28 March 2002 GST/HST Ruling 35952 - Application of GST to Activities of Professional Music Teachers

Dear XXXXX

Thank you for your letter of May 12, 2001 and related information which you subsequently submitted concerning the application of the Goods and Services Tax (GST) to your various activities as professional music teachers. Your request was transferred to our office from the XXXXX GST/HST Rulings Centre. We apologize for the delay in responding to your request.

Statement of Facts

On the basis of your letter, facsimiles, and our conversations, our understanding of the facts is as follows:

You are registered for purposes of the GST as a partnership under the trading name of XXXXX XXXXX. You indicated that you are no longer involved in farming activities.

Private studio instruction

You both teach private music lessons to students in a studio at your residence. This involves one-to-one private music instruction on the instrument the student is studying. As part of these regular lessons your students participate in master classes. Monthly invoices are issued directly to each of your respective students based on an hourly rate.

Master class instruction

You provide master class instruction to your own private students, to other teachers' students and to students in colleges and universities.

These are open group classes where a group of students observe the instructor working with each student as they play a piece of music. As the instructor, you offer advice to the student playing and directly assist and provide guidance on the piece played. The other students, who are observing, offer information as well.

For your own students, these types of classes take place about three or four times yearly. In some colleges where music diploma programs are offered, master classes are identified as part of their weekly music program.

University sessional instruction

XXXXX is hired for a session/term by the music department at the University XXXXX. This involves teaching individual private music lessons to piano majors, supervision of chamber music groups and instructing in music performance classes. The agreement with the University is for four months. The University XXXXX establishes the course schedule. As an academic staff member, you are subject to income deductions and certain entitlements to benefits under the terms and conditions of the Collective Agreement. You are also a voting member eligible to attend Department meetings.

Music festival adjudicator

As an adjudicator at a festival, you listen to individual music performances by various participants. The participants pay a fee to enter the festival. You provide a written or oral opinion on the participant's performance. Marks, certificates and scholarships are usually awarded based on the performance rating you give.

Summer music workshops

You are involved in two weeklong day programs for students aged 6 to 19.

The XXXXX is a registered charity for income tax purposes. In this summer program, the students receive group and individual music instruction in solo and ensemble repertories. Professional musicians such as you, are contracted to teach the master classes, individual practice sessions, chamber music ensembles and recital preparation. Private lessons are also available during the workshop. Classes operate from 9 a.m. to 2:30 p.m. each day with students being responsible for their own accommodation and meals. Some evenings, there are recitals or coffee houses where performances are by both students and instructors.

Any after hour recreational activity is organized by volunteer parents of the XXXXX organization and is not part of the program. The program uses the facilities of your studio, the local community hall, the church and art centre. You do not charge the XXXXX organization for the use of your facilities.

The pamphlet for the XXXXX organization identifies the program as an annual summer music event for young pianists, violinists, violists and cellists. The program offers XXXXX.

As you are also artistic advisors to XXXXX, you assist in planning and organization of the annual summer program. Your role as teachers in the program is similar to other professionals hired.

Included with the payment to you from the XXXXX organization is an itemized account of payment for services rendered by you. Fees for teaching, individual private lessons, travel, administration and office expenses are identified individually on the payment.

You are also involved in the program offered by the XXXXX XXXXX. The daily schedule of this program consists of morning techniques, master classes and some semi-private lessons. In the afternoon, you coach a chamber music group and teach private lessons. The School provides you with a teaching schedule, the group assignment and orchestra conductor scores. The agreement with the XXXXX identifies your services as XXXXX. In addition to a lump sum fee as an instructor, you receive payment for private lessons given to students, at an hourly rate. A flat rate fee for travel is also included.

Church organist

XXXXX has a contract as the organist at a local church. He plays the organ on Sundays and at choir rehearsals.

Music Recordings

As discussed, you have also been involved in recording music and selling the recordings to individuals as well as distributors.

Ruling Requested

You have requested that we provide a ruling for purposes of the GST regarding the status of the above-noted supplies made by you as professional musicians.

Ruling Given

Based on the facts set out above, we rule as follows:

The services you supply directly to students in instruction of music during private studio teaching and master class instruction are exempt from the GST pursuant to paragraph 9(b) of Part III of Schedule V to the Excise Tax Act (ETA) and the Equivalent Courses (GST) Regulations.

The University sessional instructor services provided to the University XXXXX are not subject to the GST.

The services as music festival adjudicator and church organist are taxable supplies and subject to the GST at the rate of 7% pursuant to subsection 165(1) of the ETA.

The services of teaching music at the XXXXX and the XXXXX are exempt from the GST pursuant to paragraph 9(b) of Part III of Schedule V to the ETA. However, the services of administration or consultation, including office expenses, event tickets and associated administrative travel are taxable supplies and subject to the GST at the rate of 7% pursuant to subsection 165(1) of the ETA.

The supply of music recordings to individuals and distributors is taxable and subject to the GST at the rate of 7%.

These rulings are 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 these rulings provided that none of the above issues is currently under 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

Pursuant to paragraph 9(b) of Part III of Schedule V to the ETA and the Equivalent [C]ourses (GST) Regulations, the supply of a service of tutoring or instructing an individual in music lessons is exempt from the GST. To be a music lesson, an activity must be designed to result in a progression or development of skills toward a pre-set lesson goal or objective and there must be an evaluation of the students' progress against the pre-set lesson activity and goal. The CCRA views music lessons to include lessons that develop skills in musical performance (involving the use of the human voice or musical instruments), conducting an orchestra or musical composition. Music lessons would not include instruction in music-recording skills, music history or the teaching of techniques of music education.

The supply of services in performances as an organist and the supply of sound recordings are not supplies of instruction in music as described above and are therefore taxable at 7%.

The supply of instruction on playing the piano and violin to individuals in a private setting at your studio or in a master class as described above constitutes music lessons for purposes of the exemption. In the master class, although in a group setting, the students each receive instruction from you on the pieces they play. The master classes constitute music lessons as they further develop the students' skills toward their lesson goals of achieving a higher level of understanding on their individual piece(s).

A student pays a fee to enter a music festival in anticipation of winning recognition of his/her achievements and often with the goal of performing at a higher level than another student in the same category or level. As an adjudicator, you are evaluating an individual's performance against those of others. This does not constitute tutoring or instructing an individual in music lessons as described above, and accordingly, such a service is taxable.

The University sessional instruction provided under the terms of the agreement with the University XXXXX is not a supply made in the course of a commercial activity as the revenue received for such services is income or salary from an office or employment. Accordingly, these services are not subject to the GST.

In your role as instructors at the two above-noted summer music workshops, you are supplying services such as individual instruction in music, chamber music sessions, and master class sessions designed to result in a progression or development of skills. Accordingly, these services are also exempt. However, the services associated with the management and organization of the summer program, such as administration, the tickets for performances, and the office expenses, are separate supplies and do not constitute instruction of music lessons and they are therefore subject to the GST at 7%.

As registrants, you are required to remit the GST on all of your taxable supplies. As some of your supplies are exempt of the GST, you may qualify as a small supplier under subsection 148(1) of the ETA. A small supplier generally includes a person whose total taxable supplies (including zero-rated supplies) in the preceding four calendar quarters are $30,000 or less ($50,000 or less in the case of public service bodies). A person who is a small supplier is not required to be registered for GST/HST purposes, but may voluntarily register. If you are a small supplier, you may choose to de-register.

We have enclosed GST/HST Memoranda 2.2 Small Suppliers, 2.7 Cancellation of Registration, and 400-3-1 Becoming and Ceasing to be a Registrant for your information. After reviewing the material and your taxable supplies, you may wish to contact GST/HST enquiries at 1-800-959-5525 to discuss your registration requirements.

Should you have any further questions or require clarification on the above matters, please do not hesitate to contact me at 613-954-3158.

Yours truly,

Debra Murphy
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate