20 January 2000 GST/HST Ruling 8104/HQR0001710 - Application of the GST/HST to Counselling Services

Thank you for your letter of November 30, 1998 which was forwarded to us by our XXXXX[.] Your letter concerns the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the contract you have entered with XXXXX under which you provide counselling services to XXXXX clients.

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

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX entered into a contribution agreement with XXXXX, for the period from XXXXX, under which XXXXX XXXXX is to provide counselling services to XXXXX clients. The body of the contract was written using the standardized wording used in all of XXXXX XXXXX contracts. This particular contract was written pursuant to XXXXX option.

2. Under the contract, XXXXX will receive XXXXX which was calculated based on XXXXX ages, clerical support, administrative wages and overhead.

3. XXXXX must counsel XXXXX clients per week, Monday to Friday inclusive, between the hours of 9:00 AM and 4:30 PM at the XXXXX[.]

4. The objective, as set out in XXXXX of the contract, is to enable clients to prepare for, find and keep employment by providing needs determination, case management counselling services, and job search counselling.

5. The following services will be provided by XXXXX in order to meet the objective:

•   Assist clients in career decision making, skill enhancement, job search and job maintenance;

•   Develop a mutually agreed upon return to work action plan for every client excluding non-cooperative clients;

•   Assist clients to implement action plans; and

•   Refer clients to appropriate interventions including the self-employment program, job finding clubs, resource centers, career exploration assistance, the targeted wage subsidy program, training interventions, diagnostic assessment and other agencies which meet the client's needs.

6. Under the terms of the agreement, XXXXX requires XXXXX and XXXXX to undertake the following:

•   Log clients referred to counselling and provide service within 30 days of referral to counselling;

•   Input information regarding client's action plans into XXXXX system on a weekly basis and follow-up on client's progress using XXXXX case management tools;

•   Liaise with XXXXX staff to improve service and meet XXXXX requirements (the terms of reference for the position state that monitoring of counselling services will be provided by XXXXX;

•   Document clients for training and complete XXXXX training contracts with service providers as directed by XXXXX;

•   Submit resumes of potential employees for the approval of XXXXX; and

•   Ensure staff who deal with the public are bilingual and proficiency tested to meet government standards.

7. XXXXX anticipates that XXXXX of the clients that receive counselling will find work within XXXXX of the end of the counselling intervention.

8. Clients are told that they are dealing with independent contractors and signs are posted notifying clients of the various contractors and the services they provide.

Ruling Requested

Is the fee charged by XXXXX in respect of the counselling services provided under the agreement with XXXXX, subject to the GST/HST.

Ruling Given

Based on the facts set out above, we rule that the fee charged by XXXXX XXXXX in respect of counselling services provided under the agreement with XXXXX, is subject to the GST/HST.

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 departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

What must be determined is whether the payment from XXXXX is consideration for the supply provided by XXXXX or whether it is a grant. Under Technical Information Bulletin B-067, Goods and Services Tax Treatment of Grants and Subsidies (TIB-067), where a payment is determined to be a grant it will not be viewed as consideration for a supply and will not be subject to the GST/HST.

Under the agreement in question, your company provides counselling and related services at XXXXX in return for the payment from XXXXX. Based on the degree of control XXXXX maintains over the services provided by your company, we conclude that these services are required to be provided through the XXXXX and are the responsibility of XXXXX. Therefore, XXXXX is viewed as contracting out its responsibilities and, based on TIB-067, the payment made to your company is consideration for a supply.

Section 165 of the Excise Tax Act (ETA) requires every recipient of a taxable supply made in Canada to pay to Her Majesty the GST/HST on the value of the consideration for the supply except where the supply is zero-rated. A "taxable supply" is defined to be any supply made in the course of a commercial activity, where the definition of "commercial activity" includes a business carried on by a person except to the extent to which it involves the making of exempt supplies. In this case, the services provided by your company are neither a zero-rated supply nor an exempt supply and are, therefore, subject to the GST/HST. Subsection 221(1) of the ETA requires that you collect this tax as an agent of Her Majesty in right of Canada and subsection 225(1) requires you to include the amount collected in your net tax calculation.

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
Excise and GST/HST Rulings Directorate

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