GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 174773
Business Number: N/A
Dear [Client]:
Subject: GST/HST interpretation
Tax status of the installation of artificial teeth by a dental practice
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the tax status of the installation of artificial teeth by a dental practice. We apologize for the delay in this response.
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 contained in your fax on [mm/dd/yyyy], we understand the following:
1. […] (the “Corporation”) is a professional corporation that provides dental services in a general practice.
2. The Corporation provides artificial teeth in the course of its activities.
3. The provision of artificial teeth includes both the installation services and the artificial tooth itself.
4. The Corporation’s manufactured cost of an artificial tooth encompasses […].
[…]:
The cost of making an impression of the tooth necessary for the lab, whether an in-house or external lab, to be able to prepare and fit a crown (the artificial tooth). This […] includes the material costs, overhead costs and time necessary to prepare the tooth to be able to have the crown fit on it.
[…]:
The cost of sending the impression to the lab and the lab work in preparing the artificial tooth. […](footnote 1).
[…]:
The cost of making and installing the temporary crown in the mouth of the patient to maintain the shape and position of the tooth while the lab is preparing the permanent artificial tooth.
5. The Corporation partitions its costs and revenue allocation as follows:
* Pre-lab manufacturing costs ([…]%)
* External lab costs ([…]%)
* Temporary artificial tooth ([…]%)
* Installation of crown ([…]%)
6. You indicate that, for the characterisation of the supply of installing artificial teeth, you agree with the decision described in the 2006 Tax Court of Canada (TCC) case, Dr. James Singer Inc. v. The Queen(footnote 2), in which the judge states that the cost of installing an artificial tooth is zero-rated given the precise wording of section 34 which “speaks specifically of the supply of a service of … installing … a property described in any of sections 2 to 32 ….”
RULING REQUESTED
You would like to know:
1. the meaning of “supply of artificial teeth” as per section 11 of Part II of Schedule VI, and
2. the tax status of the supply of installation of artificial teeth.
A GST/HST ruling is a written statement which sets out the Canada Revenue Agency’s (CRA’s) position on how the relevant provisions of the legislation apply to a clearly defined fact situation, and where all the relevant facts and supporting documentation have been presented in writing. As we are not in possession of all of the pertinent facts, we are unable to provide a ruling. We are pleased however to provide you with an interpretation of the relevant provisions of the ETA as it relates to the nature of your request.
INTERPRETATION GIVEN
Generally, most supplies of property or services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity that may be taxable at the rate of 0% (zero-rated supplies) 5%, 13%, or 15% depending on the province in which the supply is made. Zero-rated supplies are listed in Schedule VI. Exempt supplies are listed in Schedule V and are not subject to the GST/HST.
Part II of Schedule VI provides the zero-rating provisions for certain supplies of medical and assistive devices. While some medical devices are zero-rated in their own right, others are only zero-rated when supplied under certain conditions. It is a question of fact whether or not a specific supply meets the criteria or conditions of a specific zero-rating provision. Generally, if a medical device is not included in Part II of Schedule VI, its supply is subject to the GST/HST at the applicable rate for the province in which the supply is made.
Based on the information you have provided with respect to the Corporation’s supplies, the following provisions listed in Part II of Schedule VI may be relevant in determining the tax status of the dentists’ supplies.
Section 11 of Part II of Schedule VI zero-rates the supply of artificial teeth.
Section 34 of Part II of Schedule VI zero-rates a supply of a service (other than a service the supply of which is included in any provision of Part II of Schedule V except section 9 of that Part) of installing, maintaining, restoring, repairing or modifying a property the supply of which is included in any of sections 2 to 32 and 37 to 41 of Part II of Schedule VI, or any part for such a property if the part is supplied in conjunction with the service.
In addition, sections 1.1 and 1.2 of Part II of Schedule VI must also be considered when making a determination as to whether or not a particular supply of a medical and assistive device is zero-rated. Section 1.1 of Part II of Schedule VI provides that, for the purposes of this Part, other than section 33, a supply of property that is not designed for human use or for assisting an individual with a disability or impairment is deemed not to be included in this Part. Section 1.2 of Part II of Schedule VI provides that, for the purposes of this Part, a cosmetic service supply(footnote 3) and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in this Part (i.e., not zero-rated).
Based on the information you have provided with respect to the Corporation’s supplies, the following provision listed in Part II of Schedule V may also be relevant in determining the tax status of the Corporation’s supplies.
Part II of Schedule V to the ETA provides that certain health care services are exempt from the GST/HST. Section 5 of Part II of Schedule V exempts a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual. Section 1 of Part II of Schedule V defines a “medical practitioner” to mean a person who is entitled under the laws of a province to practise the profession of medicine or dentistry.
For section 5 of Part II of Schedule V to apply, the supply must be a “qualifying health care supply” and not a “cosmetic service supply” 3 pursuant to sections 1.1 and 1.2 of Part II of Schedule V.
Section 1.1 of Part II of Schedule V specifically provides that, “for the purposes of this Part, other than section 9, a cosmetic service supply and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in this Part.” This section clarifies that a cosmetic service supply, and a supply of any property or service in respect of a cosmetic service supply that is not made for medical or reconstructive purposes, are not considered basic health care and are excluded from the exempting provisions (other than section 9) in Part II of Schedule V.
Section 1.2 of Part II of Schedule V specifically provides that, “for the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a qualifying health care supply is deemed not to be included in this Part.”
The term “qualifying health care supply” is defined in section 1 of Part II of Schedule V to mean, “a supply of property or a service that is made for the purpose of
(a) maintaining health,
(b) preventing disease,
(c) treating, relieving or remediating an injury, illness, disorder or disability,
(d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or
(e) providing palliative health care.”
Supplies of property or services are not “qualifying health care supplies” if they are not made for at least one of these purposes. In circumstances where a supply is made for more than one purpose, the supply will be a qualifying health care supply if the dominant or main purpose for which the supply is made is included in paragraph (a) to (e) of the definition of qualifying health care supply.
For more information on qualifying health care supplies, please refer to GST/HST Policy Statement P-256, Qualifying Health Care Supplies and the Application of the GST/HST to Supplies of Medical Examinations, Assessments, Reports and Certificates.
Meaning of “supply of artificial teeth”
The term “supply of artificial teeth” is found in section 11 of Part II of Schedule VI but the term is not defined in the ETA.
The CRA considers “artificial teeth” a property that is fabricated for use as a substitute for a natural tooth. Although they can be made of various materials, they are usually made of porcelain or resin. The artificial teeth must be anatomical in nature, must duplicate the forms of natural teeth, and must be fabricated for the use as a substitute for natural teeth. The term “artificial teeth” generally includes crowns, bridges and dentures. Crowns that are fabricated to replace 50% or more of existing natural teeth are considered to be artificial teeth for purposes of the zero-rating provision.
An example of a supply of artificial teeth in the context of the information that you provided would be the sale of an artificial tooth made by the lab to the dentist. In this example, the lab’s supply of property (the artificial tooth) would be zero-rated pursuant to section 11 of Part II of Schedule VI.
It should be noted that where an artificial tooth is provided in conjunction with other goods or services it is necessary to determine if each of the elements is a separate supply or if there is a single supply consisting of all the elements. Where there is a single supply it is necessary to determine the characterization of the supply. The concept of single and multiple supplies are explained in further detail below.
Installation of artificial teeth
Section 34 of Part II of Schedule VI zero-rates a supply of installing a property the supply of which is included in any of sections 2 to 32 and 37 to 41 of Part II of Schedule VI. It is important to note that section 34 specifically carves out the health care services that are listed in Part II of Schedule V (except section 9 of that Part). In other words, section 34 does not apply to health care services rendered to individuals by dentists, and other health care providers, who provide services that are listed in Part II of Schedule V in order to ensure that such health care services remain exempt under the GST/HST. Therefore, where a service of installing artificial teeth is rendered to an individual by a dentist the supply would be an exempt supply pursuant to section 5 of Part II of Schedule V, as this exempt supply is excluded from the zero-rating provision of section 34 of Part II of Schedule VI.
Remarks on section 34, as addressed by judge Bowman in the decision of Dr. James Singer Inc. v. The Queen, were obiter references. A more recent Tax Court of Canada (TCC) decision, Axelrod v. The King(footnote 4) (Axelrod), addresses the provision of installation services of artificial teeth in the context of a dental treatment more accurately and will be discussed later in this letter.
Nature of the supply
The GST/HST is a transaction-based tax and for each supply made, the supplier must determine whether the tax is applicable. As such, where a number of services and/or property are supplied in conjunction with each other, the supplier must determine whether a single supply, or multiple supplies, are being made. For each identified supply, the supplier must then determine if one of the provisions listed in Schedule V or VI applies to the supply or if the supply is subject to the GST/HST.
When taken in isolation, a supply of an artificial tooth would be zero-rated under section 11, or the supply of the installation of artificial teeth would also be zero-rated under section 34, of Part II of Schedule VI. On the other hand, the installation of an artificial tooth may also be part of an overall dental service which would be exempt under section 5 of Part II of Schedule V.
Given that different provisions of the ETA may apply to the Corporation’s supplies, we need to take a closer look at the transaction involving the supply of artificial teeth, the transaction’s different elements, and the circumstances in which the transaction takes place.
Single/Multiple supplies
It must first be determined whether the Corporation is making a single supply or multiple supplies.
Multiple supplies may occur when one or more of the elements of a transaction can sensibly or realistically be broken out. Conversely, two or more elements are part of a single supply when the elements are integral components, inextricably bound up with each other, so intertwined and interdependent that they must be supplied together; or one element of the transaction is so dominated by another element that the first element loses any identity for fiscal purposes.
It is the CRA’s position that, for GST/HST purposes, the determination of whether a transaction consisting of several elements is to be regarded as a single supply, or multiple supplies, is based on a determination of fact. For more information, the GST/HST Policy Statement P-077R2, Single and Multiple Supplies provides guidance in determining whether a single supply or multiple supplies are being provided, based on the following principles:
1. Every supply should be regarded as distinct and independent.
2. A supply that is a single supply from an economic point of view should not be artificially split.
3. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply.
Policy Statement P-077R2 also explains that the way in which the consideration for a transaction is set out does not in itself determine whether there are one or more supplies. A single consideration does not automatically mean that there is one supply. Equally, separately identified consideration for certain elements do not necessarily mean that there are two or more supplies. Thus, one cannot rely solely on the breakdown of charges in an invoice to conclude that a supplier is making multiple supplies of different goods and/or services.
The key factor to consider in making the determination as to what, and how many, supplies are made in a particular situation is the need/purpose of the patient when requesting the dentist’s services. From a supplier point of view, one must consider what the dentist is being requested to do or to provide that satisfies the request or need of their patient. Therefore, consideration needs to be given to the degree to which the provision of an artificial tooth and the provision of a dental service are interconnected. It is a matter of fact whether the Corporation is making single or multiple supplies.
In this case, it would be artificial to separate certain elements of the dentist’s supplies; namely, a patient believes they are engaging the Corporation or the dentist to provide a dental treatment which comprises various elements, each of which is a critical and essential part of the service provided as a whole. A patient would not have wanted to acquire the artificial tooth without essentially having it fitted, manufactured and installed. Similarly, the rest of the dental services would not have been achievable had it not been for the provision of the artificial tooth. Hence, the artificial tooth is the mechanism by which the dentist renders the dental treatment to their patient, yet the placement of the artificial tooth in the patient’s mouth, along with the designing, fitting, adjusting and installing, is integral to the supply as a whole. The placement of the artificial tooth in a patient’s mouth requires the dentist’s professional expertise, without which, the artificial tooth would not be useful to fulfill the patient’s need.
In the Axelrod decision , the TCC determined that the dentist was making a single supply that consisted of the artificial tooth and the services of designing, prescribing, fitting, adjusting and installing the artificial tooth. In paragraphs 30 and 31 of the decision Justice Sommerfeldt stated:
“ [30] Although Albert was decided in the context of the ITA, Justice Bédard’s reasoning has merit here. It is difficult to imagine that a patient of Dr. Axelrod would have wanted to acquire dentures, a bridge, a crown or an implant without Dr. Axelrod having first done all of the preliminary work necessary to ensure that the particular prosthesis would fit and function properly in the patient’s mouth, and without Dr. Axelrod actually installing the prosthesis in the patient’s mouth. Similarly, all of the dental services rendered by Dr. Axelrod would have made no sense if they had not related to the prosthesis desired by the patient. To use the language of O.A. Brown, both the supply of the prosthesis and the supply of the dental services were integral parts or components of the overall supply. They were interconnected, interdependent and intertwined. It is even more evident that all aspects of Dr. Axelrod’s reconstruction, in a patient’s mouth, of a significant portion of a tooth, using appropriate filling or restorative materials, were integral components of a composite supply.
[31] Accordingly, I have concluded that the provision by Dr. Axelrod to a patient of dentures, a crown, a bridge, a dental implant or a reconstructed tooth was a single supply of both the artificial tooth or teeth and the professional dental services of designing, prescribing, fitting, adjusting and installing the artificial tooth or teeth, or reconstructing a significant portion of a tooth in a patient’s mouth, as the case may have been.”
Characterization of the supply
The next step in determining the tax status of the supply made by the Corporation is to characterize the supply.
As previously mentioned, section 5 of Part II of Schedule V exempts a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual. The service has to be rendered by a dentist who is entitled under the laws of a province to practise the profession of dentistry. Where a supply meets the exemption criteria of section 5 of Part II of Schedule V, it also has to satisfy criteria of sections 1.1 and 1.2 of Part II of Schedule V, i.e., the supply must not be a cosmetic service supply or a supply in respect of a cosmetic service supply, and the supply must be a qualifying health care supply.
In the Axelrod decision, the TCC further found that if Dr. Axelrod were regarded as making supplies that came within both provisions, i.e. the exempting provision of section 5 of Part II of Schedule V and the zero-rating provision of section 11 of part II of Schedule VI, then “the exempt status of the supplies will preclude Dr. Axelrod’s dental practice (which is a business) from being a commercial activity, by reason of the exception at the end of paragraph (a) of the definition of the term “commercial activity” in subsection 123(1) of the ETA.”
In other words, the exclusion from the definition of commercial activity for a business of making exempt supplies had the effect of making the exempting provision in section 5 of Part II of Schedule V paramount over the zero-rating provision of section 11 of Part II of Schedule VI to the extent of any overlap, as the judge explains in section 62 of the decision:
“ [62] As noted above, I have found that Dr. Axelrod made single supplies, rather than multiple supplies, to his patients. As explained above, based on the evidence, the predominant element of those supplies was the provision of dental services. However, if those supplies can be viewed as coming within both section V-II-5 and section VI-II-11 of the ETA, i.e., if the supplies have both exempt status and zero-rated status (to which view I do not subscribe), the exempt status of the supplies will preclude Dr. Axelrod’s dental practice (which is a business) from being a commercial activity, by reason of the exception at the end of paragraph (a) of the definition of the term “commercial activity” in subsection 123(1) of the ETA.”
In sum, the TCC found that the predominant element of a supply made by a dentist to their patient, through a dental corporation, is their professional dental services and not the artificial tooth per se. We are therefore of the view that when a dentist provides artificial teeth in the course of rendering a dental treatment to an individual, the dentist is making a single supply of a dental treatment, which is a health care service. In this case, where the supply of the Corporation satisfies all of the afore-mentioned conditions for exemption under section 5 of Part II of Schedule V, then the Corporation would be making an exempt supply of a dental treatment (a health care service) pursuant to section 5 of Part II of Schedule V.
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 interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) 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 343-553-4626.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,
Amal Khorchid
Senior Rulings Officer
Health Care Sectors Unit
Public Service Bodies and Governments Division
GST/HST Rulings Directorate
Footnotes
1 […]
2 2006 TCC 205 Dr. James Singer Inc. v. The Queen
3 As defined in section 1 of Part II of Schedule V: a cosmetic service supply means a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes.
4 2022 TCC 157 Axelrod v. The King
Email this Content