GST/HST Ruling

Dear XXXXX:

This letter is in response to your letter of April 5, 2000, your facsimile message of November 14, 2000, and several conversations we have had concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a $40 "per-diem" staff allowance paid by XXXXX ("the Management Company") to its employees.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. The Management Company is a company formed to oversee the construction XXXXX[.]

2. The Management Company is a GST/HST registrant, and makes taxable supplies from its head office located in XXXXX.

3. The Management Company constructed XXXXX XXXXX from 1990–1997 XXXXX.

4. The Management Company used its own staff and many contractors to accomplish the construction project.

5. The construction process took place at a remote construction site and camp built by the Management Company XXXXX.

6. Workers were normally required to be away from home for more than 36 hours.

7. For purposes of the Income Tax Act (ITA), the construction camp at XXXXX is both a "special work site" and a "remote work location".

8. Initially, the Management Company housed the construction workers at accommodation facilities built at the XXXXX construction site.

9. Around November 1994, the Management Company realized they were experiencing a shortage of staff accommodations at the XXXXX Construction site and agreed to pay $40 per day as a "Per-Diem Staff Allowance" to any employee (or contractor's employee) who would surrender their accommodation privileges.

10. Although the staff "per-diem" is referred to as a "transportation allowance" in the XXXXX, in fact, not all of the amounts were necessarily spent for travel to and from the work site. Some amounts were spent on meals and accommodation.

11. The amount of $40 per day for the allowance was arrived at by duplicating standard subsistence daily rates paid by Union Collective Agreements in effect at that time. The allowance was "all-inclusive" and no separate component or allocation was provided for accommodation, food or travel.

12. The amount of the allowance is a deductible expense to the Management Company under the ITA. No amount of the allowance paid is required to be included in the income of the employees under the ITA.

13. Many of the costs associated with travel to and from the work site are taxable for GST/HST purposes.

14. The purchased accommodations could be either taxable hotel rooms, or exempt long-term accommodation. Replacing mess privileges would mean that employees would have to acquire prepared meals, which are taxable supplies, or purchase groceries which may or may not be zero-rated, depending on the nature of the goods. Replacement camp activities (e.g., laundry, housekeeping, messaging) are taxable for GST/HST purposes.

15. The allowance paid by the Management Company, while described as a "transportation allowance" was considered to be a reasonable approximation of the local costs that would be incurred in obtaining transportation, meals and lodging.

16. The Management Company has no knowledge of how the allowances were actually spent once paid to the employees. The Management Company was not required to document how the employees spent these allowances, since the allowances were "unaccountable".

17. Some of the individual's receiving the allowance used the funds for purposes other than acquiring taxable supplies. The Management Company has no knowledge as to the precise numbers, control, or direction over how the individuals spent their allowances.

Ruling Requested

Where the Management Company pays a "per-diem" staff allowance to an employee, you would like to confirm that the Management Company will be deemed to have received a supply of property or service and that any consumption or use of the property or service by the employee will be deemed to be consumption or use by the Management Company. As well, you would like to confirm that in these circumstances, the Management Company will also be deemed to have paid tax under section 174 of the ETA with respect to the allowance.

Ruling Given

Based upon our understanding of the facts, it is our view that the Management Company has not satisfied the requirements under subparagraph 174(a)(iv) of the ETA with respect to the $40 per day allowance. As such, the deeming provisions under section 174 of the ETA will not apply to the allowance in question.

Explanation

You have not presented as a fact that the Management Company paid the allowance for supplies, all or substantially all of which are taxable supplies (other than zero-rated supplies). This is a condition that must be satisfied for the purposes of section 174 of the ETA. You have requested that we rule on the issue of whether or not the Management Company has indeed paid an allowance to employees for supplies, all or substantially all of which are taxable supplies (other than zero-rated supplies). It is our view that this is a question of fact.

It is our understanding that there were insufficient hotel rooms to accommodate employees in receipt of the $40 per day allowance in the area close to the work location. As well, it is our understanding that the vast majority of employees were staying in exempt accommodations, given that there were very few hotel rooms available in such a small town. Furthermore, the amount paid to employees seems more consistent with an amount paid to cover exempt accommodation, rather than an amount to cover accommodations in a hotel. Given that a significant portion of the allowance was paid for exempt accommodations, it is our view that the allowance was not paid for supplies, all or substantially all of which were for taxable supplies.

It is our view that it can be appropriate for the CCRA to consider factors such as the make up of the community or area in which employees are staying when determining whether or not a particular allowance has indeed been paid for supplies, all or substantially all of which are taxable supplies (other than zero-rated supplies). For example, if the employees of a particular registrant had been staying in a town with only a grocery store, and the town had no restaurants, and the employees of the registrant were paid a daily meal allowance, it would be "reasonable" for the CCRA to challenge the purpose and intent of the allowance if the registrant took the position that the allowance was paid for taxable meals in restaurants rather than zero-rated groceries.

To illustrate our point further, if we were to take the example of a hypothetical registrant which "reimbursed" an employee (rather than paid an allowance) for exempt accommodations and zero-rated groceries, the registrant would not have been deemed to have paid tax in respect of the "reimbursement" under subsection 175(1) of the ETA. As such, there would have been no input tax credit entitlements to the registrant with respect to the reimbursement. Furthermore, where a hypothetical registrant actually paid for such exempt or zero-rated expenditures (rather than having reimbursed an employee), once again there would be no input tax credit entitlements to the registrant.

In the case at hand, since you have advised that the allowance was fully deductible for income tax purposes, the Management Company may be in a position to take advantage of the income tax benefits that flow from this deduction. I regret that a more favourable response could not be provided in regards to this matter.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-9699.

Yours truly,

Douglas Wood, CGA
A/Technical Analyst
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

This is in reply to your letter of May 17, 2000, which was initially sent to the XXXXX TIS Centre, but was subsequently transferred to our office for direct reply. You asked about the application of the Goods and Services Tax ("GST")/ Harmonized Sales Tax ("HST") to a strawberry flavoured whey protein powder, sold under the name of XXXXX XXXXX ("the product"). Our comments are set out below.

Please accept our apologies for the delay in replying to you.

Statement of Facts

Our understanding of the facts of this case is as follows:

1. The product is imported into Canada by XXXXX. It is a whey protein powder which, according to information on the label, contains 100% XXXXX whey. It provides a complete array of essential, non-essential and conditionally essential amino acids. Finally, the claim is made that it is XXXXX[.]

2. The directions for use on the label recommend that 3 scoops of the product be mixed with with one cup of water. Other possible uses are to mix 1 scoop of the product with 150-200 ml cup of liquid, sauce or mix to produce such items as strawberry muffins or strawberry yogurt.

Ruling Requested

That the supply of the strawberry flavoured product is zero-rated as a basic grocery, pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act ("the Act").

Ruling Given

Based on the facts set out above, we rule that the supply of the strawberry flavoured product is taxable at the rate of 7% GST or 15% HST, as applicable, pursuant to paragraph 1(d) of Part III of Schedule VI to the Act ("paragraph 1(d)").

Explanation

Section 1 of Part III of Schedule VI to the Act states that supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or to be used in the preparation of such food or beverages) are zero-rated, except for supplies described in paragraphs (a) to (r) of that section.

Paragraph 1(d) excludes non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk based beverages, that contain less than 25% by volume of

(i) a natural fruit juice or combination of natural fruit juices, or

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state, or goods that, when added to water, produce a beverage included in the paragraph.

Our review of the product information submitted leads us to conclude that the strawberry flavoured product is excluded from zero-rating pursuant to paragraph 1(d). When mixed with water, the product is a non-carbonated fruit flavoured beverage that contains less than 25% by volume of natural fruit juice.

As stated in the facts, this product is imported into Canada. Division III of the Act provides that GST/HST is payable on dutiable goods (under the Customs Act) imported into Canada. Section 6 of Schedule VII to the Act provides, in part, that goods included in Part III of Schedule VI (i.e. zero-rated basic groceries) are non-taxable importations. Therefore, because the strawberry flavoured product is excluded from zero-rating, it is taxable on importation into Canada.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

This is in reply to your letter of April 5, 2000, sent to our XXXXX office on the above-noted subject. Your inquiry has been forwarded to our office for direct reply. You asked whether the Goods and Services Tax ("GST")/Harmonized Sales Tax( "HST") applies to the chocolate flavoured XXXXX powdered drink mix ("the product"). Our comments are set out below.

Please accept our apologies for the delay in answering your letter.

Statement of Facts

Our understanding of the facts is as follows:

1. Product labelling indicates that the product is marketed as a food supplement, designed to provide users with high-quality protein and carbohydrates, as well as vitamins, minerals and other important micronutrients. The product is available in XXXXX gram packets. Directions for use indicate that a packet is to be mixed with XXXXX milliliters of partly skimmed milk and mixed in a blender or shaker.

2. The XXXXX has information on XXXXX, which is assumed to be the same product described in Item 1, above. Using the XXXXX XXXXX, the product supplies XXXXX grams of high-quality proteins, which includes ion-exchanged whey proteins. The formula also includes XXXXX amino acids, L-glutamine and taurine. Each serving of the product contains XXXXX grams of carbohydrates and only XXXXX grams of fat.

Ruling Requested

Is the chocolate flavour of the product zero-rated, pursuant to section 1 of Part III of Schedule VI to Excise Tax Act ("the Act")?

Ruling Given

Based on the facts set out above, we rule that the chocolate flavour of the product is zero-rated, pursuant to section 1 of Part III of Schedule VI to the Act.

Explanation

Section 1 of Part III of Schedule VI to the Act states that supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or to be used in the preparation of such food or beverages) are zero-rated, except for the supplies excluded from zero-rating, which are set out in paragraphs (a) to (r) of that section.

We have reviewed all relevant exclusions to zero-rating in section 1 of Part III of Schedule VI and have determined that none apply to the product. Therefore, the chocolate flavour of the product is zero-rated, for the purposes of the GST or HST, as applicable.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

We are writing in response to your request of July 13, 1999, regarding the subject noted above. You asked about the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to XXXXX snack bars ("bars"). Our comments are set out below.

Statement of Facts

Our understanding of the facts of this case is as follows:

1. XXXXX sells XXXXX snack bars in two formats. These are the chocolate XXXXX pack, (containing four bars of chocolate XXXXX) and a variety pack (containing two bars of chocolate XXXXX, one of strawberry XXXXX and one of XXXXX). Each pack of four bars weighs 200 grams.

2. The bars qualify as nutritional supplements, but not meal replacements, under the Regulations to the FDA. Section B.01.001 of the Regulations to the FDA defines "nutritional supplement" to mean "a food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients".

3. As nutritional supplements, the bars must meet the nutritional profile, compositional and labeling requirements of the Regulations to the FDA. They must contain 21 specified micronutrients (i.e. vitamins and minerals) within a range relative to their energy content, which is also regulated. Also, among other things, there are requirements for protein and fat content.

4. The bars are labeled as "nutritional supplements".

Ruling Requested

Supplies of the bars are zero-rated as basic groceries for GST/HST purposes under section 1 of Part III of Schedule VI of the Act.

Ruling Given

Based on the facts set out above, we rule that the bars are zero-rated as basic groceries under section 1 of Part III of Schedule VI to the Act.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% (or 15% where the supplies are made in one of the provinces participating in the HST). However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the Act.

Section 1 of Part III of Schedule VI to the Act zero-rates supplies of food and beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions in paragraphs 1(a) through 1(r) applies. Also, the Canada Customs and Revenue Agency's ("CCRA") administrative policy on basic groceries is set out in Chapter 4.3 of the GST Memoranda Series and a relevant aspect of the policy is as follows:

"If a product's tax status is in doubt, the Department will consider the manner in which the product is displayed, labeled, packaged, invoiced and advertised to determine its tax status."

We have reviewed all information submitted on the bars. Further, we have considered how the bars are marketed, in accordance with CCRA administrative policy. In particular, we note that the bars qualify and are labeled as nutritional supplements pursuant to the Regulations to the FDA. It is the CCRA's position that products which qualify and are labeled as nutritional supplements pursuant to the Regulations to the FDA are considered basic groceries pursuant to section 1 of Part III of Schedule VI to the Act, and, therefore, are zero-rated.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Unit Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for your correspondence of February 5, 2001, and subsequent telephone correspondence concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the activities of XXXXX[.]

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX is neither a charity nor a non-profit organization. It is established as a for-profit entity although it is currently operating at a deficit.

2. XXXXX offers a day program that provides services to adults with various disabilities. It provides services to approximately XXXXX individuals per day. Some individuals receive services from XXXXX multiple days each week XXXXX charges XXXXX per hour or XXXXX per day for its services.

3. The services are designed for adults who have a limited physical or mental capacity for self-supervision and self-care due to a disability. Individuals receiving services from XXXXX are not self-sufficient and could not be left alone for any period of time, or only for a very short period of time.

4. Program activities focus on abilities in:

•   mental stimulation;

•   physical recreation;

•   cognitive learning; and/or

•   social interaction.

5. Services are provided at XXXXX establishment and not at the individuals' homes.

Ruling Requested

Are the services provided by XXXXX exempt from GST/HST?

Ruling Given

Based on the facts set out above, we rule that services provided by XXXXX are exempt from GST/HST under section 3 of Part IV of Schedule V to Excise Tax Act.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0420.

Yours truly,

Lorrie McAnulty
Charities, NPO's and Governments Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for your letter of November 14, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below. We regret the delay in our reply.

Statement of Facts

It is our understanding that the XXXXX Council XXXXX operates a resource library that is open to the public. The library contains books, films, and recordings, and all of these materials are available for borrowing by the public.

We have confirmed from our records that the Council is a registered charity for Income Tax purposes, and so on that basis meets the definition of "charity" for GST/HST purposes.

Ruling Requested

Is the Council eligible for the rebate for printed books and audio recordings of printed books, pursuant to section 259.1 of the Excise Tax Act?

Ruling Given

Based on the facts set out above, we rule that the Council is eligible for the rebate for printed books and audio recordings of printed books, pursuant to section 259.1 of the Excise Tax Act.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Pursuant to subsection 259.1(2) of the Excise Tax Act, a "specified person" is eligible for a rebate of the GST paid or payable on the acquisition or importation, otherwise than for the purpose of sale, of property that is "(a) a printed book, ... (b) an audio recording all or substantially all of which is a spoken reading of a printed book, or (c) a ... printed version of scripture of any religion."

A "specified person" in this connection includes a charity that operates a "public lending library." You have included a submission pertaining to your level of government funding. While such information may be relative in determining whether a non-profit organization is a specified person, it is not relative with respect to charities. That is, as a charity, the Council qualifies as a specified person solely on the basis of operating a public lending library, regardless of its level of government funding.

Under our policy, a "public lending library" means (as cited from other rulings):

... any place where a collection of documents and other items such as films and recordings are kept and maintained and which is open to the public for their use. It includes libraries from which these documents and other items can be borrowed, as well as those libraries accessible to the public where the documents may be viewed "on site" only (e.g. for research purposes).

On the basis that the Council is a specified person, it is entitled to a rebate with respect to the GST/HST incurred on the purchase of printed books and audio recordings of the same.

For your further assistance, we are enclosing a copy of our technical information bulletin covering this topic. Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7936.

Yours truly,

Michael Place
Charities, NPOs and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Encl.: (1)

Dear XXXXX:

Thank you for your letter of February 1, 2001 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the situation described below.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX Consultants carries on the business of providing French and English language instruction services to federal government employees.

2. XXXXX Consultants hires language instructors who work at the client's location and provide the following courses:

•   Improving oral skills (English and French, all levels);

•   Improving grammar/writing (English and French, all levels);

•   Preparation for second language exams (oral, writing, reading comprehension, English and French, all levels);

•   Individual courses; and

•   Special courses (e.g. presentations).

3. XXXXX Consultants hires instructors on a part-time basis, depending on demand. There may be two to three English, and five to six French instructors. The instructors are paid on an hourly basis.

4. XXXXX Consultants has received Treasury Board accreditation as a private sector language provider. This entitles the firm to be included on a list of private sector suppliers of language training for government employees. Accreditation involves review of the supplier's operations by a Treasury Board Committee. The Committee considers such things as curriculum offered, qualifications and experience of teachers, methodology and materials, evaluation of students, testing of students and administrative practices (such as invoicing, etc.)

5. The only business activity of XXXXX Consultants is the supply of language instruction services. This activity is carried on in XXXXX, where several federal government departments are located.

6. You advise that as of September 2000, the federal department of Public Works and Government Services ("Public Works") cancelled all standing offers related to language instruction.

Ruling Requested

That the supply of French and English language training by XXXXX Consultants to federal government departments located in XXXXX, is not subject to GST, notwithstanding that Public Works cancelled all standing offers relating to language training.

Ruling Given

Based on the facts set out above, we rule that the supply of French and English language training by XXXXX Consultants to federal government departments located in XXXXX, qualifies for the exemption in section 11 of Part III of Schedule V to the Excise Tax Act. You are not required to charge GST on these supplies.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Danielle Lafleche at 954-7936.

Yours truly,

Aurelia I. Mauro
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for the letter, from your firm, of July 13, 1999 (with attachments), and May 1, 2000 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) as it applies to the registration of XXXXX[.]

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) are as follows:

•   XXXXX an XXXXX, XXXXX, USA, is not registered for purposes of the GST.

•   The head office, management and control of the XXXXX are located in the USA.

•   XXXXX is an elected body of officials (similar to a mayor, treasurer, and council of a town or city), that represents the members of the XXXXX.

•   The band members own everything on the Reservation; the XXXXX acts for those band members.

•   The XXXXX owns XXXXX, situated in XXXXX XXXXX, USA.

•   XXXXX and XXXXX are separately incorporated, but only for payroll tax purposes.

•   The XXXXX supplies overnight accommodations, restaurant services, casino gaming activities, etc. Revenues from these operations exceed $30,000 per year.

•   XXXXX has a permanent establishment (sub-office) in XXXXX. The purpose of this office is to coordinate the Canadian advertising and marketing for XXXXX and to arrange free shuttle transportation for customers of the XXXXX.

•   XXXXX maintains a bank account in XXXXX. This account is used to pay their Canadian suppliers.

•   XXXXX offers a free shuttle service for its customers, between XXXXX and the Casino. Two return shuttle trips per day are provided. Customers using the shuttle service generally do not stay overnight at the casino. There is no contract or agreement between the XXXXX and the customer. Upon making a reservation with XXXXX, customers arrive at a pre-arranged pick-up point. They are provided with a "ticket" or "voucher", and must provide information, which the driver then presents to the Customs officer upon entry into the U.S.

•   XXXXX provides the transportation services to XXXXX collecting tax on the supply.

Ruling Requested

You would like confirmation that XXXXX is required to register, pursuant to subsection 240(1) or that XXXXX may voluntary register pursuant to subsection 240(3).

If a registrant, you would like to confirm that XXXXX would be entitled to claim ITCs in respect of:

1. GST paid to the supplier of transportation services that are provided free of charge by XXXXX to casino patrons; and

2. GST paid to other suppliers.

Ruling Given

Based on the facts set out above, we rule that XXXXX is not carrying on a business in Canada. XXXXX is purchasing transportation services and advertising services in Canada for its business outside of Canada. Therefore XXXXX is not required to register under subsection 240(1) of the Act. Also, since XXXXX is not engaged in any of the activities described in paragraphs 240(3)(a) and (b) of the Act, XXXXX is not entitled to register voluntarily.

Explanation

Subsection 240(1) of the Excise Tax Act (the Act) is the provision that requires every person who makes a taxable supply in the course of a commercial activity engaged in by the person in Canada, to register. With respect to the issue of mandatory registration for the GST/HST, only a person who is carrying on business in Canada, and who makes a taxable supply in Canada, is required to register. Based on the facts outlined above XXXXX is not considered to be carrying on business in Canada and is not, therefore, required to register.

On the issue of voluntary registration, paragraphs 240(3)(a) and (b) of the (aEA(Act contains the following relevant categories of persons who, while not required to register, may voluntarily register. They are:

1. Any person engaged in a commercial activity in Canada. This would include small suppliers or a non-resident who, while not carrying on business in Canada, is engaged in an adventure or concern in the nature of trade in Canada.

2. [(]a) A non-resident person who in the ordinary course of carrying on a business outside Canada regularly solicits orders for the supply by the person of goods for export to or delivery in Canada even though those activities may not constitute the carrying on of business in Canada,

(b) a non-resident who has entered into an agreement for the supply by the person of services to be performed in Canada,

(c) a non-resident who has entered into an agreement for the supply by the person of intangible personal property that is to be used in Canada, or that relates to real property situated in Canada or tangible personal property ordinarily situated in Canada or services to be performed in Canada.

XXXXX is not engaged in a "commercial activity" in Canada as per the definition of that term in subsection 123(1) of the Act. XXXXX doesn't solicit orders for the supply of goods for export.

XXXXX doesn't supply a service to be performed in Canada or intangible personal property that is to be used in Canada. Consequently, XXXXX is not entitled to register under paragraphs 240(3)(a) and (b) of the Act.

As to whether or not XXXXX would be able to claim input tax credits (ITC's) in respect of the GST paid to the suppliers, XXXXX is not a registrant and therefore cannot claim ITC's.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4294.

Yours truly,

Francine Ménard
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for your letter of May 9, 2000 with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction involving the manufacture of tubular membranes and filtration equipment for the filtering industry. I apologize for the lateness of this response.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

XXXXX is a manufacturer of tubular membranes and filtration equipment located in the USA, and is a non-resident, non registered person for GST/HST purposes.

XXXXX imports into Canada fiberglass backing tubes, to be coated with a polymeric coating that turns the tubes into filters. The process is performed by XXXXX is registered for GST/HST purposes.

After the processingXXXXX sends the tubes from Canada to XXXXX or to one of XXXXX customers in the USA.

The tubes are always owned by XXXXX GST has been paid by XXXXX on the importation of the tubes into Canada since 1998.

Ruling Requested

You request a ruling that XXXXX is eligible for a refund of the GST paid by XXXXX on the importation into Canada of fiberglass backing tubes, for further processing in Canada and subsequent export.

Ruling Given

Based on the facts set out above, we rule that there is no provision under the Excise Tax Act (the Act) to pay to XXXXX a refund or rebate of the GST paid on the importation of goods in the present circumstances.

Explanation

I note that you stated that XXXXX will apply for GST relief under the EOPS program for future transactions. For your information, the application process and the conditions for that program are outlined in Technical Interpretation Bulletin 069 "Goods and Services Tax Treatment of Imports by Exporters of Processing Services", a copy of which is included with this letter for your convenience.

As for the eligibility of XXXXX to claim a refund of the GST that XXXXX has paid on the importations since 1998, I regret to inform you that there is no provision under the Act to pay to XXXXX a refund or rebate of the GST in these circumstances. A non-resident person who is not a registrant (registered or required to be) for GST/HST purposes is generally not entitled to recover the GST paid on importation of goods into Canada, even where such goods are being imported for further processing in Canada. There are, however, relieving provisions under the Act that may be applicable in such circumstances.

One such provision is subsection 169(2) of the Act. This subsection provides that a registrant who imports goods of an unregistered non-resident person for the purpose of performing a service (other than shipping the goods) may claim an input tax credit (ITC) for the GST paid where the service is to be provided in the course of a commercial activity of the registrant. However, it is the registrant who must import the goods of a non-resident non-registered person, and pay the tax at the time of importation, in order to be able to claim a credit in respect of the tax paid under subsection 169(2) of the Act.

The other relevant provision is Section 180 of the Act. From your letter dated May 09, 2000, I understand that you are aware of the provisions of Section 180 of the Act.

Section 180 of the Act provides for recovery of the tax paid by a non-resident non registered person on the importation of goods into Canada for further processing by a registrant. In such a case, as long as the non-resident provides the registrant with satisfactory evidence that GST/HST was paid at the time of importation, the registrant may be considered to have paid the tax and thus be able to claim an ITC to the same extent as would have been the case if the registrant had been the importer of record. The documentation you sent to us with your letter dated

May 09, 2000 would be sufficient for these purposes.

While I appreciate your concerns with respect to the application of Section 180, it is the only mechanism currently available to you for recovery of the tax paid by you on the importations at issue.

Please note that Subsection 225(4) of the Act provides for a limitation period of four years, from the end of the registrant's reporting period during which the tax was paid on importation, within which the registrant may claim an ITC in respect of the tax paid.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4294.

Yours truly,

Francine Ménard
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for the letter of May 23, 2001, prepared by XXXXX, concerning the application of the GST/HST under Subsection 9(2) of Part I of Schedule V of the Act to the sale of a subdivided lot held by an individual.

Statement of Facts

Our understanding of the facts, the transaction, and the purpose of the transaction is as follows:

•   In the 1950's your client, XXXXX, became the legal owner of Lot 3 XXXXX ("Lot 3") which is approximately XXXXX acres of farmland.

•   In XXXXX, Plan XXXXX was registered which subdivided part of Lot 3.

•   The XXXXX access to the XXXXX River was subdivided into XXXXX lots and a road was constructed to give access to the landlocked farmland to the south.

•   During the 1980's, XXXXX acres on the XXXXX corner of Lot 3 was sold to a corporation owned by your client.

•   Since the advent of the GST on January 1, 1991, your client is the legal owner of one waterfront ("Lot 33") and approximately XXXXX acres of farmland at the XXXXX end of Lot 3.

•   Your client has not severed or subdivided Lot 3 since January 1, 1991.

•   Lot 33 has been used by your client's family for recreation use. At one time a mobile trailer was parked on the land. The land is currently vacant.

•   Your client is contemplating the sale of Lot 33 to a person other than a related individual, a former spouse or common-law partner of your client.

Ruling Requested

You are of the opinion that the sale of Lot 33 should be exempt under subsection 9(2) of Part I of Schedule V of the Act. Hence, you wish to obtain our view on the tax status of the sale of Lot 33 by your client and a confirmation as to whether the previous subdivisions of Lot 3 in the 1950's and 1980's exclude your client from selling the property exempt.

Ruling Given

Based on the facts set out above, we rule that the sale of Lot 33 by your client will be a taxable supply for GST purposes.

Explanation

Generally, every supply of real property is taxable for GST purposes, unless a specific exemption is provided for the particular type of transaction. Usually, sales of real property by an individual are exempt subject to certain exceptions.

Paragraph 9(2)(c) of Part I of Schedule V to the Act, introduced through the 1997 amendments to the Act in Bill C-70 (Received Royal Assent on March 20, 1997.), provides that the sale of a part of a parcel of land, made by an individual, a trust, or the settlor of a trust, is not exempt under section 9 of Part I of Schedule V where the parcel was severed or subdivided by the individual into parts, subject to two exceptions referred to in paragraph 9(2)(c):

•   The parcel was subdivided into two parts only and the individual, the trust or settlor did not subdivide that parcel from another parcel of land; or

•   The recipient is a related individual or a former spouse or common law partner of the individual and is acquiring the part for his/her personal use and enjoyment.

Since your client has subdivided Lot 3 into several parts (as a result of Lot 33) and the contemplated sale would not be made to a related individual or former spouse or common-law partner, none of the above exceptions are met. The sale would therefore not be exempt under subsection 9(2) of Part I of Schedule V to the Act. Given that no other exemption provision applies, the contemplated sale would be taxable for GST purposes.

In the Arsenault Tax Court case (Edwina Arsenault v. The Queen, [2000] GST C.88 (T.C.C.), Bell, J.), the Court concluded that the concerned subdivisions, which took place prior the implementation of the Act and prior to the amendment to section 9, should not be considered in determining whether the exemption applied.

You are of the opinion that the Judge Bell's decision in the Arsenault Tax Court case is right and that land subdivisions made by an individual prior to the institution of the GST legislation should not be considered in determining whether new paragraph 9(2)(c) applies to a real property sale made by an individual after April 23, 1996.

We are of the view that the application of paragraph 9(2)(c) of Part I of Schedule V to the Act by the Canada Customs and Revenue Agency (CCRA) is consistent with fairly settled law on the issue and the Arsenault decision should not be viewed as a persuasive precedent.

As explained by Judge Lambert of the British Columbia Court of Appeal in the Hornby Island Trust Court case (Hornby Island Trust Committee et al. v. Stormwell et al. (1989) 53 D.L.R.(4th) 435, Lambert, J.A., British Columbia Court of Appeal, pages 441-2.) and referred to in XXXXX 's letter:

"A retroactive status operates forward in time, starting from a point further back in time than the date of its enactment; so it changes the legal consequences of past events as if the law had been different than it really was at the time those events occurred.

A retrospective statute operates forward in time, starting only from the date of its enactment; but from that time forward it changes the legal consequences of past events."

Paragraph 9(2)(c) applies to supplies of real property made after April 23, 1996 (i.e. the announcement date of the amendment). It is retroactive only to the limited extent that the enactment did not receive Royal Assent until 1997. It is retrospective in that a supply of part of a parcel of land made after the effective date may be excluded from the general exemption provided by subsection 9(2) depending on whether and to what extent the supplier had subdivided or severed the parcel in the past. In other words, the exclusion in paragraph (c) will apply regardless of when the subdivision or severance occurred.

In reference to your comments with respect to the presumption against retroactive legislation as mentioned in the Gustavson Drilling Tax Court case (Gustavson Drilling (1964) Ltd v. Minister of National Revenue [1977] 1 S,C,R, 271, Dickson, J. ) and the flagrant violation of natural justice to deprive people of "vested" rights, we wish to add the following comments.

In our opinion, if a right to sell property tax-free can be said to be a "vested right", then the rights of owners of all property coming within the purview of Part IX of the Act as of January 1, 1991 were interfered with by the enactment of that legislation. It was the clear intent of the Parliament that Part IX applies to all property, not merely to property acquired after 1990.

Furthermore, the position of the CCRA has consistently been that, unless the Act requires "grandfathering" (as in the case of the transitional provisions in Division IX of Part IX), where the determination as to whether a supply of property is taxable or exempt is based on the manner in which that property is held. We are not restricted to looking at the period after 1990 alone.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Act, or to our interpretative policy; and that you have fully described all necessary facts and the transaction for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-952-8816.

Yours truly,

Thérèse Desjardins
Technical Analyst
Real Property Unit
Financial Institution and Real Property Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

I am writing to revoke the Application Ruling sent to you on XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of certain electrical mobility vehicles, also known as scooters.

Your letter dated XXXXX, asked for confirmation that zero-rated devices such as wheelchairs, walkers and other similar aids to locomotion would include electric scooters such as XXXXX. This letter amends and replaces our earlier ruling.

Statement of Facts

Our understanding of the facts from your letter and from promotional literature provided by manufacturers of these products is as follows:

1) The electrical mobility vehicles (scooters) are either three or four wheeled one-passenger vehicles powered by a rechargeable battery.

2) They are fitted with contoured supportive seats with adjustable seat back angles. Seat heights can be raised or lowered to provide easier transfer from a bed or chair. Some models provide optional positioning straps on seats to secure riders. In some cases, vinyl seats are available as an option to alleviate concerns of persons suffering from incontinence.

3) Arm rests can be adjusted by angle, both vertically and horizontally or flip up entirely to provide a secure transfer for persons with limited torso movement.

4) Steering on these vehicles is designed to be adjustable by height and degree of inclination. Tillers are adjustable. Controls and switches are ergonomically designed to be within easy fingertip reach. Some models feature lighted soft-touch control panels with digital controls. Other models offer different kinds of throttle levers with varying finger controls (pull versus push). Optional extended throttle levers are also available.

5) These vehicles have carriage steps with low ground clearance to assist riders who have difficulty lifting their feet.

6) The maximum width of the scooters has been designed so the vehicle may easily move through residential doorframes. They have a short turning radius that enables the vehicle to negotiate access ramps with sharp turns.

7) Some models are equipped with rear anti-tip wheels that prevent the vehicle from tipping over if the user ascends a slope of greater degree than recommended. Other models feature internal fault detection, anti roll-back and anti roll-forward mechanisms.

8) The choice of scooters vary from fully equipped with air-spring suspension to basic models that have no suspension at all.

9) Some scooter models are equipped with front and rear bumpers as standard equipment. In many cases, the frames are detachable and lightweight so the vehicle can easily be transported.

10) Some scooters come with driving lights and are marketed for outdoor oriented customers.

11) Other available options include: carrying baskets that attach to the body of the scooter, adjustable headrests, rearview mirrors, forearm and wishbone crutch and cane holders, walker holders, oxygen bottle carriers, safety flags, rear view mirrors, lighting packages, audible back-up warning signals, canopies and choice of colour.

Ruling Requested

Are the following electric scooters, XXXXX zero-rated by section 14 of Part II of Schedule VI to the Excise Tax Act (ETA)?

Ruling Given

Based on the information provided, we rule that the electric mobility vehicles (scooters) listed above are zero-rated, meaning these supplies are taxable at 0%.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Section 14 of Part II of Schedule VI to the ETA zero-rates "a supply of a chair, commode chair, walker, wheelchair lift or similar aid to locomotion, with or without wheels, including motive power and wheel assemblies therefore, that is specially designed for use by an individual with a disability."

The ETA does not define the term "individual with a disability". However, the World Health Organization defines the concept of "disabled" as "functional limitation due to a deficiency". The Dorlands' Illustrated Medical Dictionary, 27th Edition defines this term as "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last or has lasted for a continuous period of not less than 12 months." Therefore, an individual with a disability may be described as an individual who is restricted in carrying out the activities of daily living because of some medical impairment.

We consider "specially designed" to be a precise term intended to ensure that only items made to address the specific medical conditions of individuals with a disability fall under the zero-rating provision. The term "designed," relates to the intention of the original designer or manufacturer as to the ultimate use of the goods as reflected in the qualities and features of the items themselves. Goods must be specially designed for the particular use of persons with disabilities. The qualifier "specially" imposes a restriction on the word "designed" which excludes general purpose goods from this zero-rating provision.

Some devices may have been originally designed for a particular purpose (for example, space, military or commercial applications) and are later turned to other uses, including assisting individuals to overcome a disability. While these devices may be of use to persons with a disability, they were not specially designed for use by such individuals. As mentioned in our earlier letter, an example of such a device would be an automatic door opener.

We note that while some manufacturers promote electric mobility vehicles exclusively as devices for persons with disabilities, others are also promoting these products as mobility aids for members of the public who may not have a disability yet who have difficulty walking longer distances (for example, seniors).

Some promotional materials advertise scooters as "safe, economical and environmentally friendly alternative means of transportation" or as a "consumer lifestyle mobility device".

Notwithstanding the manner in which these vehicles are promoted, they will be zero-rated under section 14 of Part II of Schedule VI, if they were specially designed for use by an individual with a disability. This means the vehicles must have been designed at the outset for this purpose and they must exhibit design features, qualities and capabilities that are specifically intended to address the various needs of persons with a disability, namely persons who have limited mobility due to physical disabilities.

From the information provided, we understand that the model vehicles listed in your letter include most or all of the following design features, qualities and capabilities specifically intended to address the various needs of persons with a disability:

•   seats that can be set at different angles and that can swivel and slide to facilitate the transfer of an individual with a disability;

•   seat height that can be raised or lowered to provide easier transfer from a bed or chair;

•   seats and backrests that are padded to alleviate pressure sores for persons who sit in the vehicles for long periods of time;

•   optional positioning straps on seats;

•   optional vinyl seats to alleviate concerns of persons suffering from incontinence;

•   seats that can be ergonomically designed for persons who require pressure relief or lumbar support;

•   arm rests that can be adjusted vertically and horizontally to provide a secure transfer for persons with limited torso movement;

•   arm rests that can be flipped up to enable the individual to remain in the vehicle while working at a desk or table;

•   optional headrests;

•   carriage steps that have low ground clearance to assist individuals who have difficulty lifting their feet;

•   handlebars that are adjustable by height and angle;

•   controls and switches that are ergonomically designed to be within easy reach;

•   thumb or finger controls that enable persons with limited dexterity to operate the vehicle with a spring assisted "wig wag" throttle control;

•   throttle controls that can be switched for either left or right hand operation - designed for persons who have limited use of one hand or partial paralysis on one side;

•   maximum width that is designed so the vehicle may easily move through residential door frames;

•   short turning radius that enables the vehicle to negotiate access ramps with 180 degree turns;

•   rear anti-tip device that prevents the vehicle from tipping over should the user ascend a slope of greater degree than recommended - designed for persons with limited upper body mobility who cannot adjust their body position to increase the stability of the vehicle in this situation;

•   frames that are detachable and lightweight so the vehicle can be easily transported by companions or caregivers, and

•   optional holders for walkers, canes, crutches and oxygen cylinders.

Taking the foregoing into account, we have concluded that the electric mobility vehicles listed in your letter are zero-rated by section 14 of Part II of Schedule VI as a "similar aid to locomotion" specially designed for use by an individual with a disability. As a result, these vehicles are subject to the GST/HST at a rate of 0%.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9590.

Yours truly,

Elaine Bonnah
Municipalities and Health Care Services Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate