8 June 2000 GST/HST Interpretation 31550 - Aromatherapy Courses

This is in response to your e-mail query of May 19, 2000, requesting advice on whether aromatherapy courses (Standard Aromatherapy course, Advanced Aromatherapy course, Essential Oil Practitioner course) provided by a particular school (which is a proprietorship) would be exempt under section 8 of Part III of Schedule V. As you are aware, courses which satisfy certain criteria and which are offered by a vocational school (or public college, school authority or university) are exempt under section 8.

Effective for supplies made after 1996, the definition of vocational school was amended to remove any reference to ss. 118.5(1) of the Income Tax Act. Therefore, the amended definition of vocational school as well as guidelines set out in Policy Statement P-229 Definition of Vocational School in Section 1 of Part III of Schedule V to the Act, will apply in respect of courses offered after 1996.

The school that is the subject of your query would be regarded as a vocational school pursuant to guidelines set out in Policy Statement P-229, if it is established and operated primarily to provide courses that develop or enhance students' occupational skills.

Your e-mail does not mention whether the school's governing documents indicate the purpose of the organization as that of vocational training. However, the description you provided of its activities and the fact that it is registered with the Private Post Secondary Education Commission XXXXX indicate that it may be established primarily to provide students with occupational courses. However, not all schools registered under that Act may qualify as a vocational school for GST purposes. You should still ascertain that its governing documents accord with the view that the school was established primarily for the purpose of providing occupational training courses.

The Agency will consider a particular school to be operated primarily to provide courses that develop or enhance students' occupational skills, if more than 50% of its total annual revenues are derived from tuition or from the provision of property or services related to the provision of instruction (e.g. sale of textbooks, locker rentals, parking, photocopy services to students, etc.). From the limited information provided, it appears that more than 50% of the school's annual revenues are derived from vocational courses; however, you may wish to obtain documentation to confirm this before providing a ruling.

Where a school is commencing operations, the Agency will consider it to be operated primarily as a vocational school if its intent (e.g., as set out in a business plan) is to primarily offer courses that develop or enhance students' occupational skills.

Finally, to be considered a vocational school, the school must provide occupational courses that have a direct link to skills that are essential for an individual to gain or retain employment. Generally, the Agency does not consider courses in sport, games, hobbies or other recreational or cultural pursuits, or courses that are designed to be taken for personal interest, as relating to a trade or vocation. Nor does the Agency review the intent of the student.

We agree that, generally, aromatherapy is becoming accepted as a vocation as the Agency has received requests for rulings on the tax status of fees for aromatherapy services. It is a question of fact, however, as to whether the courses provided by the school in question provide skills that develop or enhance students' occupational skills. Therefore, you may wish to examine the curriculum and promotional material to determine if the particular school that is the subject of your query markets its courses as providing skills needed for employment and not for recreational or personal interest. If this is the case, the school would be regarded as meeting the definition of "vocational school".

In accordance with guidelines set out in Policy Statement P-231, courses provided by the school (if a vocational school) would be exempt provided that the courses meet the requirements set out in section 8 of Part III of Schedule V. Generally, section 8 exempts instruction in respect of certificates, diplomas, licences, etc, that attest to the competence of individuals to practice 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 a public institution.

You mention that the school is registered with the Private Post Secondary Education Commission. Accordingly, the school meets requirement (b) above and you needn't determine whether it meets (a) or (c). Nevertheless, we wish to note that it does not appear that the school is a non-profit organization or public institution; nor is there evidence that the certificate issued by the school is prescribed by federal or provincial regulation.

The preamble to section 8 sets out three requirements:

The supply by the educational institution must be in respect of courses leading to certificates, diplomas or similar documents.

It appears that, although there has been limited interest (one student) in the Essential Oil course to date, upon successful completion (mark of 80% or more ) of the Standard, Advanced and Essential Oil Practitioner courses, the school issues to each student a certificate in all three courses.

The competency gained by the students must relate to the practise or performance of a trade or vocation.

As discussed previously, although we are in agreement that aromatherapy, generally, is becoming more accepted as a vocation, you may wish to review the curriculum and promotional materials relating to the Standard and Advanced Aromatherapy courses and the Essential Oil Practitioner course to determine whether those courses would be regarded as relating to the practice or performance of a trade or vocation.

The certificate diploma, license or similar document must attest to the competence of the students to practice the trade or vocation.

It appears that the 20 week Standard Aromatherapy Course and the 12 day Advanced Aromatherapy course and the Essential Oils Practitioner course are part-time courses rather than courses that are offered as part of a full-time program. If this is the case, since the competency of the student in all three courses are evaluated on a pass/fail basis (80%) based on written and practical examinations, the courses would be exempt under section 8 of Part III (if all other requirements are met). This is our administrative policy as set out in Policy P-231 Courses That Qualify For Exemption Pursuant To Section 8 of Part III of Schedule V to the ETA.

Although, the above information is of a general nature, I hope it will assist you in providing a written response to the client. Should you wish more specific guidance, please forward documentation regarding the school and the three previously mentioned courses. I may be reached at (613) 952-0420 should you wish to discuss any of the above.