18 July 2003 GST/HST Ruling 42536 - Tax Status of Supplies of Psychometric Services

Dear XXXXX:

This is further to your letter XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of psychometric services made by your client, XXXXX, to a psychologist. Your letter was referred to us for review by our XXXXX Tax Services office.

Your letter is in response to our previous letter XXXXX addressed to XXXXX, in which we had advised XXXXX that XXXXX supplies were subject to the 7% GST/HST. You are suggesting that section 10 of Part II of Schedule V to the Excise Tax Act (the "ETA") may apply to exempt the services supplied by XXXXX to a psychologist.

Statement of Facts

Based on the information provided with your letter and included with XXXXX, as well as our telephone conversations XXXXX our understanding of the facts is as follows:

1. Your client, XXXXX is an independent contractor who makes supplies to a psychologist. You advised that your client is not a "medical practitioner" or "practitioner" as those terms are defined in the ETA. Therefore, your client's supplies do not fall within sections 5 or 7 of Part II of Schedule V to the ETA.

2. Your client works as a "psychometrist". Your client's supply consists of assisting a psychologist in administering psychological assessments of the psychologist's patients. The work involves carrying out psychometric testing of these patients under the direction and supervision of the psychologist. These tests are administered in the psychologist's office and form part of the psychological services that the psychologist provides to his or her patients.

3. Your client does not deal directly with referral sources. Rather, the contract is with the psychologist who employs and pays your client for the time spent assisting the psychologist with the assessment and treatment of the psychologist's patients. The consideration paid to your client by the psychologist is on a per-assessment basis.

4. The psychologist instructs your client and oversees XXXXX work. The psychologist also assumes any risk associated with the work performed by your client.

5. You submitted an article entitled "Fundamentals of Human Neuropsychology", which describes several types of neuropsychological assessments rendered by psychologists. According to the article, these assessments involve a variety of tests to evaluate personality, intelligence, memory, musical talent, speech-sounds perception, time-sense, etc. You advised that the assessments described in the article are examples of the types of tests that your client would assist the psychologist in administering to his or her patients.

6. The psychometric tests administered by your client provide information to the psychologist to assist the psychologist in formulating a diagnosis pertaining to his or her patient.

Ruling Requested

The supplies made by your client to the psychologist of assisting the psychologist in administering psychological assessments of the psychologist's patients fall within the exemption in section 10 of Part II of Schedule V to the ETA.

Ruling Given

Based on the facts set out above, we rule that the supplies made by your client to the psychologist of assisting the psychologist in administering psychological assessments of the psychologist's patients do not fall within the exemption in section 10 of Part II of Schedule V to the ETA. As no other exempting provisions apply, the supplies made by your client are taxable.

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; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Based on the information provided as well as our additional research, we understand psychometric testing to be the scientific measurement of mental capacities and abilities that is carried out as a component of a psychological service supplied by a psychologist. Although psychologists use psychometric tests to formulate psychological diagnoses, for the reasons explained below, psychometric tests are not prescribed diagnostic services for purposes of section 10 of Part II of Schedule V to the ETA.

Section 10 of Part II of Schedule V to the ETA exempts the supply of a prescribed diagnostic service when made on the order of a medical practitioner or practitioner. A diagnostic service is considered to be the detection and determination of the cause of a disease by means of a study procedure and the report of findings.

While there are many types of diagnostic services, the scope of the exemption in the ETA is limited to prescribed diagnostic services described in the Health Care Services (GST/HST) Regulations. Accordingly, for purposes of section 10 of Part II of Schedule V to the ETA, a diagnostic service is a laboratory, radiological or other similar diagnostic service of the same kind as those generally available in a health care facility and includes the administration of drugs, biologicals or related preparations when provided in conjunction with this service. Note that a "health care facility" as defined in the ETA does not include a practitioner's private practice. Therefore, a psychologist's private practice would not fall within the meaning of health care facility for purposes of the ETA.

Examples of diagnostic services that fall within section 10 of Part II of Schedule V to the ETA are serological tests, microscopic analysis and diagnostic imaging (e.g., x-ray, CT scanning, MRI scanning, mammography and ultrasound) that are used to detect and determine the cause of a disease. The ETA provides that these diagnostic services remain exempt when they are provided outside a health care facility.

Psychological services are not prescribed diagnostic services for purposes of section 10 of Part II of Schedule V to the ETA because they are not of the same class or kind of diagnostic services enumerated in the Health Care Services (GST/HST) Regulations; i.e., a psychological service is not a laboratory, radiological or other such diagnostic service generally available in a health care facility used to detect and determine the cause of a disease.

For purposes of the ETA, a psychological service rendered to an individual includes the various professional and technical components of that service, such as the direct physical encounter with the individual, the performance of procedures during the encounter such as tests and interpreting results, the provision of advice and information to the individual, formulating and communicating a diagnosis, etc. The psychological service is exempt under section 7 of Part II of Schedule V to the ETA when it is supplied by a "practitioner" of the service as that term is defined in the ETA. This supply includes any component that the psychologist delegated to an assistant to perform for the psychologist.

According to the information provided and our research, the psychologist is the person who supplies the psychological service rendered to an individual and in the course of making that supply, the psychologist may delegate certain procedures to an employee or assistant. We understand that psychometrists provide a range of testing services generally under the employ of, or as an assistant to, a psychologist. They carry out these tests under the supervision of a psychologist, generally in the psychologist's office. When a psychologist delegates a test procedure to be performed on his or her patient by an assistant and the assistant carries out the procedure under the supervision of the psychologist, the procedure is a component of a supply made by the psychologist, notwithstanding any interaction that the assistant had with the psychologist's patient.

In the case at hand, the psychologist contracts with your client for assistance in conducting psychological assessments of the psychologist's patients. The psychologist delegates psychometric test procedures to your client who carries out these tests for the psychologist under the supervision of the psychologist in the psychologist's office. In addition, you advised that the psychologist assumes any risk associated with the work performed by your client. Under these circumstances, the psychometric testing of the psychologist's patients that is delegated to your client is a component of the psychological service supplied by the psychologist.

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 Health Care Services Unit
Public Service Bodies and Governments Division