acceptable standard on the test, graded material or project evaluation, the student obtains a pass in the course and obtains a certificate. If the student does not obtain an acceptable standard on the test, graded material or project evaluation then the student fails the course, and does not obtain a certificate. These courses will be collectively referred to as "Evaluation Courses":

Introduction to Film making
Movie Magic: Budget and Scheduling
Script writing: The Basic Tools
Script writing Workshop: Developing Your Script
Introduction to Film Editing
Low Budget Film making: A Producer's Workshop
Advanced Make-Up for Film, Television & Special Effects
Traffic Control Course
Acting Fundamentals
Scene Study & Audition Technique
Camera Styles
Voice Over Lab
Introduction to 3D Animation with Lightwave
Introduction to Softimage 3D
Introduction to Maya
Sculpting for Animators
Softimage 3D Level I
Classical Animation: The Art & Technique
Foundation Drawing Skills
Fundamentals of Life Drawing
Advanced Life Drawing
Introduction to Multimedia
Introduction to Internet
Web Publishing with HTML
Introduction to CD Rom Authoring
Introduction to Photoshop & Fractal Painter
Digidesign Protools
Digital Video Editing Workshop: Introduction to Avid's Media Composer
Digital Video Editing Workshop: Introduction to Avid's Media Composer - Tips & Techniques
Introduction to Macromedia Flash
Quick Time VR

8. The following part-time courses assess the performance of the student on the basis of attendance. In addition, class participation and attentiveness are also judged by the instructors in assessing whether a student should pass or fail a course. As with the Evaluation Courses, if the student obtains a "pass" grade in the course s/he is issued a certificate. If the student obtains a "fail" grade, s/he is not issued a certificate. These course will be collectively referred to as the "Attendance Courses":

The Assistant Director
Script Supervision & Continuity
Introduction to Cinematography & Lighting
Art Direction
Directing for Film
Basic Make-up for Film & TV
Beyond the Paradigm: "Screenwriting that Hollywood Will & Will Not Love"
Writing for Interactivity

9. The following part-time courses have been cancelled by XXXXX and are no longer offered to students. The cancellation may be merely temporary. These courses assess the performance of the student in the same manner as the Attendance Courses, and will be referred to as the "Cancelled Courses":

Building Landscapes with Bryce 3D
Fundamentals of Houdini
Drawing Animals
Animation Assistant Workshop
Enhancing Your Webpage with Java Script
Creating the Ultimate Webpage

10. It is not clear whether the part-time course listed on the XXXXX website, entitled XXXXX is a pass/fail course. Further, if it is a pass/fail course, it is not clear on what basis, or in what manner the students are assessed.

11. The XXXXX also offers a corporate training program. It is a customized service offered by the XXXXX whereby its existing courses are offered in packages tailored to meet the specific needs of businesses, organizations and other groups. Additional courses and seminars can also be custom designed to meet the needs of a particular organization. To date, the corporate training program has been restricted to a program specifically designed for XXXXX network engineers and advanced communications engineers. Using a combination of labs and lectures, the training program concentrates on the latest technologies, with a focus on increasing productivity on the intranet and security issues. A similar program has been designed for XXXXX[.]

12. The XXXXX corporate training programs are not offered on a pass/fail basis. Students are provided with informal, continual feedback, and each student has a clear idea of their performance. Students who have difficulty with the program have the option of taking the training again, at the discretion of his/her employer.

Ruling Requested

Whether the part-time courses and the corporate training programs offered by the XXXXX are exempt supplies pursuant to section 8 of Part III of Schedule V to the ETA.

Ruling Given

1. It is the Department's position that the Evaluation Courses offered by the XXXXX are exempt supplies under section 8 of Part III of Schedule V to the ETA.

2. It is the Department's position that the Attendance Courses offered by the XXXXX are not exempt supplies pursuant to section 8 of Part III of Schedule V to the ETA, and are therefore subject to the GST/HST.

3. It is the Department's position that the corporate training programs currently being offered to XXXXX are not exempt supplies under section 8 of Part III of Schedule V to the ETA, and are therefore subject to the GST/HST.

Explanation of Ruling/Interpretation Re: Cancelled Courses and XXXXX

XXXXX[.] Section 8 of Part III of Schedule V to the ETA provides that a supply made by a vocational school of a service of instructing individuals is exempt where the course leads to a certificate, diploma or similar document attesting to the competence of individuals to practice or perform a trade or vocation and the supplier is governed by legislation respecting vocational schools. Since the XXXXX is a vocational school for the purposes of the ETA that is governed by legislation respecting vocational schools, the courses that it offers will be exempt pursuant to section 8 if they lead to certificates, diplomas or similar documents that attest to the competence of individuals to practice or perform a trade or vocation.

The determination of whether the courses offered by the XXXXX lead to certificates, diplomas or similar documents that attest to the competence of individuals to practice or perform a trade or vocation must be undertaken on a case-by-case basis. There is sufficient information to rule decisively with respect to the Evaluation Courses, the Attendance Courses and the Corporate Training Programs. However, there is insufficient information to rule decisively with regards to the Cancelled Courses and the XXXXX[.]

With respect to the Cancelled Courses and the XXXXX, we are providing you with the following guidelines with which to make a ruling once you have received the necessary information from the XXXXX[.]

Part-time courses offered by a vocational school will be exempt supplies under section 8 of Part III of Schedule V to the ETA if they are clearly related to a vocation or trade and:

1. The part-time course is otherwise offered as a credit in a full-time program of courses offered by the same institution, leading to a certificate, diploma, licenses or similar document that attests to the competence of individuals to practice or perform a trade or vocation;

OR

2. The competency of the students is evaluated on a pass/fail basis, where

a. the status of a student as having either failed or passed a course is based on the evaluation of the student's performance on a single, or series of, tests, graded materials or projects; and

b. a certificate or similar document is issued to students that pass the course.

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

Under this criteria, the Cancelled Courses would not likely be exempt from the GST/HST if reintroduced in the manner described in the part-time schedule.

[required only when the decision is unfavourable]

We trust that the above provides you with the guidance necessary to provide a ruling regarding the GST/HST status of the Cancelled Courses and the XXXXX Course offered by the XXXXX. Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Paule Labbé (Manager) at (613) 954-7957 or me at (613) 952-4157.