16 December 2002 GST/HST Interpretation 40653 - Treatment of Revenues

Dear XXXXX

Thank you for your letter XXXXX (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the treatment of revenues derived from the operation of a nursing home.

You have submitted for our review two separate agreements between subsidiaries of XXXXX and XXXXX. The subsidiaries each own or lease land and buildings which are used in the operation of long-term care facilities. The subsidiaries have been awarded licenses by the XXXXX to operate the facilities as nursing homes. XXXXX, is a company that is engaged in the business of long-term facility maintenance, including supervising, managing, and operating laundry, housekeeping, grounds and facilities management. It provides maintenance services in respect of the aforementioned facilities. XXXXX receives a disbursement from the revenue earned by the subsidiaries in respect of the provision of its services.

Interpretation Requested

You have asked us to consider whether the subsidiaries must pay the GST on the amounts paid to XXXXX.

Interpretation Given

Based on the information provided, it is our view that the subsidiaries are acquiring a taxable supply of maintenance services from XXXXX. This service is an input into the operation of the nursing home facilities. Pursuant to section 165 of the Excise Tax Act, any amount payable by the subsidiaries as consideration to XXXXX in respect of the maintenance services is subject to tax. This means that subsidiaries are required to pay the GST on the amounts, identified in the agreements as a distribution of gross revenue, which are paid to XXXXX in respect of its supply of maintenance services.

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) 952-8530.

Yours truly,

Dwayne Moore
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate