2 October 2003 GST/HST Interpretation 43254 - Nursing Personnel Supplied by a Corporation

Dear XXXXX:

This is in response to your letter XXXXX requesting information regarding our interpretative approach to paragraphs 6(a) and 6(c) of Part II of Schedule V to the Excise Tax Act (the "ETA"), which concerns supplies of nursing services, as well as our telephone conversation XXXXX.

Interpretation Requested

You outlined two scenarios in which a physician hires nursing personnel from a corporation and presented your analysis regarding the application of paragraphs 6(a) and 6(c) of Part II of Schedule V to the ETA.

"Scenario A" involves two supplies: (1) A physician is under contract to a pharmaceutical company to make a supply of conducting clinical trials of new drugs. This supply made by the physician involves the testing of new drugs on the physician's patients. (2) To make the supply to the pharmaceutical company, the physician contracts with a corporation to obtain a supply of nursing personnel, who are registered nurses. The nurses will perform certain activities for the physician, including interacting with the physician's patients to check their vital signs, record their medical history, administer medications, etc. The registered nurses perform these activities in various locations, such as in a hospital, the physician's office, and in the corporation's office.

"Scenario B" also involves two supplies: (1) A physician is under contract to a non-profit organization to make a supply of information pertaining to the physician's patients for the purpose of a research project undertaken by the non-profit organization regarding individuals who have suffered strokes. (2) To make the supply to the non-profit organization, the physician contracts with a corporation to obtain a supply of nursing personnel, who are registered nurses. The nurses will perform certain activities for the physician, including interacting with the physician's patients to describe the research project and obtain consent to access their medical files, read and interpret their medical files, and grade the patients on an established scale that is used to quantify the condition of people who have suffered strokes. The registered nurses perform these activities in various locations, such as in a hospital or a long-term care facility.

Based on the information contained in your letter, we understand that you would like an interpretation of paragraphs 6(a) and 6(c) of Part II of Schedule V to the ETA with respect to the second supply made by the corporation to the physician of nursing personnel within the context of the scenarios A and B, as well as an explanation of our position regarding "billing routes" for health care services.

Interpretation Given

As a transactional tax, the exemptions in the ETA apply on a "supply-by-supply" basis. The legislative provisions set out specific criteria that must be met in order for a particular supply to fall within those exemptions. Thus, the tax status of a particular supply is determined on the factual context in which the supply in question was made. For instance, an analysis of the terms and conditions of a contract would be required to determine whether the supply satisfies the criteria set out in the ETA. Additionally, the tax status of a supply is not based on the acquisitions (or "inputs") used, consumed or supplied to make that supply because the provisions of the ETA distinguish an input used to make a supply from the supply itself.

The specific criteria in the ETA that must be met in order for a supply of a nursing service to be exempt from the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") are contained in section 6 of Part II of Schedule V:

6. A supply of a nursing service rendered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, where

(a) the service is rendered to an individual in a health care facility or in the individual's place of residence;

(b) the service is a private-duty nursing service; or

(c) the supply is made to a public sector body.

Accordingly, a supply made by any person of a nursing service is exempt when the nursing service is rendered by a registered nurse, nursing assistant, practical nurse or psychiatric nurse and when the supply is provided within one of the three contexts enumerated in the exemption.

Nursing services are generally understood to be patient care services performed by registered or licensed nurses pertaining to the diagnosis and treatment of health problems, assessment of a patient's nursing needs, and the preparation of nursing care plans for the patient. We understand nursing services to involve regulated procedures and other acts performed on patients by registered nurses as part of patient care plans, such as wound dressings, medication administration and patient education.

Whether a corporation's supply of nursing personnel made to a physician falls within the exemption is a question of fact requiring an analysis of the terms and conditions of the contract between the parties. Among the factors that would be considered are the specific provisions in the contract. What specific activities are the registered nurses performing? Are they activities that fall within the scope of nursing services? Where are the services being rendered?

In our telephone conversation, you indicated that you would like our comments on whether the activities performed by the nurses in scenarios A and B would be considered to be "nursing services". First of all, we would like to note that we would not consider an activity to be a nursing service solely on the basis that a registered nurse performed the activity. For instance, we would not consider administrative and supervisory services performed by registered nurses to be nursing services. With respect to scenario A, looking solely at the activities performed by the registered nurses, we would consider, in a general sense, some of these activities as falling within the scope of nursing services, such as the examination of patients and the monitoring of their vital signs. In contrast, the data collection activities performed by the registered nurses in scenario B appear to be more akin to administrative services rather than nursing services.

The issue for ETA purposes is, however, not whether the activities performed by the registered nurses constitute nursing services, but whether those activities constitute the supply in question. Activities can be inputs to supplies, elements of supplies, or supplies on their own. In identifying and analyzing the various elements of a supply, a distinction must be made between the individual elements that comprise the supply and the supply itself. Thus, in order to determine whether the supply made by the corporation in scenarios A and B falls within paragraph 6(a) of Part II of Schedule V to the ETA, it is first necessary to identify the supply.

The exemption in paragraph 6(a) of Part II of Schedule V to the ETA applies only to nursing services that are rendered to an individual in either a health care facility (such as a hospital or nursing home) or in the individual's place of residence, and this exemption applies only to the person who in fact supplies these services. For example, when a community health organization makes a supply of wound dressing services that are rendered by a registered nurse to an individual in the individual's place of residence, this supply would fall within paragraph 6(a) of Part II of Schedule V to the ETA.

Based on the descriptions of scenarios A and B, we are assuming that the corporation in those scenarios is making a single supply. That supply must be evaluated independently to determine its tax status under the ETA. Thus, the corporation's supply to the physician must be evaluated independently of the physician's supply to the pharmaceutical company and the supply made to the non-profit organization. The tax status of the corporation's supply is determined without reference to the physician's supply. Similarly, the physician's supply is evaluated independently of the inputs acquired to make that supply.

In our view, paragraph 6(a) would not apply to the corporation's supply as described in both scenarios A and B because the description of activities suggests that the corporation is a provider of personnel services; i.e., the activities performed by the registered nurses do not constitute a supply made by the corporation. Although the corporation's supply involves nursing personnel, the corporation in both scenarios does not appear to be supplying services that fall within the scope of nursing services. In our view, the corporation's supply appears to consist of nursing personnel who will perform multiple activities for the physician. We also note that there is no specific requirement with respect to the corporation's supply that the nurses provide services to individuals in a health care facility or the individual's place of residence, and therefore the "location" criterion of this exemption does not appear to be met with respect to the corporation's supply made to the physician.

You also requested our opinion on whether the corporation's supply in scenario B made to the physician could be exempt under paragraph 6(c) of Part II of Schedule V to the ETA because of the physician's contract with a non-profit organization. As previously indicated in this letter, the tax status of a particular supply must be evaluated independently for purposes of applying the provisions of the ETA.

Paragraph 6(c) of Part II of Schedule V to the ETA requires the supply be "made to" a public sector body. Therefore, this exemption applies only when the recipient of the supply of nursing services is a public sector body, such as a hospital authority or a non-profit organization. This requirement is subject to the definition of "recipient" in subsection 123(1) of the ETA. This definition provides that any reference to whom a supply is made is a reference to the recipient of the supply. Where consideration is payable for a supply, the recipient is defined as the person who pays or who is liable to pay that consideration. If no consideration is payable for the supply, the recipient is defined as the person to whom the service is rendered. In our opinion, the corporation's supply made to the physician would not fall within this exemption because the corporation's supply is not "made to" a public sector body.

With respect to our past commentary regarding "billing routes", please note that this commentary was made in reference to those provisions in the ETA that do not require that the supply be "made to" a particular recipient. Thus, our commentary applies to the exemptions in Part II of Schedule V that allow for a person other than the individual (or patient or resident) to whom the service was rendered to pay for that service. For instance, on the basis of the wording in section 5, a supply made by a medical practitioner of a health care service rendered to an individual maintains its exempt status when a person other than the individual pays the consideration for that service.

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) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Healthcare Services Unit
Public Service Bodies and Governments Division