11 March 2013 GST/HST Interpretation 145894 - Services Rendered by Pharmacists

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

Dear [Client]:

This is in reply to your letter of [mm/dd/yyyy] and our telephone conversation on [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to professional services rendered by pharmacists.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia will be replaced by the 5% GST and a provincial sales tax. It is also proposed that, effective April 1, 2013, the provincial sales tax and the 5% GST currently in effect in Prince Edward Island will be replaced by a 14% HST.

All legislative references are to the Excise Tax Act (the ETA) and the regulations therein, unless otherwise specified.

Interpretation Requested

You would like clarification regarding the amendment made to Part II of Schedule V to the ETA announced by the Minister of Finance on March 29, 2012, adding certain professional services rendered by pharmacists to the list of exempt health care services in that Part. In our telephone conversation you also asked about the application of the GST/HST to fees charged by pharmacists for missed or cancelled appointments.

We understand that you are a licensed pharmacist practicing as a sole proprietor in […][Province X] and that you have recently started a business that provides clinical pharmacist services to individual clients. Clinical pharmacist services do not include the sale or dispensing of drugs. You provided a letter of agreement which describes the clinical pharmacist services that you offer. These services involve health assessments of individuals such as:

* Basic medication review where the individual takes less than [#] medications and has less than [#] medical conditions. The review includes [#] appointments within a […] period to provide assessment of the list of medications and the individual's past medical history and recent laboratory results, as well as research and follow-up. The charge to the individual is $[…].

* Complex medication review where the individual takes [#] to [#] medications and has [#] to [#] medical conditions. The charge to the individual is $[…].

* Follow-up appointment after completion of the medication review. This may include assessment of non-prescription drug use, drug allergies, ongoing monitoring, cancer screening and vaccine information. The charge to the individual is $[…].

* Follow-up appointments in a package of [#] appointments over a […] period. The charge to the individual is $[…].

* Annual update of medication review, on client request and with changes in health. The charge to the individual […].

For individual health assessments, follow-up and review, the individual provides a copy of current laboratory results, medication list or their medications and medical history information for discussion at appointments. The individual is required to provide a consent to use medication and medical information for the purposes of the assessment, follow-up and annual update.

You will also offer presentations to groups about high blood pressure and medications. The charge to the client is $[…]. For these presentations, the client will provide the facilities and audience for the presentation including projector for display of slides.

Appointments or presentations cancelled within 48 hours of the scheduled time or not attended will be charged a cancellation fee […].

The authorized acts enabled for the practice of pharmacy are set out in the […], which identifies the scope of practice of a pharmacist in [Province X] as follows: […]

These authorized acts include prescribing certain drugs and administering certain substances. You work as an independent contractor and indicated that your clinical pharmacist services are provided in accordance with the standards and requirements established by the professional regulatory authority, […].

In their expanding role within the health care system, we understand that pharmacists can practice as independent consultants for management of medication therapy that includes disease prevention and health promotion services. In this role pharmacists can initiate, manage and modify drug therapy and access a patient's health care information such as laboratory test results to assist them in helping a patient manage his or her medication use. Pharmacists can advise individual patients of pharmaceutical options, possible medication interactions, common side effects, as well as practical knowledge about administration of medicines. A pharmacist may also be involved in treatment follow-up such as tracking the effects of medication and discussing medication effectiveness and side effects with patients. This involvement of a pharmacist is often appropriate for patients who have a variety of medications to treat several conditions or symptoms.

[…], which sets out its expectations when pharmacists charge fees for professional services outside of customary dispensing activities. Thus there is a separation of medication management therapy and consulting services generally from other pharmacy services such as dispensing and preparing medication.

Interpretation Given

Chapter 1.4 of the GST/HST Memoranda Series, Excise and GST/HST Rulings and Interpretations Service, describes the circumstances in which the Canada Revenue Agency (CRA) will issue a ruling or an interpretation. A ruling is a written statement the CRA provides to a taxpayer that sets out the CRA's position on how the relevant provisions of the legislation apply to a clearly defined fact situation of the taxpayer. An interpretation is a written statement which sets out the CRA's view on how the ETA applies to a generic fact situation.

The CRA will issue a ruling only when the person requesting the ruling has provided all the relevant facts of a transaction or series of transactions. The CRA will not issue a ruling where the request relates to a hypothetical situation or where it is unable to obtain sufficient facts from the taxpayer. In such cases, the CRA may provide an interpretation of the relevant provisions of the legislation in order to assist the taxpayer in fulfilling their obligations under the law.

Bill C-38, An Act to Implement Certain Provisions of the Budget tabled in Parliament on March 29, 2012 and Other Measures, included an amendment to exempt certain services rendered by pharmacists from the GST/HST. This Bill received Royal Assent on June 29, 2012. New section 7.3 of Part II of Schedule V exempts the following:

A supply of a service (other than a service described in section 4 of Part I of Schedule VI) rendered in the practice of the profession of pharmacy by a particular individual who is entitled under the laws of a province to practise that profession if the service is rendered within a pharmacist-patient relationship between the particular individual and another individual and is provided for the promotion of the health of the other individual or for the prevention or treatment of a disease, disorder or dysfunction of the other individual.

In addition, the exemption in section 10 of Part II of Schedule V for diagnostic services was expanded to include those diagnostic services ordered by pharmacists when the pharmacists are authorized to issue such orders under the laws of a province:

A supply of a prescribed diagnostic, treatment or other health care service rendered to an individual if made on the order of

(a) …

(b) …

(c) a person that is entitled under the laws of a province to practise the profession of pharmacy and is authorized under the laws of the province to order such a service, if the order is made within a pharmacist-patient relationship.

These amendments apply to supplies made after March 29, 2012. We interpret the phrase "pharmacist-patient relationship" in these sections to mean a situation where the pharmacist is engaged in a professional therapeutic relationship with the individual. This would generally occur where the individual has established a contractual relationship with the pharmacist for the provision of care relating to the health of that individual.

Pharmacists' services of dispensing prescription drugs continue to be zero-rated pursuant to section 4 of Part I of Schedule VI along with the supplies of prescription drugs that are zero-rated pursuant to section 3 of that Part.

The amendments to Part II of Schedule V relate, in part, to the recent legislative changes introduced in several provinces, such as [Province X], to permit pharmacists to assume more responsibility in the provision of health care services in the course of their professional practice beyond those of dispensing drugs. It is understood that the provinces are expanding such responsibility on an individual basis and therefore the authorized activities of a pharmacist may vary in each province. For example, the following services when rendered within the practice of the profession of pharmacy by a pharmacist to an individual would fall within the exemption in section 7.3 of Part II of Schedule V where these services involve the promotion of the patient's health or are provided for the prevention or treatment of a disease, disorder or dysfunction of the patient:

•     ordering and interpreting lab tests (e.g., to determine if a medication is creating an adverse reaction);

•     administering medications and vaccinations (e.g., administering flu vaccines);

•     changing drug dosages;

•     prescribing drugs for minor ailments; and

•     medication management therapy.

Not all "non-dispensing" professional services rendered by pharmacists are exempt. Activities such as administrative, teaching and research services are not included in the GST/HST exemptions for health care professionals and are therefore subject to the GST/HST at the applicable rate, […].

In other situations the client may be a general audience attending a presentation or similar event or the client may be an institution or business such as a hospital or a retail pharmacy contracting with a pharmacist under a general service contract to operate its pharmacy. Because of the specific wording of section 7.3 of Part II of Schedule V that requires a particular type of interaction between the pharmacist and a patient, this exemption would not apply to group presentations or to general service contracts between a hospital or retail pharmacy and a pharmacist. For instance, there is no "pharmacist-patient relationship" between the pharmacist and the members of an audience attending a presentation or with the hospital or retail pharmacy. In this respect we note that although a service contract with a pharmacy may include as one of the pharmacist's duties the provision of advice to individuals, this duty is not necessarily determinative that the contract, as a whole, is in respect of an exempt supply described in section 7.3 of Part II of Schedule V.

With respect to your question concerning fees paid for missed or cancelled appointments, section 182 requires the GST/HST to be remitted on such fees relating to taxable supplies. Subsection 182(1) is a deeming provision where the amount paid for a breach, modification or termination of an agreement, such as a cancellation fee, is treated as consideration for the intended taxable supply. This provision deems the recipient of the taxable supply to have paid and the registrant (the supplier) to have collected the GST/HST on that deemed consideration at the time the fee is paid. For instance, a supplier in [Province X] would be deemed to have collected tax equal to […] of the amount paid a result of the cancellation. Accordingly, the supplier would be deemed to have collected GST/HST on the deemed consideration for cancellation fees charged in relation to taxable supplies. However, no GST/HST would apply to fees paid for missed or cancelled appointments that are in relation to exempt supplies.

With respect to your question regarding NSF cheques, it is our view that the NSF fee charged for a returned cheque is generally consideration for processing a financial instrument (a debt security) as described by paragraph (d) of the definition of "financial service" in subsection 123(1) and is not excluded by paragraphs (n) to (t) of the definition. Accordingly, the NSF fee would be consideration for an exempt supply of a financial service and no GST/HST would apply to such a fee.

Additional Information

Please note that, with certain exceptions, every person who makes a taxable supply of goods or services in Canada in the course of commercial activity engaged in by the person in Canada is required to be registered for GST purposes. An exception is where a person is a small supplier. A person is a small supplier throughout a particular calendar quarter and the following month if the consideration for taxable supplies (other than sales of capital property) made by the person, or of associated persons, in the preceding four calendar quarters did not exceed $30,000. More information is provided in the publications available on our Web site. Chapter 2, Registration, of the GST/HST Memoranda Series and the guide RC4022, General Information for GST/HST Registrants provide an overview of the registration requirements as well as the GST/HST obligations and entitlements for businesses.

The foregoing comments represent our general views with respect to the subject matter of this letter. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-6761. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Susan Eastman
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate