4 April 2001 GST/HST Interpretation 32408 - Section 211 Election on a Municipal Street

Dear XXXXX:

I refer to various correspondence and telephone conversations between our two offices concerning the application for an election under section 211 (All legislative references refer to the Excise Tax Act (ETA)) from the town of XXXXX and its calculation of an Input Tax Credit (ITC) payable of XXXXX should the election be valid. On November 3, 2000, after consulting with our unit, your office transferred the file to us as a Type II transfer

Statement of Facts

The following pertinent facts are understood from XXXXX letter of July 13, 2000 and other documents provided subsequently by the town's representative, XXXXX:

1. XXXXX submitted an election under section 211 in respect of its "streets with paid parking meters" (XXXXX, with an effective date of XXXXX (As noted by officer XXXXX of your office, this effective date was not allowed in November 2000, as subsection 211(5) requires that the election be filed within one month after the end of the reporting period in which the election becomes effective.). The streets are allegedly "considered as individual properties XXXXX We asked XXXXX, without success, for evidence to this effect at various times, including a Fax dated XXXXX (XXXXX).)

2. On the town's application, the following is provided as the legal description of the property in respect of which the subject election has been filed: XXXXX This legal description allegedly covers streets with parking meters.

3. The ITC computation made by the consultant, is based on the requested effective date of XXXXX. The percentage of XXXXX commercial use of a portion of the street named XXXXX is calculated based on the parking area for cars on the street relative to the total area of the portion of the street on XXXXX. The result of the calculation is an amount of XXXXX if the election is valid.

4. The legal description of the property described in Fact (2) is complemented by a plan of the property, certified by XXXXX[.] However, the plan does not refer to XXXXX as a separate legal property.

Issue

XXXXX is asking us to approve the ITC calculation. However, such calculations are usually sent to the TSO auditors by the TIS office after the section 211 election is approved, as indicated by XXXXX of your office. The issue here is whether the subject election is valid for purposes section 211 of the Excise Tax Act (ETA).

Response

Based on the information provided, in particular on the legal description of the subject property, the election at issue cannot be considered.

Explanation

The election at issue is made in respect of "real property" under section 211 of the ETA. For purposes of this provision, "real property" means the entire estate or interest in real property held by a person, such as for example all of the land (It is supported in real property law that a legal description, which refers only to an area of land defined by reference to lot boundaries or other recognizable means of demarcation, includes, as real property, all structures and other improvements that are fixtures to such land.) included in a single legal description, or the entire leasehold interest of a person. It generally means the smallest legal parcel of land that includes the property in respect of which a person intends the election to cover.

In the case at hand, the subject election's stated object is a portion of XXXXX XXXXX with paid parking. However XXXXX, the property shown does not appear to be the smallest legal parcel of land which includes the targeted road, judging from the real estate on either side of the subject road (Please see Fact (4) above.). If XXXXX does represent the smallest legal parcel that includes the subject portion of XXXXX[.] This should be supported by hard evidence such as a letter to that effect and other plans from XXXXX, more information would be required before it can be determined whether an election under section 211 would be valid; for example, you will need to know whether the conditions of subsection 211(1) are met. ((i) Ownership of the real estate XXXXX; (ii) Whether that real estate is capital property, inventory or real property acquired by way of lease, licence or similar arrangement for making a supply of the property in one of those manners, as described in paragraphs (a), (b) or (c) of subsection 211(1).)

Should you have any further questions or require clarification on the above or any other GST/HST matter, please do not hesitate to contact me at 952-9587.

Yours truly,

Bao Tran
Technical Analyst
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate