3 December 2001 GST/HST Interpretation 35667 - GST/HST and the Sale of Parking Units

Dear XXXXX

Thank you for your letter of April 17, 2001, and the additional information provided by telephone and facsimile, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of your client.

As the proposed transactions relate to real property situated in the Province of XXXXX, the HST will not apply and this letter will address the GST only.

Background

1. The vendor is a residential condominium corporation in the province of XXXXX and is a non-profit corporation under section 149 of the Income Tax Act.

2. The condominium corporation is not a GST/HST registrant.

3. The condominium developer (the "developer") is a registrant and had charged GST to the individual condominium purchasers on the sale of the residential and parking units.

4. In XXXXX 1994 the condominium corporation had purchased XXXXX unsold parking units XXXXX from the developer. The document effecting the transfer of the parking units to the condominium corporation from the developer stated that the units were transferred "together with their appurtenant common interests". The purpose of the conveyance was stated as " transfer of remaining assets by developer to condominium corporation".

5. These parking units ("parking spaces") are located in the basement of the residential condominium building.

6. From XXXXX 1994 onwards, the condominium corporation has rented out, on a monthly basis, the parking spaces to individuals who are residents in the building. No GST was charged on these rentals.

7. The condominium corporation now intends to sell one or more parking spaces to residents in the building. The purchasers of the parking units would be individuals who own condominium units in the building.

Interpretation Requested

Does the condominium corporation charge the GST on the sale of the parking spaces?

Interpretation Given

Based on the information provided, we are pleased to provide you with the following interpretation.

Subsection 165(1) provides that GST is payable in respect of taxable supplies made in Canada. A taxable supply is defined in subsection 123(1) of the Excise Tax Act (ETA) as a supply made in the course of a commercial activity. A commercial activity, as defined in subsection 123(1), includes:

"(c) the making of a supply (other than an exempt supply) by the person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply."

Accordingly, the making of any supply of real property is a commercial activity and is taxable, unless the supply is exempted by a provision of the ETA.

The sale of a parking space is a supply of real property for GST purposes as a result of the definition of real property in subsection 123(1) of the ETA.

The result is that the sale of a parking space by itself is generally taxable (i.e., as a supply by way of sale of real property) unless an exempting provision applies.

There is a specific exemption for the sale of a parking space in a condominium complex under certain circumstances in section 8 of Part I of Schedule V of the ETA. However, this particular provision applies to exempt the sale of a parking space in a condominium complex only when it is sold along with a residential condominium unit and only if the supplier had purchased it and has not claimed an input tax credit in respect of its acquisition. Specifically, section 8 states that the sale of the parking space is exempt provided:

•   the parking space is located in the condominium complex,

•   the parking space is supplied as part of, or at the same time, as an exempt sale of a residential condominium unit, and

•   the supplier of the parking acquired the space by way of sale and did not subsequently claim an ITC with respect to the acquisition of or improvement to the space.

In this case, the parking spaces are being sold at a different time and the sale of each space is not part of the exempt sale of a residential condominium unit. Accordingly, section 8 of Part I does not apply. However, it is possible that another exempting provision may apply.

Section 13 of Part I of Schedule V of the ETA exempts a supply of property or a service, made by a condominium corporation to the owner or lessee of a residential condominium unit, but only if the property or service relates to the occupancy or use of the unit. Generally, as a result of this provision, no tax is payable on most condominium fees charged to owners or lessees of residential condominium units, if the fees relate to the occupancy or use of a residential condominium unit in the complex.

This provision could also apply to a supply of property by a condominium corporation to a condominium owner, for example, a storage locker, if all the conditions in section 13 are met.

Documents relating to the proposed sale of the parking spaces by the condominium corporation to the individual condominium owners were not provided to us. However, based on the information that has been provided, a parking space supplied by the condominium corporation in these circumstances would appear to be an exempt supply under section 13 of Part I of Schedule V, assuming that all the conditions in that provision were satisfied. As stated above, section 13 requires, among other conditions, that the supply of the property or service by the condominium corporation must relate to the use or occupancy of the condominium unit. It is our view that in the circumstances described, this requirement would likely be met with respect to the sale of the parking spaces in question. Accordingly, such a supply would not be taxable.

Other Information

Sections 148 and 148.1 of the ETA set out the rules for small suppliers.

In summary, small suppliers generally include those persons whose total taxable supplies (with certain exclusions) in the preceding four calendar quarters are $30,000 or less, or where the person is a public service body, $50,000 or less.

A person also ceases to be a small supplier at any time in a calendar quarter if the total value of the total taxable supplies (with certain exclusions) in that quarter made by the person, or an associate, exceeds $30,000 or, if the person is a public service body, $50,000.

Our understanding is that the non-profit condominium corporation may qualify as a "non profit organization" (NPO), and therefore a public service body, under the ETA. Whether the non-profit condominium corporation is an NPO for the purposes of the ETA is a question of fact, and the CCRA has issued Policy Statement P-215: Determination Of Whether An Entity Is A "Non-Profit Organization" For Purpose Of The Excise Tax Act ("ETA") to assist in your determination.

Generally, when small suppliers who are not registered for the GST make taxable supplies, no tax is payable in respect of these supplies. However, the sale of real property is an exception to this rule. Unless an exempting provision applies, GST is payable by the purchaser upon a sale of real property by a small supplier.

As stated above, a parking space is real property. Accordingly, unless an exempting provision applies, GST would generally have to be collected, and remitted, by the vendor upon sale of a parking space. (Generally, the responsibility to collect GST on a taxable supply rests with its supplier. However, paragraph 221(2)(b) of the ETA provides that where a taxable supply of real property is supplied to a recipient who is registered for GST purposes, the obligation to account for the tax rests with the recipient of the supply of real property).

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 and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-1512.

Yours truly,

Mark Seigel
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate