4 December 2002 GST/HST Ruling 39587 - Supply of Guest Suites by Condominium Corporation

Dear XXXXX:

Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST) to the supply of guest suites by the XXXXX Condominium Corporation XXXXX (the Condo Corporation).

All legislative references below are to the Excise Tax Act ("the ETA").

Statement of Facts

Our understanding of the facts is as follows:

1. There are XXXXX units in the subject condominium complex, and of these, XXXXX are guest suites. The other units are owned by non-registrant individuals ("unit owners").

2. The Condo Corporation owns and manages the guest suites. The Condo Corporation also owns and manages other facilities XXXXX[.]

3. The guest suites cannot be booked by anyone other than unit owners. While restrictions on the type of guests is not formalized in writing, it is clearly understood by the unit owners that the use of guest suites is restricted to visiting family and friends of the unit owners.

4. When booking a room, a unit owner must complete a "XXXXX" agreement form and submit it to the Condo Corporation. The form sets out the fee XXXXX per night), dates of use, and other terms; XXXXX[.]

5. Since substantially all of the guest suites are provided for periods of continuous occupancy by guests of less than 60 days, the suites do not meet the definition of "residential complex" in the ETA.

6. The Condo Corporation is not registered for the GST/HST. It has not been collecting GST on the consideration payable for the guest suites. Its revenues from this source exceed $50,000 annually.

Ruling Requested

The Condo Corporation requests a ruling as to whether it is required to charge GST on the consideration payable for the supply of guest suites.

Ruling Given

Based on the facts set out above, we rule that the supply of the guest suites is a taxable supply. Since the Condo Corporation is not a small supplier, it is required to register and to collect and remit the GST on the consideration payable by unit owners for the supply of guest suites.

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 transactions for which you requested a ruling.

Explanation

A "supply" is defined under subsection 123(1) of the ETA as "the provision of property or a service in any manner ..." and if no exemption applies to a supply, it is taxable (Note definitions of "taxable supply" and "commercial activity" pursuant to subsection 123(1)). Since, in our view, no exemption applies to the supply of guest suites by the Condo Corporation, this supply is taxable. Accordingly, the Condo Corporation is required to be registered (Subsection 240(1)) for the GST/HST, and to collect (Subsection 221(1)) and remit (Subsection 228(2)) tax on the fees payable by the unit owners for the use of the guest suites.

We should note that a common exception to the requirement to register and to charge tax on taxable supplies involves taxable supplies made by a small supplier. A small supplier (Subsection 148(1)), in brief, is a person whose revenues from taxable supplies do not exceed $30,000 over four consecutive calendar quarters (for "public service bodies" such as non-profit organizations, this threshold is $50,000). Small suppliers may choose (A small supplier who chooses to register will then be required to charge tax on revenues from taxable supplies, but would also be entitled, by claiming input tax credits, to recover the tax payable on purchases related to making taxable supplies. Conversely, a small supplier who chooses not to register will not charge tax on revenues from taxable supplies, but will also be precluded from claiming input tax credits.) not to register for the tax, and if they so choose, are not required to charge tax on their taxable supplies. (Section 166) Since you have advised that the Condo Corporation's revenues from the guest suites exceed $50,000 per year, it is apparent that it is not a small supplier.

The exempting provisions are set out under Schedule V of the ETA. As noted above, it is our view that none of these exemptions apply to a supply of guest suites in the situation you have described. We did examine one exemption in particular. Section 13 of Part I of Schedule V provides the following exemption:

13. A supply of property or a service, made by a corporation or syndicate established upon the registration, under the laws of a province, of a condominium or strata lot plan or description or similar plan or description, to the owner or lessee of a residential condominium unit described by that plan or description, if the property or service relates to the occupancy or use of the unit.

While this provision will exempt many of the supplies made by a condominium corporation, it is our view that it does not apply to the supply of guest suites in the present circumstances. As noted above, in order to qualify for the exemption, the supply by a condominium corporation of property or services to the owner of a condominium unit must relate to the "occupancy or use" of that unit. Since a guest suite is, in fact, a unit in and of itself, and is provided for the use of guests, in our view it is not a supply that "relates to the occupancy or use" of the owner's condominium unit. Accordingly, the requirements of the exemption are not met.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9587.

Yours truly,

Michael Place
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate