25 August 2003 GST/HST Interpretation 44052 - Monitoring Services Provided to Indians

Thank you for your e-mail XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax(HST) to monitoring services provided to Indians.

During our telephone conversation XXXXX, you referred to XXXXX, an application ruling on the tax status of alarm monitoring services and place of supply (i.e. where is the place of supply of an alarm monitoring service when the real property that is being monitored is located in a participating province and the provider is in a non-participating province). From reading GST/HST Policy Statement P-169R: Meaning of "In Respect of Real Property Situated in Canada" and "In Respect of Tangible Personal Property that is Situated in Canada at the Time the Service is Performed", for Purposes of Schedule VI, Part V, Sections 7 and 23 to the Excise Tax Act (P-169R), you concluded that a supply of a service of monitoring real property, is in respect of real property. Also, that the place of supply of the service depends on the location of the real property that is being monitored pursuant to the Supply in a Province rules in Schedule IX to the Excise Tax Act (ETA). Therefore, when the real property being monitored is located in a participating province the tax rate will be 15% (HST) and when the real property being monitored is located in a non-participating province the rate of tax will be 7% (GST), regardless of the location of the service provider.

Reference was made in your e-mail to a letter dated XXXXX written by XXXXX you, which stated that a "monitoring service that is made off reserve for real property on reserve is not acquired for real property interests of an Indian". During our discussion XXXXX you asked why the place of supply was not considered to be "on reserve", or why the monitoring service was not considered to be for real property interests of the Indian, and therefore relieved of tax.

Section 87 of the Indian Act provides relief for "personal property of an Indian or band situated on a reserve." The administrative policy of Canada Customs and Revenue Agency (CCRA) concerning the application of GST/HST to the section 87 Indian Act relief is explained in Technical Information Bulletin B-039R, GST Administrative Policy - Application of GST to Indians (B-039R). Our administrative guidelines are fully consistent with the relieving provisions affecting the personal property of an Indian situated on a reserve, and may be viewed as reflecting governmental tax policy when extending relief to other supplies such as services acquired that meet the conditions of B-039R.

Services supplied to an individual Indian are relieved of tax in accordance with B-039R when the following conditions are met:

•   the service is performed totally on reserve for an Indian who is on reserve at the time the service is performed,

•   where the service is performed totally on reserve for property, the property is situated on reserve at the time the service is performed, or

•   where the service is performed off reserve, the service is for real property interests on reserve.

Please note that the place of supply rules used for determining whether a supply is made in or out of a participating province are not used as a basis for determining whether a supply is made on or off a reserve under B-039R.

Generally, a supply of a service (other than a telecommunication service) will be seen as having been performed at least in part at a location off-reserve, and therefore not eligible for tax relief under B-039R, if:

•   the service requires a person to perform a task (i.e., the supplier acting through one or more of its employees), and the person performs or physically carries out the task off reserve; or

•   the service requires the operations of the supplier's equipment (e.g. computer), and the equipment used in the task is located off a reserve at the time the service is performed.

Where any part of the service is performed off reserve, the service is not performed totally on reserve. Based on the above guidelines, the monitoring service provided in the case of your XXXXX letter was performed off reserve.

B-039R provides tax relief on the acquisition of taxable services by individual Indians, whether performed on or off reserve if they are for real property interests on reserve. As indicated in section 19.1 of the Real Property GST/HST Memoranda Series, an interest is a general term to denote a claim, title, right or share in something. Therefore, for example, the acquisition of legal services to obtain title to the real property or draw up an Agreement to Lease real property would be seen as services acquired for real property interests.

While a service acquired to physically protect or secure real property (e.g., monitoring services) would be viewed as a service "in respect of real property" it would not be "for real property interests". Therefore, where a monitoring service is performed off reserve, it would not be relieved of tax even if it were for real property on reserve. The supply would be taxable at 7% or 15% which would be determined by applying the Supply in a Province rules in Schedule IX to the ETA.

If you require additional information or wish to discuss the matter further, please do not hesitate to contact me at 613-954-7954.