24 December 2001 GST/HST Interpretation 37184 - University Meal Plans

Dear XXXXX:

Following, as you requested, are our views on the application of section 14 of Part III to Schedule V to a university meal plan in the circumstances described below.

Background:

A university has a dorm (Dorm B) that is somewhat separated from the main dorm (Dorm M) which houses the only cafeteria. Students in Dorm B may purchase a meal plan from the university consisting of 21 weekly meals:

-    seventeen of which are served in the Dorm M cafeteria;

-    two of which are provided by a privately operated restaurant (R) located in Dorm B (and billed to the university), and

-    two of which are provided by outside restaurants (such as XXXXX, Chinese take outs etc[.]) and are delivered to Dorm B (and billed to the university).

Questions:

(i) Does section 14 require catering services be provided?

(ii) Are the meals provided by R exempt under section 14? If so, how would this be communicated to R?

(iii) Are the meals provided by XXXXX etc. exempt under section 14? If so, how would this be communicated?

Our Opinions:

([i]) Does section 14 require catering services be provided?

Section 14 should not be interpreted as requiring catering services. The reference to "catering services" is meant to be inclusive, not restrictive (if it were meant to be restrictive, the terms might be "a supply of food and beverages that includes catering services ..."). This interpretation is clear from other uses of "including" in the ETA.

(ii) Are the meals provided by R exempt under section 14? If so, how would this be communicated to R?

The exemption under paragraph 14(a) applies to a supply of food and beverages by a vendor to, for example, a university under a contract whereby the food and beverages are to be provided to students under a meal plan described in section 13 of Part III.

The supply by R may qualify for the exemption under this provision provided there is a contract, whether written or otherwise, between R and the university, and that R is aware that the food they are to provide is for students under a meal plan as described in section 13. Although the meals are "provided to" the students by R in this situation, the supply would be "made to" (Note that under the definition of "recipient" in subsection 123(1), the recipient is "the person who is liable under the agreement to pay (the) consideration" and that "... any reference to a person to whom a supply is made shall be read as a reference to the recipient." Thus since the university is the person liable under an agreement to pay the consideration in this situation, the supply by R is considered to be "made to" the university.) the university by virtue of the agreement between R and the university. Thus the supply qualifies under section 14 as being a "supply of food and beverages ... made to a person that is ... a university. ..."

Concerning the "communication" issue, it will be evident to R, in providing meals to students in the above circumstances, that it is making a supply to the university by virtue of its agreement with the university. That is, the requirement for a contract between the restaurant and the university should make any legislative provisions easier to administer for both parties (since both will be aware of the terms of the contract). Even so, R may not be aware of section 14, so we assume the university would advise R that the supply is exempt if the university wishes to avoid paying tax on consideration charged by R for the supply.

(iii) Are the meals provided by XXXXX etc. ("take-out restaurants") exempt under section 14? If so, how would this be communicated?

It is possible for meals delivered by take-out restaurants to qualify under the exemption provided, once again, that there is a contract between the take-out restaurants and the university and that the restaurants are aware that the food they are to provide is for students under a meal plan as described in section 13.

Concerning the communication aspect, once again, the requirement for a contract between the restaurant and university should make the provision easier to administer for both parties (since they will be aware of the terms of their arrangement).

Other Comments:

On another matter for your interest, it is our view that the exemption under section 14 would not apply to groceries delivered by a vendor (e.g. XXXXX) to a university cafeteria for use by the university in preparing meals. That is, we might take the view that the food delivered (basic groceries) is not the same as the food provided (meals) to the students; rather, the groceries are used as an input into preparing the meals. In other words, the supply made by the vendor must be the same as the one made by the university (must be a "resupply"). This conforms to the Department of Finance Explanatory Notes and avoids the unwanted result of exempting zero-rated groceries.

We would welcome your views if you have any comments or concerns about our position, as outlined above.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-7936.

Yours truly,

Danielle Laflèche
Manager
Charities, NPOs and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

c.c.: