12 August 2003 GST/HST Interpretation 36831 - Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to Fees Charged by

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees charged by XXXXX for missed appointments or late notice cancellations by persons who had requested medical reports. We apologize for our delay in responding.

Statement of Facts

Our understanding of the facts is as follows.

1. XXXXX is in the business of conducting independent medical examinations of individuals, and preparing reports based on such examinations. The reports are prepared for use by insurance companies, lawyers and employers regarding the physical and/or psychological condition of individuals.

2. XXXXX collects and remits 7% GST with respect to the supply of the service of issuing the reports, as the supplies are taxable in the particular fact situation at issue.

3. XXXXX charges two separate fixed fees in respect of individuals who

(a) do not keep appointments (commonly referred to as "no shows") or

(b) cancel appointments on late notice (commonly referred to as "cancellations").

It is understood that, in cases where an appointment is not kept or is cancelled with insufficient notice, XXXXX does not provide an examination, report or other service or property to the person with respect to the "no show" or "cancellation" fee. The fee is simply intended as compensation for having failed to keep the appointment.

4. XXXXX[.]

5. XXXXX[.]

6. XXXXX[.]

7. XXXXX[.]

8. XXXXX[.]

Ruling Requested

What is the GST/HST status of the fees paid for no shows and cancellations in the circumstances described above?

Ruling Given

Based on the facts set out above, we rule that XXXXX is liable to remit GST equal to 7/107 of the total amount collected as a fee for a no show or cancellation in relation to taxable reports prepared by XXXXX (or 15/115 if the supply was to have been made in a participating province).

This ruling is 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 this ruling, provided that none of the above issues is currently under audit, objection, or appeal, there are no relevant changes in the future to the ETA or our interpretative policy, and you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

While fees paid to XXXXX for "no shows" and "cancellations" are not consideration for supplies, they are amounts other than consideration that are made as a consequence of the breach or termination of agreements for the making of taxable supplies (other than zero-rated supplies) by a registrant. Consequently, such fees fall under subsection 182(1) of the ETA. It deems 7/107 (or 15/115) of the amount paid for a no show or cancellation to be consideration for the intended taxable supply of the service of providing a medical report. Subsection 182(1) deems the recipient of the supply to have paid and XXXXX to have collected GST or HST on that deemed consideration at the time the fee is paid. Consequently, XXXXX should remit the tax that it is deemed to have collected.

If you have any further questions or require clarification on the above matter, please contact me at (613) 952-9211.

Yours truly,

Don Dawson
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate