24 March 2000 GST/HST Ruling 8382 - Application of the GST/HST to Supplies of Text Books and Administrative Services

Dear XXXXX

Thank you for your letter of October 12, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by XXXXX[.] Our ruling is set out below.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency.

On April 1, 1997, the HST replaced the GST and the provincial sales tax in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized rate of 15%. Supplies of goods and services made in a participating province are subject to tax at the harmonized rate, unless a relieving provision applies. As the supplies about which you are inquiring are being made only in XXXXX, we will address only the GST implications in this ruling.

Statement of Facts

A statement of the facts of this case, as we understand them, is set out below.

1. The XXXXX[.] The XXXXX is incorporated as a non-profit organization in XXXXX XXXXX and is a member of the XXXXX XXXXX, which consists of XXXXX, including XXXXX[.]

2. The XXXXX ("the course") for people working in the industry. The course was originally a program offered at XXXXX. In XXXXX, following a major reorganization at the XXXXX decided to take the course out of the XXXXX and sponsor the course itself.

3. The course takes XXXXX to complete. XXXXX[.] On successful completion of the course, students are awarded a diploma which attests to the holder's competence to practise a trade or vocation in the field XXXXX[.] Occasionally, there are individuals who work in the XXXXX XXXXX who attend only some of the lectures since they just wish to improve their knowledge in a specific area. These individuals do not write an exam or obtain a diploma. However, the vast majority of students (98%) attend to obtain a diploma.

4. As indicated above, the XXXXX decided to sponsor the course after it was taken out of XXXXX. The XXXXX arranged for a private corporation, XXXXX, to run the course. XXXXX[.]

5. XXXXX provides all administrative services required to run the course. It deals with the students, accepts registration fees, sets and supervises examinations, arranges for lecturers and pays the lecturers. XXXXX also produces three textbooks for the course. These have been written by the various lecturers. The material in each of the textbooks is arranged such that each chapter corresponds to a lecture.

6. With respect to the course, XXXXX bills the XXXXX for administrative services, lecturers' fees and textbooks. The administrative fee is a minimum of XXXXX (This is based on a class size of 15 students. XXXXX XXXXX have an understanding whereby XXXXX will charge an additional administrative fee of XXXXX per student if there are over 15 students. The typical class size is 20 students per semester, so the typical billing for administrative services per semester is XXXXX[.] For lecturers' fees, XXXXX bills the XXXXX XXXXX XXXXX per lecture. Finally, the XXXXX is billed XXXXX XXXXX[.]

7. Other supplies made by XXXXX in 1999 include:

•   Canadian sales of textbooks (to persons not taking the course)

•   XXXXX

•   U.S. sales of textbooks (to persons not taking the course) XXXXX

•   XXXXX XXXXX total revenue for all supplies made in the 1999 calendar year is XXXXX[.]

8. XXXXX has registered for GST (GST registration number XXXXX. In 1999, XXXXX charged the XXXXX GST on the administration fee and the textbooks.

Rulings Requested

Is the supply of textbooks for the course and the supply of administrative services to run the course made by XXXXX to the XXXXX subject to GST?

Rulings Given

Because XXXXX is a registered small supplier, it is required to charge GST on all taxable supplies it makes in Canada. The supplies described in facts 5 and 7 above are taxable supplies since, on the basis of the information provided, there is no exemption for them in the provisions of the Excise Tax Act (the "Act").

Thus, based on information you submitted regarding XXXXX 1999 sales, XXXXX must charge GST on its billings to the XXXXX (i.e. fees for administrative services, lecturers and textbooks), as well as fees for textbooks sold in Canada and fees charged to the XXXXX XXXXX is not required to charge GST on its U.S. sales of the textbooks, as only taxable supplies made in Canada are subject to GST. That is, pursuant to subsection 142(2) of the Act, tangible personal property that is delivered or made available to the recipient of the supply outside Canada is deemed to be a supply made outside Canada and is thus not subject to GST.

Additional Information

Since XXXXX is a "small supplier", we will provide the following additional information concerning this area for your assistance.

Pursuant to subsection 148(1) of the Act, a person qualifies as a small supplier throughout any calendar quarter and the following month if the total consideration paid (in this case, consideration is money) for taxable supplies made inside or outside Canada by the person in the preceding 12 month period did not exceed $30,000.

A small supplier is not required to register for GST and, if it remains unregistered, is not required to collect GST on any taxable supplies made. An unregistered small supplier is also not required to file any GST returns. However, an unregistered small supplier cannot claim input tax credits for GST paid on taxable inputs.

It is important to note that a person who makes taxable supplies and who qualifies as a small supplier may choose to become a GST registrant, pursuant to subsection 240(3) of the Act. A small supplier who registers voluntarily is required to collect GST on any taxable supplies made in Canada and to file GST returns. The voluntary registration option might be of interest to small suppliers who wish to claim input tax credits on their purchases. Since XXXXX voluntarily registered, it is required to collect and remit the GST and file returns, and is entitled to claim input tax credits.

Pursuant to subsections 148(1) and 148(2) of the Act, a person ceases to qualify as a small supplier at any time in a calendar quarter when the total consideration for taxable supplies made inside or outside Canada of that person in that quarter or in the four preceding quarters exceeds $30,000. (For the purposes of this rule, proceeds from supplies of financial services or from the sale of capital property are excluded.)

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9215.

Yours truly,

Pauline Greenblatt
Technical Analyst
Charities, NPO's and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate