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.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 246452r
Dear [Client]:
Subject: GST/HST ruling and GST/HST interpretation
Application of GST/HST to supplies of hospital beds, mattresses and other products
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of certain products made by […] (the Corporation). […][You provided] supplemental documentation on the types of beds and mattresses supplied by the Corporation [to health care authorities]. Additionally, on [mm/dd/yyyy], you provided information that the Corporation is also making the separate supply of air pumps and of mattress covers to be used with mattresses sold by the Corporation.
As a result of this additional information, we are able to issue the following ruling and interpretation.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on the information provided, we understand the following:
1) […].
2) The Corporation supplies […][medical] beds, mattresses and other related equipment. The Corporation’s products include the following:
[…][Medical beds, mattresses, air pumps and mattress covers]
3) The Corporation’s main customers are private and public institutions offering acute and long-term health care services.
4) Specifically, the Corporation supplies [medical] beds, mattresses and other related equipment to the following health care providers:
[…]
5) These health care providers operate various facilities and institutions.
6) The Corporation’s products may be shipped directly by the Corporation to the customer’s facilities or they may be shipped to a central warehouse operated by the Corporation’s customers and subsequently shipped to the facilities.
7) Certain [medical] beds may be supplied by the Corporation on the written order of a specified professional for use by an incapacitated individual named in the order. The [medical] beds maybe delivered, in these cases, directly to the incapacitated individual’s home or to another location for subsequent delivery to the incapacitated individual’s home. The Corporation’s other products may also be supplied to incapacitated individuals and delivered directly to their home or to another location for subsequent delivery to their home.
RULING REQUESTED
You would like to know if:
a) […][The Corporation’s medical beds] are hospital beds for purposes of section 4 of Part II of Schedule VI.
b) […][The air pumps, mattresses and mattress covers] are parts, accessories or attachments that are specially designed for a property described in Part II of Schedule VI pursuant to section 32 of this Part and if their supply is zero-rated.
c) The supply by the Corporation of the products described in paragraph 2 above are zero-rated where the products are supplied to the operator of a health care facility or when they are supplied on the written order of a specified professional(Footnote 1) for use by an incapacitated individual named in the order.
d) The health care providers listed in paragraph 4 above are operators of facilities that are health care facilities as defined in Section 1 of Part II of Schedule V.
RULING GIVEN
Based on the facts set out above, we rule that:
a) The […][Corporation’s medical beds] are hospital beds for purposes of section 4 of Part II of Schedule VI.
b) The mattresses, air pump and mattress cover described in paragraph 2 above are part, accessory or attachment specially designed for a property described in Part II of Schedule VI and supplies of these products are zero-rated pursuant to section 32 of Part II of Schedule VI.
c) The supply by the Corporation of the […][Corporation’s medical beds] are zero-rated pursuant to section 4 of Part II of Schedule VI when supplied to the operator of a health care facility.
d) The supply by the Corporation of [medical] beds on the written order of a specified professional for use by an incapacitated individual named in the order are zero-rated pursuant to section 4 of Part II of Schedule VI.
With respect to your request that the CRA confirm whether the health care providers listed in paragraph 4 above are operators of health care facilities as the expression is defined in section 1 of Part II of Schedule V, the CRA is generally prohibited from using or communicating confidential information obtained in the course of administering the goods and services tax /harmonized sales tax (GST/HST) legislation unless they are specifically authorized to do so.
EXPLANATION
Generally, all supplies of property and services made in Canada are subject to the GST/HST at the applicable rate depending on the province in which the supply is made unless specifically zero-rated under the ETA.
Supplies of certain medical and assistive devices are zero-rated. For a supply of a medical device to be zero-rated, a specific zero-rating provision included under Part II of Schedule VI must apply to the supply of the particular medical device. If a medical device is not included in Part II of Schedule VI, then the supply of the medical device is generally subject to the GST/HST at the applicable rate.
Section 4 of Part II of Schedule VI zero-rates the supply of a hospital bed, if the bed is supplied to the operator of a health care facility (as defined in section 1 of Part II of Schedule V) or on the written order of a specified professional for use by an incapacitated individual named in the order.
In order for a supply of a bed to be zero-rated under section 4 of Part II of Schedule VI the bed must therefore be a hospital bed and the supply of the hospital bed must meet one of the two following conditions:
a) the hospital bed must be supplied to the operator of a health care facility as defined in section 1 of Part II of Schedule V or,
b) the hospital bed must be supplied on the written order of a specified professional for use by an incapacitated individual named in the order.
Hospital beds
A bed is a type of furniture designed to provide a fixed support and a comfortable surface on which a person can sleep, rest or lie down. A hospital bed is a type of bed specifically designed to facilitate patient care and safety, and which meets the requirements of hospitals. A hospital bed is used for the purpose of acute care hospitalization, long-term inpatient hospitalization, long-term care in a nursing home or other medical facility, in addition to being used by incapacitated individuals in their homes.
A hospital bed may have some or all of the following features:
(1) leg assembles with casters
(2) a tilting rigid mattress deck
(3) mattress deck height and tilting mechanisms
(4) headboard and footboard
(5) side rails
(6) bumpers
(7) attached drip (intravenous) pole.
A gurney, stretcher, transfer patient board, reclining medical chair, and an operating table are not a bed for GST/HST purposes and therefore are not zero-rated under this section. However, an incubator and a paediatric crib are hospital beds.
Based on the information provided, the features of the […][Corporation’s medical beds] indicate that these beds are hospital beds for purposes of section 4 of Part II of Schedule VI. Therefore, supplies of these beds will be zero-rated where the supply meets the conditions in section 4.
Mattresses, air pumps and mattress covers
Section 32 of Part II of Schedule VI zero-rates a supply of a part, accessory or attachment that is specially designed for a property described in this Part.
The term "specially designed" relates to the intention of the manufacturer as to the ultimate use of a product as reflected in the qualities and features of the product itself. A product is "specially designed" if it is designed for the particular use set out in the ETA. The specially designed features must be significant enough in that the features make the product recognizably different from similar products without such features. The qualifier "specially" imposes a restriction on the word "designed" which excludes general-purpose goods from the zero-rating provision.
The mattresses described in paragraph 2 above have been specially designed for hospital beds described in section 4 of Part II of Schedule VI. The air pumps and mattress covers described in paragraph 2 have been specially designed for the mattresses. The mattresses, air pumps and mattress covers therefore meet the conditions of section 32 and their supplies is zero rated regardless of the recipient of the supply and the location of their delivery.
Operator of a health care facility
Section 4 of Part II of Schedule VI, in part, zero-rates a supply of a hospital bed if the supply is made to the operator of a health care facility as defined in section 1 of Part II of Schedule V.
Section 1 of Part II of Schedule V defines “health care facility” to mean:
(a) a facility, or a part thereof, operated for the purpose of providing medical or hospital care, including acute, rehabilitative or chronic care,
(b) a hospital or institution primarily for individuals with a mental health disability, or
(c) a facility, or a part thereof, operated for the purpose of providing residents of the facility who have limited physical or mental capacity for self-supervision and self-care with
(i) nursing and personal care under the direction or supervision of qualified medical and nursing care staff or other personal and supervisory care (other than domestic services of an ordinary household nature) according to the individual requirements of the residents,
(ii) assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the residents, and
(iii) meals and accommodation;
The ETA does not define the word “operator”. However, the meaning of that term was discussed in the Tax Court of Canada decision of Caithkin v. The Queen(Footnote 2). The discussion was in respect of section 2 of Part IV of Schedule V where the section provides, among others, that a supply of a service is exempt when the supply is made in an establishment operated by the supplier for the purpose of providing such service. The key question was what does the word “operated” means in section 2. Justice Graham referred to definitions found in dictionaries:
“ [35] The Canadian Oxford Dictionary, Second Edition, defines “operate” as:
… manage, work, control; put or keep in a functional state …
[36] Webster’s New World Dictionary of American English, Third College Edition, defines “operate” as:
… 2 a) to put or keep in action; work (a machine, etc.) b) to conduct or direct the affairs of (a business, etc.); manage …”
As who operates a health care facility is specific to each province, the determination of whether an entity is operating a health care facility needs to be determined on a case-by-case basis.
In general, a person that operates a hospital (general or specialized), a long term care home or facility, a mental health institution, a cancer center, a rehabilitation or palliative center will be considered a health care facility. An organization will be considered to operate a health care facility if it operates one of the above listed facility.
Supply made to the operator of a health care facility
Section 4 of Part II of Schedule VI, in part, zero-rates a supply of a hospital bed when the bed is supplied to the operator of a health care facility (as defined in section 1 of Part II of Schedule V). The closing words of the definition of “recipient” in subsection 123(1) provides that any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply.(Footnote 3) Therefore, this condition requires that the recipient of the supply of the hospital bed be an operator of a health care facility. The use of the bed or the location where it is shipped, including when the bed is shipped to an incapacitated individual’s home, is not relevant for the zero-rating provision to apply.
Supplied on the written order of a specified professional for use by an incapacitated individual named in the order
A supply of a hospital bed will also be zero-rated under section 4 where the hospital bed is supplied to any person as long as the supply is on the written order of a specified professional for use by an incapacitated individual named in the order. Who is the recipient of the supply or where is the place of delivery of the hospital bed does not matter for the zero-rating provision to apply.
INTERPRETATION GIVEN
Generally where a person operates a hospital (general or specialized), a long term care home or facility, a mental health institution, a cancer center, a rehabilitation or palliative center, these facilities will be considered a health care facility. Therefore, the health care providers listed in paragraph 4 above will be considered operators of health care facilities as long as they operate one of these types of facility.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation or the additional information provided herein.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 438-304-4971.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Robert Demers
Industry Sector Specialist
Health Care Sectors Unit
Public Service Bodies and Governments Division
GST/HST Rulings Directorate
FOOTNOTES
1 The expression « specified professional » is defined in section 1 of Part II of Schedule VI and means, for the purposes of section 4, as indicated in its paragraph b) :
(i) a person that is entitled under the laws of a province to practise the profession of medicine, physiotherapy or occupational therapy, or
(ii) a registered nurse.
2 2014 TCC 80. The decision was upheld by the Federal Court of Canada (2015 FCA 118) but it did not discuss nor refer to the concept of “operator”.
3 “recipient” of a supply of property or a service means
(a) where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration,
(b) where paragraph (a) does not apply and consideration is payable for the supply, the person who is liable to pay that consideration, and
(c) where no consideration is payable for the supply,
(i) in the case of a supply of property by way of sale, the person to whom the property is delivered or made available,
(ii) in the case of a supply of property otherwise than by way of sale, the person to whom possession or use of the property is given or made available, and
(iii) in the case of a supply of a service, the person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply;
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