18 July 2002 GST/HST Interpretation 33784 - Application of GST/HST to Supported Independent Living Services

Dear XXXXX:

Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations. We apologize for the delay in our response.

We understand that XXXXX (the Company) started operations at the end of XXXXX. The Company contracts with XXXXX (the Province) to provide services to adults with developmental disabilities. The Province determines an individual's eligibility for services, the level of support required, and the amount of funding needed to provide the services. Once the Province approves an individual's eligibility, it contracts out with the Company for predetermined services at set rates.

The Company in turn contracts with caregivers who provide the actual accommodation, meals, and other support services to the clients in the caregivers' own homes.

The Company and the caregivers sign contracts that state the caregivers are independent contractors and not employees of the Company. The CPP/EI Eligibility Division of the Revenue Collections Directorate has provided you with an opinion that the contracts are indicative of an independent contractor relationship.

The caregivers provide the clients with a wide range of services, depending on each individual's needs. These services include providing an environment conducive to satisfying the client's needs; assisting the client to grow in areas of personal care, household, and community living skills; administering medications; and coordinating recreational and leisure activities with the client. The Company is paid directly by the Province and the money is deposited directly into its bank account. The amounts paid by the Company to the caregivers are determined by budgets approved by the Province and the client's family or guardian.

Interpretation Requested

What are the GST/HST implications for supplies made by XXXXX?

Interpretation Given

Generally, any supply made in Canada is taxable unless specifically exempted. Certain goods and services such as child and personal care services are exempted from GST/HST in Schedule V to the Excise Tax Act (ETA). Specifically, supplies of providing care, supervision and a place of residence to children, underprivileged individuals or individuals with a disability are exempt under section 2 of Part IV of Schedule V to the ETA where they are rendered in an establishment operated by the supplier for the purpose of providing such services.

Where a company is arranging for personal care services to be provided by others in their residences or establishments, rather than supplying these services itself in its own establishments, the company's supplies will be taxable, as the above noted exemption does not apply to the supply of arranging for these services.

When payments are received from a government, there is always a possibility that the payment is a grant rather than consideration for a supply. As there is no written contract between the company and the Province, we cannot determine the exact nature of the payment made to the company. Generally, however, where there is a direct link between the payment received by a person and a supply provided by that person, either to the grantor of the payment or to third parties, the payment is regarded as consideration for the supply. We have enclosed Technical Information Bulletin B-067, Goods and Services Tax Treatment of Grants and Subsidies, to assist you in determining whether the payments you receive are grants or consideration. If the Province were giving you grants, your supplies of arranging for, described above, would be considered made for no consideration. Therefore, GST would not apply. You would still be entitled to claim input tax credits (ITCs) for any expenses related to these taxable supplies.

If the payments received from the Province are not grants, but consideration for services, there is still no requirement to collect tax since the Province is not required to pay GST, even where the supplies are taxable. Essentially, the supplies are treated as though they were zero-rated which means that no GST is charged, but suppliers registered for GST/HST are still able to claim ITCs for any GST/HST paid or payable on expenses connected to making their zero-rated, taxable supplies.

Where a person's taxable supplies (including zero-rated supplies) plus those of its associates exceed the $30,000 threshold ($50, 000 for a public service body) in the immediately preceding four consecutive calendar quarters or in a single calendar quarter, the person is required to register for GST/HST. If a person's taxable supplies (including those of its associates) are below the threshold, it may still register voluntarily.

A particular corporation is associated with another corporation if they are associated for purposes of the Income Tax Act. For example, two corporations that are both controlled by the same person or group of persons are associated with one another.

Please contact the Business Window at 1 800 959-5525 should you need to register.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA 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) 952-9592.

Yours truly,

Helena Ingr
Charities, NPOs and Educational Services Unit
PSBs and Governments Division
Excise and GST/HST Rulings Directorate