Quesnel & District Minor Hockey Assn. v. R., [1997] 3 C.T.C. 2260

Beaubier T.C.J.:

1 This appeal was heard at Prince George, British Columbia on April 30, 1997 pursuant to the Informal Procedure. The Appellant called Vera Bishop and Patricia Oakley as witnesses.

2 The Appellant has appealed an assessment of G.S.T. respecting the operation of a food concession at the Quesnel Twin Arenas for the period from January 1, 1991 to June 30, 1993.

3 The Respondent alleged assumptions 10(a) to (h) inclusive which, on the evidence before the Court, excepting for subparagraph (f), are true. They read:

(a) the Appellant is a non-profit society registered with the Province of British Columbia;

(b) the Appellant was registered under Part IX of the Excise Tax Act (the “Act”) effective January 1, 1991 (GST No. 123450777);

(c) the Appellant's main activity is that of promoting hockey amongst children within the District of Quesnel, the majority of children being fourteen years of age and under;

(d) the Appellant's hockey program runs from September to April each year;

(e) the Appellant operates a food concession (the “Concession”) during the hockey season at practices, games and tournaments;

(f) the Appellant is carrying on the business of selling taxable supplies at the Concession;

(g) the goods are not sold at an event where similar competing goods are sold by vendors in the business of making such sales;

(h) at all material times, the Appellant was not a small supplier as defined in sections 148 and 148.1 of the Act; ...

4 The evidence is that the concession operated by the Appellant was, in essence, a small hamburger stand which sold hamburgers, hot dogs, coffee, hot chocolate and chips. The maximum price was $4.00 for a loaded hamburger. The Association hired a cook who held a certificate for cooking for the public. She also did the banking. All the other work was done by the volunteers including sales, making change, pouring coffee and opening and closing. The concession was only open during the Association practices, games and tournaments. If a volunteer did not appear to conduct sales for a designated Association practice, game or tournament, the concession was closed. The Association's referees and linesmen were paid on a per game basis out of the concession's cash. If the concession was not open, they accumulated chits and collected the next time the concession opened.

5 The City of Quesnel had another concession which it operated in the rink for other events.

6 About 80% of the children playing in the league operated by the Association are 14 and under; there were about 500 children playing in each year in the period. The Association operates the practices, games and tournaments for about 180 days each season. There are 13 players per team and about 200 of their parents act as volunteers from time to time each season. The objects of the Association are:

Section 1:

To foster, improve and perpetuate an interest in the game of Amateur Hockey, for the benefit of all young hockey players, in Quesnel and Districts; to participate in the competitions for the Championship of British Columbia.

Section 2:

To control and operate Minor Hockey within the District of Quesnel;

Section 3:

To promote and inform the members of the Mutual Aid Fund, as a means of assistance to members injured in play, in authorized Hockey activities, to ensure the best possible safety standards are set and maintained by the Association.

7 After expenses, including referees' and linesmen's pay, the concession netted the following seasonal income:

8 Subsection 123(1) of Part IX of the Excise Tax Act defines a public sector body and a public service body as follows:

“public sector body” means a government or a public service body;

“public service body” means a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university;

4. A supply of tangible personal property (other than alcoholic beverages or tobacco products) made by way of sale by a public sector body where

• (a) the body does not carry on the business of selling such property;

• (b) all the salespersons are volunteers;

• (c) the consideration for each item sold does not exceed $5; and

• (d) the property is not sold at an event at which supplies of property of the kind or class supplied are made by persons who carry on the business of selling such property.

12. A supply made by a public sector body of a membership in, or services supplied as part of, a program established and operated by the body that consists of a series of supervised instructional classes or activities involving athletics, outdoor recreation, music, dance, arts, crafts or other hobbies or recreational pursuits where

• (a) it may reasonably be expected, given the nature of the classes or activities or the degree of relevant skill or ability required for participation in them, that the program will be provided primarily to children 14 years of age or under, except where the program involves overnight supervision throughout a substantial portion of the program; or

• (b) the program is provided primarily for underprivileged individuals or individuals with a disability.

9 On the evidence before the Court, the concession provided a supply by a public sector body supplied as part of activities involving athletics where it may reasonably be expected that the program of the association and the supply of food by the concession would be provided primarily to children 14 years of age or under. The supply made was provided by salespersons who were volunteers, the consideration for each item sold did not exceed $5.00, and the goods sold were not at an event which supplied property of the kind or class made by persons who carry on the business of selling such property. The evidence before the Court is that the only concession or source of food during the practices, games or tournaments was the Association's. The nearest source of food of any kind other than at the concession was at a 7-Eleven store some blocks away from the arena.

10 The question remaining before the Court is whether or not the public sector body, that is Quesnel and District Minor Hockey Association, carried on the business of selling such property.

11 Under the Excise Tax Act a “business” does not have to be carried on for profit. In this case, the concession was not operated regularly or continuously either throughout the year or on a day to day basis. It operated during practices, games, or tournaments conducted by the Association. However even that was sporadic, because the concession did not operate if a volunteer did not appear to conduct the sales of the concession. There was not even a schedule of volunteers published which designated named volunteers for each game. Rather, the team mother for each team telephoned that team's parents and attempted to get a volunteer for her team to staff the concession for each of that team's practices, games or tournaments. Therefore, there should have been two volunteers for each game since two teams participated in each game. But this did not always happen, or volunteers simply did not appear, in which case the concession remained closed.

12 There was no day to day supervision of the concession or its operation and the net income in the years before the Court was at times marginal. The Association was asked by a figure skating club in Quesnel to open the concession for its activities. The Association refused this offer which might have given it a source of extra income for its own activities. The fact that it refused this opportunity is evidence to the Court that the Association did not intend to operate the concession as anything other than an adjunct to its purposes, that is, to conduct practices, games and tournaments for the young children it intended to benefit. The concession itself obviously provided a source of hot nourishment to the children playing, their brothers, sisters and parents. On the basis of the net income figure, and considering the volume of food that had to be sold by the concession, it was operated virtually on a cost basis excepting for the unusual figure in the 1991-2 season. This discrepancy was not explained, but it is a discrepancy.

13 In these circumstances, the Court finds that the Appellant was not carrying on the business of selling the food vended by the concession during the period in question.

14 The appeal is allowed and the assessment is vacated.

15 The provision of the Tax Court of Canada Act respecting costs to be awarded in this appeal reads as follows:

18.3009 (1) Where an appeal referred to in section 18.3001 is allowed and the judgment reduces the amount of tax, net tax, rebate, interest and penalty in issue in the appeal by more than one-half, the Court may award costs, in accordance with the rules of Court, to the person who brought the appeal where

• (a) the amount in dispute was equal to or less than $7,000; and

• (b) the aggregate of supplies for the prior fiscal year of that person was equal to or less than $1,000,000.

(2) The Court may, in deciding under subsection (1) whether to award costs, consider any written offer of settlement made at any time after the notice of appeal is filed.

16 This is another example of the drafting problems that appeared once the G.S.T. came into effect. Many of the provisions were obviously based on the Income Tax Act and the experience with it. Others were innovative. This cost provision is based on the Income Tax Act premise that assessment periods are by fiscal year.

17 This is an informal case. The Court is entitled to make some assumptions based upon the evidence before it. Obviously, this Appellant did not have aggregate supplies in the previous fiscal year in excess of $1,000,000. In this case, the Court assumes that the amount in dispute in each fiscal year within the period was equal to or less than $7,000. Conjunctively, the Court may award costs where the amount in dispute was less than $7,000 and the supplies for the prior fiscal year were less than $1,000,000. This conjunction indicates that the $7,000 relates to a fiscal year. Otherwise, the Minister of National Revenue could restrict the right of an appellant to costs merely by assessing over an extended period such as 30 months. That could not be the intent of either Parliament or the Minister of National Revenue.

18 The judgment has reduced the amount of tax in dispute to nil.

19 Therefore, the Appellant is awarded its party and party costs in respect to this appeal.