16 February 1999 General Information Letter HQR0001536 - GENERAL INFORMATION LETTER Provincial Cost Recovery Fees

Dear XXXXX

Thank you for your letter of January 4, 1999 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to cost recovery fees charged by provincial governments.

Under section 122 of the Excise Tax Act (ETA), provinces are required to collect and remit the GST/HST in respect of taxable supplies. A "taxable supply", as defined under section 123 of the ETA, "means a supply that is made in the course of a commercial activity", where a "commercial activity" is defined to include "a business carried on by the person... except to the extent to which the business involves the making of exempt supplies by the person". Therefore, what must be determined when we look at the application of the GST/HST to a government fee is whether there is a supply provided in respect of that fee and, if so, is it a taxable supply or an exempt supply. Where a supply is exempt, no GST/HST should be collected. Exempt supplies are set out in Schedule V to the ETA. For your information, I have attached a copy of GST Memorandum 300-4-6, Exempt Supplies, Public Sector Bodies which provides a general explanation of exempt supplies made by government.

In your letter, you have asked how the GST will apply to a proposed fee that will be charged to vendors who are unwilling to submit invoice data electronically. Unfortunately, without more specific detail, such as a copy of the contract (or proposed contract) that will be signed between the registered vendors and the province and which incorporates this fee, it is not possible to provide a definitive statement as to the fee's tax status at this time. Once you have more detail in respect to this fee or you have determined where other cost recovery fees will be applied, please submit all relevant documentation so that we may provide you with a ruling. To assist you in determining our documentary requirements, please refer to a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series (attached) and, in particular, paragraph 25.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0370.

Yours truly,

Brent Fleming
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate