Facts

1. A municipality will collect non-recyclable garbage on a weekly basis when the garbage is placed in a container or bag and a tag is attached to the container or bag.

2. The municipality issues, at no cost to each homeowner/occupant, 52 tags, where a tag is to be affixed to one bag/container per week. The municipality will collect only those bags/containers where tags have been attached. For homeowner/occupants who have more than one bag/container to be collected, additional tags may be purchased at a cost of $1.50 per tag.

Ruling Requested

Is the collecting of tagged bags of garbage considered to be an exempt supply of a garbage collection service pursuant to paragraph 20(h)?

Ruling provided

The supply of the service of collecting the first tagged bag and any additional tagged bags is considered a supply of garbage collection services and would be exempt pursuant to paragraph 20(h). (That is, there would be no GST/HST on either the first 52 tags or any additional tags.)

Example No. 2

Facts

1. A regional municipality is composed of four smaller municipalities within a certain area. The regional municipality has established a board to operate a recycling facility which processes recyclable material for sale. The board, a para-municipal organization of the regional municipality and determined to be a municipality, is registered for the GST/HST.

2. All four municipalities within the region use the facility for the processing of recycled material collected as part of their "blue box" programs. Each of the four municipalities is responsible for the collection and delivery of the recyclable material to the facility.

3. The recycling facility sorts, processes and markets recyclable material for sale. The proceeds of the recycled material offsets the facilities capital and operating costs.

4. Each municipality provides its own trucks and blue boxes to collect recyclable material from households. Households pay a monthly user fee for the collection of the recyclable material.

5. The Board charges each municipality a fee for managing the marketing of the recycling.

Rulings requested

Is the Board entitled to input tax credits (ITCs) for the GST incurred on operating and capital costs of the facility?

Are the four local municipalities entitled to claim ITCs for the GST incurred in acquiring and operating the trucks, the blue boxes and other costs related to the recycling program?

Rulings provided

The Board is making a taxable supply of processed recyclable materials. As a registrant, the Board is entitled to claim ITCs for GST/HST incurred in constructing and operating the recycling facility.

The four local municipalities are making a supply of collecting and transporting recycling material to a recycling facility. This is considered to be an exempt supply of garbage collection services pursuant to paragraph 20(h).

The municipalities are not entitled to claim ITCs for GST/HST incurred on costs related to collecting and transporting recyclable material. However, qualifying municipalities may be entitled to claim rebates relating to this exempt supply.

The supply of the management service made by the para-municipal organization to the four municipalities is an exempt supply pursuant to section 28 of Part VI of Schedule V to the ETA. The para-municipal organization would not be entitled to claim ITCs for GST/HST on inputs incurred to make the supply of the management service. As a determined municipality the para-municipal organization would be entitled to the 57.14% public service body rebate (restricted to the federal component of HST in Newfoundland).

Example No. 3

Facts

1. A municipality, as part of a "clean environment" campaign, has designated a day on which it will collect used car batteries from residences in its jurisdiction. This is a special pick-up which is not part of regularly scheduled garbage collection services provided to homeowners by the municipality.

Ruling Requested

Is the special pick-up service an exempt supply of a garbage collection service?

Ruling provided

The special collection of the batteries would have been taxable prior to January 1, 1997, as the exemption in paragraph 20(h) of Part VI of Schedule V applied only to regularly scheduled garbage collection. However, on or after January 1, 1997, the exemption is extended to include all garbage collection services, including collection of recyclable materials, provided by a government or a municipality or by a board, commission or other body established by a government or a municipality. Therefore, on or after January 1, 1997, the special collection of the batteries would be an exempt supply.