7 April 2000 GST/HST Interpretation 7925 - Tour packages

Dear XXXXX

Thank you for your letter of December 22, 1998, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to tour packages. Specifically, you are requesting clarification of the term "tour package" for purposes of determining the amount of the rebate that may be claimed under subsection 252.1 of the Excise Tax Act (ETA) in the following scenario:

Company A is a Canadian company that is a registrant carrying on a travel business in Canada. Company A acquires hotel space from Canadian hotels and sells it to non-resident, non-registered tour vendors for resale to non-resident individuals. If required, Company A also arranges for bus transportation to hotels, "meet and greet" services at the airport and ski lift tickets. The additional services are billed by Company A on the same invoice to the non-resident tour vendor but are sold and itemized separately. The ultimate purchasers may purchase all services at the same time, however, they are reserved separately. For example, one customer may not wish to ski. Another customer may prefer to rent a car in order to get from the airport to the hotel. The Canadian company credits any rebates in respect of short-term accommodation to the non-resident tour vendor, as described in subsection 252.1(8) of the ETA.

Interpretation Requested

You are requesting confirmation that the combination of hotel, bus transportation services and other services, is not considered to be a tour package because each item in the bundle of services is billed separately and, in addition, the ultimate purchaser can acquire one item without necessarily purchasing all of the items. If so, the rebate to which the non-resident tour operator would be entitled in respect of the short-term accommodation would be equal to the actual tax paid on the short-term accommodation rather than the amount determined in accordance with the 50% method under paragraph 252.1(5)(b) of the ETA.

Given that the registrant credits the non-resident tour vendor with the rebate under subsection 252.1(8) of the ETA, you are also seeking confirmation that the response to the above question will not be affected by the billing procedures of the non-resident tour vendor. Specifically, although the registrant itemizes each service separately on the invoice to the non-resident tour vendor, the non-resident vendor may or may not issue one all-inclusive invoice to its customers.

Interpretation Given

Subsection 163(3) of the ETA defines a tour package to mean a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price.

Subsection 252.1(3) of the ETA allows an unregistered non-resident tour operator to obtain a rebate in respect of the tax on short-term accommodation or a tour package including short-term accommodation that the operator acquires and resupplies to non-resident persons at a place outside of Canada where the tour operator or the operator's agent is conducting business. The rebate may only be claimed by the unregistered non-resident tour operator to the extent that the accommodation is ultimately made available to a non-resident individual. In the case a tour package including short-term accommodation, subsection 252.1(5) provides that the rebate is equal to 50% of the total tax paid on the tour package adjusted by the total number of eligible nights spent in Canada. Subsection 252.1(8) of the ETA allows the registrant to pay or credit the amount of the rebate to the non-resident tour operator and to claim a corresponding net tax deduction.

The short-term accommodation supplied by the registrant in the scenario described in your letter would not be considered to be part of a tour package to the extent it may be acquired by the non-resident tour operator separately from the other property and services being supplied by the registrant. This will not be affected by the manner in which the non-resident tour vendor subsequently bills the property and services to non-resident individuals.

To the extent that the short-term accommodation is not being supplied as part of a tour package, and provided that all of the other legislative conditions are satisfied, the amount of the short-term accommodation rebate that the registrant may credit to the non-resident tour vendor under subsection 252.1(8) of the ETA will be equal to the actual tax paid on the short-term accommodation.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8223.

Yours truly,

Carolle Mercier
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate