21 January 2013 GST/HST Interpretation 146225 - Application of GST/HST to a Supply of a Legal Service Performed in Large Part on a Reserve and Provided to an Indian Individual

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.

[…][Scenario A]

A lawyer is based on a reserve.  In […] [a] particular situation, the lawyer provides legal services to assist Indian individuals who are making claims to the Government of Canada.

A part of […] [the lawyer's] services do not occur on a reserve. 

Interpretation Requested

You note that GST/HST Technical Information Bulletin B-039, GST/HST Administrative Policy - Application of the GST/HST to Indians states, concerning services acquired by an Indian:

Individual Indians must pay the GST/HST on all taxable services that are not performed or do not occur totally on a reserve….

You ask if the lawyer should charge GST/HST to the Indian recipient of the service.   

Interpretation Provided

It is our understanding […] that the recipient of the legal service is the Indian individual and is not the Government of Canada. […].

Analysis

B-039 is a statement of administrative policy, and, as such, is intended to give guidance but is not intended to be read as if it is legislation, using the principles of statutory interpretation.  As a result, we caution against interpreting the language of B-039 too strictly when the service is purchased on a reserve, especially where the service provider and the Indian customer are normally located on the reserve.

In respect of services provided to Indian individuals on a reserve, the Finance Canada press release of December 13, 1990 states that: "GST will not apply to services purchased on [a] reserve by Indians, such as small engine repairs, where the benefit will be realized primarily on [a] reserve." (Emphasis added). In the end, B-039 used the words "performed totally" in order to give service providers a clearer rule to apply. As the GST/HST applies on a transactional basis, our administrative policy recognizes the challenges that a service provider would experience if compelled by the CRA to determine if the service provides a benefit that will be realized "primarily" on a reserve. For example, it may be virtually impossible for a service provider to determine absolutely if the benefit of a small engine repair that is "purchased" on a reserve (e.g., performed on a lawn mower situated on a reserve) would be realized at all on a reserve.

There are numerous examples of situations in which a service is relieved where the service is not performed totally on a reserve (e.g., a transmission "service" charge associated with delivery of electricity by a hydro company to an Indian on a reserve). Below we make observations concerning 2 hypothetical situations […].

Example 1

A lawyer who has her office on a reserve is providing a mediation service for a divorce action initiated by 2 married Indian individuals who are residents of the reserve. She represents one member of the divorcing couple. The mediation sessions take place totally on the reserve. Related to the mediation she makes a telephone call on a cell phone when she is on travel status to attend a conference in downtown Ottawa. When making out her invoice for the mediation service she notes that on her phone bill a related phone call is tracked to a location off a reserve (in Ottawa). 

We would say the off-reserve phone call is a supplementary requirement to complete the on-reserve mediation service and as a result the tax should not apply to the mediation service. The same result would apply if the recipient of the supply is an Indian individual who is not a resident of a reserve as the service was performed on a reserve.       

Example 2

A lawyer who has her office on a reserve is providing a probate service to the beneficiary Indian children concerning a will of a deceased Indian father. The necessary documents, prepared on the reserve, are sent from the lawyer's office to a provincial courthouse not situated on a reserve to be probated.  The provincial judge makes a ruling supporting the claims of the original beneficiaries, and has it sent to the lawyer's office.

The objective of the lawyer's clients was to probate the will and the lawyer did virtually all of the work related to the service on a reserve. The fact that the lawyer must send the documents to a court located off a reserve would be considered to be a supplementary requirement to complete the on-reserve lawyer's probate service.  The tax should not apply to the lawyer's services. The residency of the Indian clients does not matter in this case as the service was performed on a reserve.

Our comments concerning [Scenario A]

In [Scenario A] the service provider and the Indian customer both are normally located on the reserve. An analysis of the appropriate tax application should include a review of the possibility that the aspects of the lawyer`s services that do not occur on a reserve are a supplementary requirement to complete the on-reserve service. If the part(s) of the lawyer's service that does/do not occur on a reserve can be considered a supplementary requirement to complete the on-reserve claim submission service, the tax relief applies.