31 March 2004 GST/HST Ruling 43731 - Supplies Made by a Charity

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

XXXXX is a registered charity under the Income Tax Act (the ITA), and therefore a charity under the Excise Tax Act (the ETA). The XXXXX operates residential and outpatient substance abuse programs and provides counselling services XXXXX.

XXXXX.

XXXXX is a registered charity for purposes of the ITA, and therefore a charity for purposes of the ETA. The XXXXX.

The XXXXX has been registered for GST/HST purposes since XXXXX.

Substance Abuse Programs

The XXXXX operates substance abuse treatment centres in XXXXX. The XXXXX revenues for the operation of the centres is mainly from the following three sources:

1. XXXXX

2. XXXXX

3. XXXXX

Corporate clients refer their employees with substance abuse problems to the XXXXX. Generally the employee must participate in a substance abuse program as a condition of keeping his/her employment with that corporate client or is referred through an employee assistance program.

The XXXXX supplies the Substance Abuse Programs and counselling services to corporate clients. Although the XXXXX does make the supply, it does not actually perform those services. The XXXXX subcontracts the XXXXX to provide the substance abuse program and counselling services to the corporate clients' employees.

The cost to the corporate client can differ depending on what is provided to the employee. The following services are provided:

•   residential program

•   outpatient program, or

•   counselling services.

The residential substance abuse program is an all-inclusive program that covers a period of XXXXX weeks. The residential program consists of:

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

Patients in the residential substance abuse program must reside in a XXXXX establishment and receive the meals provided. The patients are supervised 24 hours/day by XXXXX staff. When billing corporate clients, there is no breakdown of inputs or aspects to the supply being made.

The outpatient substance abuse program consists of the same aspects as the residential program, but the corporate client's employees do not reside in a XXXXX establishment for the duration of the program.

The XXXXX has been and will be charging GST to corporate clients on these supplies until XXXXX. All GST collected by the XXXXX has been (and will be) remitted to the Receiver General.

Neither the XXXXX nor the XXXXX are charities designated under section 178.7 of the ETA.

Parking

The XXXXX operates two parking lots XXXXX. Supplies of short-term parking are made to the general public.

The XXXXX has not made an election under section 211 in respect of the real property used to make supplies of the parking spaces.

The XXXXX has not been collecting GST on the supply of parking since XXXXX. GST collected prior to this time was remitted to the Receiver General.

Ruling Requested

1. Tax status of the supply by the XXXXX of the

•   residential substance abuse program,

•   outpatient substance abuse program, and

•   counselling services

made to corporate clients who are residents of Canada.

2. Tax status of the supply by the XXXXX of the

•   residential substance abuse program,

•   outpatient substance abuse program, and

•   counselling services

made to the XXXXX.

3. Tax status of parking made by the XXXXX.

Ruling Given

Based on the facts set out above, we rule that

1. The supply by the XXXXX of the

•   residential substance abuse program,

•   outpatient substance abuse program, and

•   counselling services to the corporate clients who are residents of Canada is an exempt supply pursuant to section 1 of Part V.1 of Schedule V to the ETA.

2. The supply by the XXXXX of the

•   residential substance abuse program,

•   outpatient substance abuse program, and

•   counselling services made to the XXXXX is an exempt supply pursuant to section 1 of Part V.1 of Schedule V to the ETA.

3. The supply of parking made by the XXXXX is an exempt supply pursuant to section 1 of Part V.1 of Schedule V to the ETA.

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

Section 1 of Part V.1 of Schedule V exempts all supplies of property and services made by a charity except those supplies excluded from exemption by paragraphs (a) through proposed paragraph (n) of that section.

There is no exception to exclude from exemption the supply of the services that are the residential and outpatient Substance Abuse Programs, and the counselling services.

Paragraph 1(l) of Part V.1 of Schedule V to the ETA was amended by Statutes of Canada 2001, c. 15, so that this paragraph applies only to sales of real property.

Prior to the amendment the application of paragraph 1(l) to supplies by way of lease, licence or similar arrangement operated contrary to an intended policy change, announced in April 1996, to exempt all supplies of real property by a charity by way of lease, licence or similar arrangement, regardless of how that property was used by the charity immediately before the supply.

Accordingly, supplies of real property made by a charity otherwise than by way of sale (e.g., by way of lease, licence or similar arrangement) are exempt where the consideration for such supplies became due after 1996 or was paid after 1996 without having become due, except where a charity had charged or collected any amount as or on account of tax in respect of the supply on or before October 4, 2000.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-4206.

Yours truly,

Carol A. Gaudet
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate