26 March 2001 GST/HST Ruling 33645 - Application of GST/HST on Services of a For-profit Entity

Dear XXXXX:

Thank you for your letter of January 11, 2001, (with attachments) concerning the application of the Goods and Services Tax (GST) to services provided by XXXXX[.]

Statement of Facts

Our understanding of the facts is as follows:

1. The Association is an incorporated for-profit entity that earns annual revenues from services offered in excess of $30,000. The articles of incorporation do not contain any stated objects.

2. According to its brochure, the Association offers a program in various schools for students with disabilities who are between 6 and 12 years of age. The program is offered one lunch hour per week for a six week session. The emphasis of the program is on self-improvement and building confidence. One of the aims of the program is to help alleviate some of the social problems which arise during a non-structured lunch hour such as some students being left out of activities organized by other students.

3. The program does not provide instruction in any educational subject or recreational activity, nor does it provide its services as part of a program consisting of a series of supervised activities involving recreational pursuits. Rather, it consists of providing care and supervision to approximately twenty children involved in activities such as sports, games, magic, dance, or arts and crafts, etc. Furthermore, the Association's literature does not describe any such formal, structured recreational/educational program; nor does it set out expectations that the child attain any educational or recreational goals.

4. The Association receives fees from parents of the children ranging from $30 to $40 for the six week session. In the rare circumstance, where a child's parents are unable to pay the fee, a child will be registered in the program without paying the registration fee.

5. Employees of the Association are young adults or senior citizens who do not hold any particular employment related training or certification.

Ruling Requested

Are services provided by the Association taxable or exempt for GST purposes?

Ruling Given

Based on the facts set out above, we rule that services provided by the Association are exempt under section 1 of Part IV of Schedule V to the Excise Tax Act.

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.

Explanation

In accordance with section 1 of Part IV of Schedule V to the Excise Tax Act, a child care service, the primary purpose of which is to provide care and supervision to children 14 years of age or under for periods normally less than 24 hours per day is exempt.

It is apparent that one of the main objectives of the Association is to provide more structure (i.e., more supervision) than is generally available during the school lunch hour. The literature submitted for our review does not set out as a main purpose the provision of a formal, structured recreational or educational program, nor does it set out any educational or recreational goals for children registered in the program. On this basis, it is evident, as you have contended, that the primary purpose of the Association's child care service is to provide care and supervision to children (under the age of fourteen for periods normally less than 24 hours per day). Consequently, the exemption under section 1 of Part IV applies.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0420.

Yours truly,

Lorrie McAnulty
Charities, NPO's and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate