GST/HST Ruling

Dear XXXXX

This is in reply to your facsimile of October 1, 1999 in which you inquired about the tax status of XXXXX dietary supplement. An enlarged photocopy of the label was included with your facsimile.

Statement of Facts

Our understanding of the facts is as follows:

1. The product's name is XXXXX;

2. The only ingredient is XXXXX[;]

3. The suggested use of XXXXX is: "As a dietary food supplement for adults, take one teaspoon (5 grams) up to three times daily mixed with 8 ounces of water";

4. XXXXX is in powdered form;

5. XXXXX has a warning on the label saying: "Keep out of reach of children".

Ruling Requested

You request a ruling to determine the tax status of XXXXX.

Ruling Given

Based on the facts set out above, we rule that supplies of XXXXX are taxable at the rate of 7% GST and 15% HST (where 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 departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

When mixed with water, XXXXX is taken to supplement nutritional intake, not drunk for enjoyment or to quench thirst. The fact that there is a suggested daily dosage, and that use of the product is restricted to adults further suggest that XXXXX is not an ingredient into a beverage.

Consequently, the supply of XXXXX is not considered the supply of an ingredient for beverages under Section 1 of Part III of Schedule VI to the Excise Tax Act and therefore, is taxable at the rate of 7% GST, and 15% HST (where applicable).

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,

Roger Tessier, CA
Goods Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Dear XXXXX

Thank you for your letter of July 15, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the service provided by XXXXX of arranging for medical practitioners to perform pre-placement examinations and drug screening tests on individuals who are potential employees of various companies that are located across Canada.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (the "CCRA").

On the basis of the above mentioned letter, our understanding of the facts and the transactions is as follows:

Statement of Facts

1. XXXXX is a GST/HST registrant located in XXXXX. It arranges for pre-placement examinations and drug screening tests to be performed by medical practitioners on prospective employees (i.e., individuals) of other companies located across Canada.

2. A company contacts XXXXX for the pre-placement medical examination and/or drug screening test to be performed on an individual who is in XXXXX subcontracts with a medical practitioner to perform the medical examination and/or drug screening test and books the appointment for the individual. It will notify either the individual or the company of the time and date of the appointment.

4. The entire service made by XXXXX is performed in XXXXX[.]

5. The pre-placement examinations and drug screening tests are not insured services for the purposes of the provincial health insurance plan.

6. The medical practitioner invoices XXXXX for the supply of the pre-placement medical examination and/or drug screening test performed on the individual.

7. XXXXX invoices the company (i.e., its client) for the service of arranging for the medical practitioner to perform the pre-placement examination and/or drug screening test on the individual. The consideration charged by XXXXX includes an amount for the reimbursement of the medical practitioner's charges and an amount in respect of XXXXX fee for providing this service.

Ruling Requested

XXXXX is required to collect the HST on the amount it charges a company for the service of arranging for a medical practitioner to perform an examination and/or drug screening test on an individual who is a prospective employee of the company.

Ruling Given

Based on the facts set out above, we rule that XXXXX is required to collect the HST at the rate of 15% on the amount (i.e., the consideration) it charges a company for the service of arranging for a medical practitioner to perform a pre-placement examination and/or drug screening test on an individual who is a prospective employee of the company. The tax is calculated on the value of the consideration for this service which includes the amount for the reimbursement of the medical practitioner's charges and an amount in respect of XXXXX fee.

As you were previously advised in a letter from our XXXXX XXXXX dated April 27, 1999, services that are performed all or substantially all (i.e., 90% or more) in a participating province are considered to have been performed in a participating province and to the extent that the services are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate of 15%.

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 (the "ETA"), or to CCRA interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

XXXXX is making a supply of a service of arranging for a medical practitioner to perform an examination or a drug screening test on an individual who is a prospective employee of another company. This supply is not a supply of a health care service. As there are no exempting provisions in the ETA that apply, the HST at the rate of 15% is collectible on the consideration charged by XXXXX for facilitating the medical examinations and drug screening tests. XXXXX is entitled to claim input tax credits for any GST/HST it paid on supplies it incurred in the course of arranging for the examinations and drug screen testing.

Under Part II of Schedule V to the ETA, a supply of a health care service is exempt from tax when the service is supplied by a specific health care professional, such as a medical practitioner or other practitioner (e.g., physiotherapist) and the service is rendered to an individual. The terms "medical practitioner" and "practitioner" are defined in section 1 of Part II of Schedule V. By virtue of provincial legislation, only a natural person (i.e., individual) can be licensed or otherwise certified as a medical practitioner or other practitioner to practice medicine or render other health care services. XXXXX is not a medical or other health care practitioner and thus the exempting provisions in Part II of Schedule V are not applicable to XXXXX supplies, whether or not its supplies are health-related.

For the purposes of the ETA, health care services have to promote physical and mental health, and the protection against disease. Only these health care services are exempt. With respect to drug screening tests, it is the CCRA's position that testing for drug and/or alcohol levels is not diagnostic in nature nor is it considered to be a health care service. Consequently, the supply of such a service does not meet any of the exempting provisions of Part II of Schedule V to the ETA and is therefore taxable.

Please note that supplies made by medical practitioners and other practitioners of health care services rendered to individuals will retain their exempt status regardless of who pays for these services, i.e., where the consideration for these services is billed to a third party. Thus, where a medical practitioner makes a supply to XXXXX of a health care service rendered to an individual (i.e., a medical examination), this supply is exempt and no GST/HST is collectible on the invoice billed to XXXXX by the medical practitioner. When XXXXX invoices a company for the reimbursement of the medical practitioner's charges and for the service of arranging for the medical examination, the invoice is in respect of a separate supply from the original supply made by the medical practitioner to XXXXX that, as stated above, does not meet any of the exempting provisions of Part II of Schedule V (i.e., it is not a supply made by a medical practitioner nor is it a supply of a health care service).

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division

Dear Sir:

Thank you for your letters of May 14, 1999 and September 24, 1999, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of medical reports made by your client, XXXXX[.] Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (the "CCRA").

On the basis of the above mentioned letters and our telephone conversation of November 9, 1999, our understanding of the facts and the transactions is as follows:

Statement of Facts

XXXXX is a medical facility that specializes in the assessment of injured patients (i.e., individuals). XXXXX subcontracts with medical practitioners to perform the examinations and assessments and to prepare the resulting medical reports. XXXXX also subcontracts with other health care professionals to assist the medical practitioner in the assessment of the individuals and the preparation of the reports.

2. The individual is referred to XXXXX by his or her family physician for an examination and assessment for the purpose of determining the extent of the individual's injuries in order to provide the family physician with guidelines for appropriate medical treatment as well as the individual's entitlement to insurance benefits.

3. The medical practitioner and other health care professionals perform the examination of the individual and prepare a medical report based on the examination. The examination and consequent medical report is not an insured service for the purposes of the XXXXX[.]

4[.] XXXXX invoices the individual and also submits a copy of the invoice to the individual's primary insurer for reimbursement of the medical practitioner's charges for the examination and the medical report.

Ruling Requested

The GST/HST is not collectible on the amounts charged by XXXXX to individuals and their primary insurers for the assessments and supplies of medical reports.

Ruling Given

Based on the facts set out above, we rule that the amounts charged by XXXXX to individuals and their primary insurers are consideration paid to XXXXX for a taxable supply consisting of a service of arranging for a medical practitioner to examine and assess an individual and a "resupply" of a medical report. The GST/HST at the rate of 7% is calculated on the value of the consideration for this supply which includes the amount related to the reimbursement of the medical practitioner's charges to XXXXX[.] In the case of a supply made in a participating province (Newfoundland, Nova Scotia, and New Brunswick), the rate of tax is 15%.

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 (the "ETA"), or to CCRA interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Under Part II of Schedule V to the ETA, a supply of a health care service is exempt from tax when the service is supplied by a specific health care professional, such as a medical practitioner or other practitioner (e.g., physiotherapist) and the service is rendered to an individual. The terms "medical practitioner" and "practitioner" are defined in section 1 of Part II of Schedule V. By virtue of provincial legislation, only a natural person (i.e., individual) can be licensed or otherwise certified as a medical practitioner or other practitioner to practice medicine or render other health care services. Section 9 of this Part also exempts the supply of goods and services by any person where, and to the extent that, the consideration for the good or service is paid for or reimbursed by a provincial health insurance plan.

A corporation such as XXXXX is not a medical or other health care practitioner, nor can it practice medicine or render health care services to individuals. As stated in the ruling above, it is our view that XXXXX is making a supply of a service consisting of arranging for a medical practitioner to perform an examination and assessment on an individual and a "resupply" of a medical report that was prepared by the medical practitioner as a result of this examination and assessment. This supply made by XXXXX is not a supply of a health care service. Thus, as section 9 noted above is not applicable, none of the exempting provisions in Part II of Schedule V apply to this supply and the GST at the rate of 7% is collectible on the value of the consideration charged by XXXXX to the individual and the individual's primary insurer. This value includes the amount related to the reimbursement of the amount paid by XXXXX to the medical practitioner. XXXXX is entitled to claim input tax credits for any GST it paid on supplies it incurred in the course of facilitating the examinations and assessments and supplying the medical reports.

Please note that supplies made by medical practitioners and other practitioners of health care services rendered to individuals will retain their exempt status regardless of who pays for these services, i.e., where the consideration for these services is billed to a third party. For example, where a medical practitioner makes a supply to XXXXX of a health care service rendered to an individual, this supply is exempt of tax pursuant to section 5 of Part II of Schedule V to the ETA and no tax is collectible on the invoice billed to XXXXX by the medical practitioner. When XXXXX invoices an individual or an insurance company for the reimbursement of the medical practitioner's charges, the invoice is in respect of a separate supply from the original supply made by the medical practitioner to XXXXX that, as stated above, does not meet any of the exempting provisions of Part II of Schedule V (e.g., it is not a supply made by a medical practitioner or a practitioner nor is it a supply of a health care service).

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division

GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Ottawa ON
 XXXXX                                                                                K1A 0L5
 XXXXX
 XXXXX
 XXXXX                                                                                Case: HQR0000929

Dear XXXXX :

This is in reply to the letter of October 27, 1997, with attachments, which we received from XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX " (the "Project"). Based on the information provided, as well as several telephone conversations with XXXXX our understanding of the facts is as follows.

Statement of Facts

1. A group of XXXXX institutions are working together on a joint research project to study XXXXX

 XXXXX

 XXXXX

 XXXXX

 XXXXX

2. The Project XXXXX However, a proposal submitted in October 1996 to the XXXXX describes the activities of the Project.

3. The purpose of this XXXXX Project is XXXXX . The Project began on XXXXX , and its objectives are:

 XXXXX

 XXXXX

 XXXXX

 XXXXX

 XXXXX

 XXXXX

4. Each of the XXXXX participants has agreed to contribute resources, such as property, knowledge, time, and skill to the Project:

a) XXXXX provides financial management services.

b) XXXXX provides expertise regarding standards, contributes space and technical services, provides storage (memory) on the XXXXX server, acts as a site for the transmission of information, provides a central referral and information centre for the research results and final report.

c) XXXXX provides office space.

d) XXXXX l provides research services.

5. Each of the XXXXX participants obtains a copy of the final report. In addition, XXXXX and other XXXXX interested in XXXXX will have access to the results of the Project at no charge.

6. The Project is managed by a joint Steering Committee constituted of representatives of the XXXXX participating institutions. The Steering Committee selected the project manager to whom it provides general direction. It reviews the management of all funds, oversees the development of the research, reviews reports provided by the researchers and consultants, represents the project to other interested parties as well as in written reports for the Web and for conferences, and will approve the final report.

7. The project manager is an employee of t XXXXX oversees the general operation of the Project and bills the Project for time spent working on its business pursuant to an agreement between XXXXX

8. XXXXX signed a Letter of Agreement with XXXXX with respect to the Project in which XXXXX offered to engage the consultant and to pay XXXXX per hour for the services rendered under the agreement.

9. XXXXX signed a Letter of Agreement with XXXXX care of the Project in which XXXXX on behalf of the Project, offered to engage XXXXX and to pay XXXXX per hour for the services rendered under the agreement. XXXXX assists in the development of the costing and usage studies.

10. With respect to accounting practices, the Project maintains its own set of records and operates within a budget approved by the Steering Committee.

11. The Project's revenues are generated solely from donations and grants. The Project's largest sponsor is the XXXXX which gave XXXXX on behalf of the Project, a cheque for XXXXX . XXXXX is to provide annual financial and narrative reports on the uses made of the grant funds and, shortly after the funds have been fully expended, a final financial accounting and assessment of the Project's results.

12. All donations and grants are used exclusively for the Project. The Project does not generate revenue from sales. Cheques donated from fundraising activities are made payable to the Project.

13. All funds from grants and donations are deposited into a separate bank account in the name of the Project that is maintained exclusively for the Project. All interest earned on the grant funds is used exclusively for the Project. All disbursements related to the Project are made through this account.

14. It was decided by the Steering Committee that XXXXX maintain the accounting records for the Project, including managing the bank account and investment account. The Project's accounting records are to be audited jointly with XXXXX records. XXXXX does not "own" the funds (including the funds from the XXXXX and it does not charge the Project for its accounting services.

15. XXXXX , former accountant for XXXXX has advised that any funds remaining once the Project is completed do not belong to XXXXX or to any of the other participating institutions. Similarly, once the Project is completed, none of the participating institutions have the right to the capital assets acquired by the Project. The Steering Committee will determine how to dispose of any unused funds as well as the capital assets.

16. The Project established a working group which includes representatives from all XXXXX institutions as well as other parties.

Rulings Requested

1. Is the Project a person and is it required to be registered for the GST?

2. If the Project is required to be registered, what is the required filing frequency of the Project's GST reports?

3. Is the Project entitled to claim input tax credits?

4. Is the Project entitled to claim a GST rebate?

Rulings Given

Based on the facts set out above, we rule the following:

1. Is the Project a person and is it required to be registered for the GST?

It is our view that the Project is not a "person" pursuant to the Excise Tax Act (the "ETA"). As only "persons" are entitled to register, the Project cannot register in its own right. Each institution accounts separately for the GST in proportion to its individual interest in the Project.

2. If the Project is required to be registered, what is the required filing frequency of the Project's GST reports?

As stated above, the Project is not a "person" and therefore cannot register. Thus, the Project does not file GST returns.

3. Is the Project entitled to claim input tax credits?

Since the Project is not a "person" under the ETA, it cannot claim input tax credits. Furthermore, since there is no evidence of the Project making taxable supplies for consideration, none of the participants will be eligible for input tax credits for purchases related to the activities of the Project.

4. Is the Project entitled to claim a GST rebate?

Since the Project is not a "person" under the ETA, it cannot claim rebates. However, as explained below, each of the participants who are eligible for rebates under section 259 of the ETA may apply for a rebate for purchases related to the activities of the Project.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST Memoranda Series. We are bound by these rulings 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 departmental interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

It is the Department's view that the Project is not a "person," pursuant to the ETA, apart from the participants. See the enclosed Chapter 2.4, Branches and Divisions, of the GST Memoranda Series for guidelines that the Department uses to determine when an entity is a "person" as defined in the ETA. Based on the information on hand, the Project appears to be an arrangement whereby XXXXX institutions (i.e., XXXXX ) are working together in a limited endeavour, which does not constitute a "person" in the ETA. For this reason, the Project is not permitted to register for the GST since it is not viewed as a "person" pursuant to the ETA.

The Project participants include XXXXX which, for the purposes of the ETA, are defined as public institutions XXXXX , is a public sector body. The participants are carrying out research activities and making available to interested parties the project results for no consideration. Such supplies made by charities are exempt pursuant to section 1 of Part V.1 of Schedule V to the ETA, which is the general exempting provision for charities. Similarly, section 2 of Part VI of Schedule VI exempts such supplies made by public institutions. The same supplies made by public sector bodies are exempt pursuant to section 10 of Part VI of Schedule V to the ETA if provided for no consideration.

Please note that for the purposes of the ETA, a university is included in the definition of a public service body. Furthermore, the definition of a public sector body also includes a public service body. Thus, the exemption provided in section 10 of Part VI of Schedule V applies to supplies made for no consideration by XXXXX

Consequently, as the Project participants are not making taxable supplies for consideration and because they are engaged in exempt activities with respect to the Project, no portion of the GST paid on project-related expenses may be recovered through input tax credits. Thus, these institutions are not eligible to claim input tax credits for any tax they have paid as a recipient of taxable purchases they consumed, used, or supplied in the course of the Project's activities.

Section 259 of the ETA provides for a rebate of the non-creditable tax charged (i.e., tax paid for which the person is not entitled to claim an input tax credit) for charities, qualifying non-profit organizations, and selected public service bodies, such as not-for-profit universities. Since the individual institutions are, in essence, treated as the recipients of the purchases, each may include the GST it paid or owes on goods and services it purchased in respect of the Project, or in respect of the allocation discussed in the following paragraph. If the institution is entitled to rebates under section 259 of the ETA, the GST paid on these expenses may be included in that institution's rebate claims. For example, as a charity, XXXXX may claim a rebate of 50% of the tax it paid or owes as the recipient of the taxable purchases related to the Project.

Based on the facts provided, most of the purchases made with respect to the activities of the Project are made from the Project funding which is considered to be funding received by XXXXX on behalf of the Project. Some purchases, however, are made directly by the participants, in their own right. That is, they have, individually, incurred the liability for some Project purchases so that they are entitled to rebates, respectively. With respect to purchases made from the Project funding, normally, the tax and rebate eligibility with respect to these purchases should be allocated on a reasonable basis to each participant (i.e., such an allocation should reflect the extent of a participant's interest in the Project).

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division

Enclosure: GST Memoranda Series, Chapter 2.4

Legislative References: ETA: subsection 123(1); subsections 141.01(2) and (3); section 259; section 1 of Part V.1 of Schedule V; section 10 of Part VI of Schedule V

NCS Subject Code(s): R - 119253, 11940-1, 11690-1, 11650-1

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5

                                                                        June 17, 1998

Dear XXXXX

We are writing in reply to a letter dated December 29, 1997 (with attachments) from XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction described below.

Statement of Facts

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

1. XXXXX is incorporated under the XXXXX is a not-for-profit corporation, the objects of which are to organize a campground community and provide recreational facilities for members and to manage and operate the facilities and property of the campground community.

2. XXXXX is neither a condominium corporation nor a cooperative housing corporation.

3. The corporation operates a recreational campground facility ("the Campground") in XXXXX The Campground is on XXXXX acre parcel of land owned by the corporation and contains XXXXX sites. There are XXXXX additional sites available for rental on a seasonal basis and XXXXX sites available for overnight rental. XXXXX l which are operated year round. There are also washroom facilities, a recreation hall and playgrounds.

4. Persons wishing to use the Campground purchase a share in XXXXX Each shareholder receives a membership certificate. This certificate entitles the member to legally occupy a specified site as long as the membership is maintained in good standing. XXXXX retains ownership of the sites. A membership is in good standing if all rules and regulations are complied with and all dues and accounts are fully paid.

5. Section x of the rules and regulations sets out the type of trailer which can be situated on a site This section provides that trailers must be XXXXX The trailers may be up to XXXXX feet wide with a maximum lentgth (tongue and bumper not included) of XXXXX feet.

6. The trailers are not permanently affixed to the sites. The trailers are set on cement piers or other stabilizing methods are used. The trailers are not bolted down, fastened to or strapped down with hurricane straps.

7. The water, sewer, electricity and gas lines are suitable for year-round use. The park facilities are accessible all year long and there is year round security.

8. XXXXX is billed directly and incurs on its own account all costs of operating and maintaining the Campground.

9. Each year, an operating budget is presented to the members for approval. The cost of operating the Campground is divided equally among the XXXXX members. The members' pro-rata share of expenses is assessed as membership dues which are payable by XXXXX of each year. Payment of these dues is required to keep the membership in good standing.

Ruling Requested

You have requested confirmation that the annual dues assessed to members to fund the operating costs of the campground are exempt from GST.

Ruling Given

Based on the facts set out above, we rule that the supplies of a campsite by XXXXX to a member of the corporation is an exempt supply pursuant to subparagraph 7(b)(ii) of Part I of Schedule V to the Excise Tax Act. The annual dues assessed to the member are periodic payments which are consideration for this supply and are, therefore, not subject to GST.

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 departmental 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) 952-9212.

Yours truly,

Michael Warren
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor                                  
25 McArthur Avenue
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

Dear XXXXX

This is further to our meeting on April 23, 1998 and the letter dated December 8, 1997 requesting a confirmation of the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain transactions made by your client XXXXX[.]

Our understanding of the facts is as follows.

Statement of Facts

1. XXXXX provides services as an agent and auctioneer to sell the vehicles of various principals to purchasers who participate at auctions.

2. Many of the principals that XXXXX represents are new and used automobile dealers or leasing companies all of whom are registered for purposes of the GST/HST.

3. Some of the supplies made by the principals through XXXXX or its subsidiaries at auctions are exported or are made to purchasers who are Indians. Under certain circumstances these supplies are zero-rated or relieved from tax.

4. XXXXX did not collect the GST/HST on the zero-rated supplies or those relieved from tax that it made on behalf of the principals however, in settling its accounts with the principals XXXXX included an amount equal to the GST/HST as if the supplies were taxable at 7% or 15% as the case may be.

5. As well, XXXXX collected 7% GST on behalf of the principals on certain supplies of automobiles however, it provided an amount equal to the 15% HST when settling its account with the principals.

6. The transactions which are the subject of this ruling took place after April 23, 1996, and for those that took place after March 1997, an election under subsection 177(1.3) of the Excise Tax Act (ETA) was in effect.

Ruling Requested

Can XXXXX or the principals (e.g. the automobile dealers who sell the cars through XXXXX obtain a rebate of excess amounts remitted to the Receiver General by the principals as or on account of net tax in situations where XXXXX passed on excess amounts even though the amounts were never collected from taxpayers.

Ruling Given

Based on the facts set out above, we rule that XXXXX is not entitled to a rebate of excess amounts it passed to the principals as agent. It is the principals who would be able to apply for a rebate under section 261 of the ETA to recover excess amounts that they have remitted as or on account of net tax. An example of this is where the principals have accounted for tax in respect of supplies for which they were not required to collect tax and on which they did not collect tax. The payment of the rebate is of course subject to statutory restrictions such as the applicable time limits. Furthermore, the principals must be able to provide sufficient documentary evidence that tax was not required to be collected on the supplies in respect of which they have accounted for tax (e.g. proof of recipient's Indian status and proof of delivery to a reserve or proper export documentation). Where the principals have remitted excess amounts as net tax for a particular reporting period that has already been assessed, the Minister would have to allow for any eligible rebate in reassessing the net tax for that reporting period in accordance with section 296 of the ETA. This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under objection or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

A rebate is available under section 221 of the ETA where a taxpayer paid an amount as or on account of tax in excess of the tax imposed under section 165 of the ETA or where a person who is required to collect tax under section 221 of the ETA remits an amount as or on account of net tax that exceeds what is required to be remitted for a reporting period.

In calculating funds owing to the principal, an agent may pass on the proceeds of the sales (including tax it collected on behalf of the principal) less any commissions that were applicable. Where an agent makes an error in calculating what it owes to the principal the resolution of the situation is a matter between the two parties.

XXXXX did not charge or collect excess amounts as or on account of tax from the purchasers of the vehicles. As well, it did not pay or remit an excess amount as tax or net tax. In situations where the principals remitted excess amounts of net tax because of the excess amounts provided by XXXXX the principals make seek recovery of these amounts.

Finally, please find attached a summary of this ruling that may be provided to dealers who are customers of XXXXX apprising them of the ramifications of changes to the GST/HST agency rules and their possible entitlement to a rebate under section 261 of the ETA.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0301.

Yours truly,

Dave Caron
Manager
General Operations Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
XXXXX                                                                                 Vanier, Ontario
XXXXX                                                                                 K1A 0L5

                                                                        May 26, 1998

Dear XXXXX

Thank you for your letter of July 7, 1997 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below by your client, XXXXX.

As your client's property and transactions are situated in XXXXX, a non-participating province, our comments will be restricted to the application of GST.

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

Statement of Facts

1. In 19 xx, your client XXXXX acquired two parcels (two legal titles) of forestry land, totaling XXXXX hectares (ha), surrounding and in the proximity of XXXXX, a lake of approximately XXXXX ha on XXXXX[.]

2. Originally, there were XXXXX unauthorized occupants who had constructed XXXXX cottages/cabins in which they were living. There was also some unauthorized transient use. This situation was resolved through licence agreements, the non-exclusive use of a portion of land for an annual fee XXXXX[.]

3. In the 19 XXXXX the number of licence lots increased several times and roads were extended. The lots were marked out and not subdivided, as a subdivision would have required a prospectus and formal approvals by the Superintendent of Real Estate. Currently there are XXXXX surveyed licence lots of which XXXXX are licenced to licence holders. The average size of these lots is XXXXX[.]

4. For property tax purposes, the lots have been classified as residential since the 19 XXXXX. The use of the lots has been for recreational residential purposes. Currently, XXXXX of the XXXXX licence holders have cabins or cottages on their lots. The assessor has assessed the XXXXX cabins and cottages at XXXXX not including the value of the land, or an average of about XXXXX per cabin cottage. Although there is a good gravel road access, there is no hydro, telephone, sewer or water utilities to these lots at the present.

Transaction(s)

5. Currently, your client has made a rezoning and development application to subdivide the property into XXXXX waterfront lots as a strata title subdivision. These lots, to a large degree, conform to the licence lots currently plotted but not subdivided. The strata title development, including common property, would total approximately XXXXX ha. In addition, XXXXX ha would be donated as a park; but it is likely that the majority of this acreage would be subdivided off an adjoining lot.

The intent would be to sell these lots by first offering them to the current licence holders and then to the general public if not purchased by the licence holder. It is noted that the licence holders own the improvements, and if the lot is not purchased by the licence holder, he would have to either remove the improvements or make arrangements with your client for your client to sell the improvements along with the lot, or possibly sell the improvements to your client.

6. Under the standard Recreational Licence Agreement with your client, a cabin or cottage cannot be used as a permanent residence and there are specific restrictions on cabins and cottages such as:

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

7. On January 23, 1991, our XXXXX office issued a ruling to XXXXX one of your client's licence holders, to the effect that the supply of land by licence to XXXXX is exempt from GST under section 7 of Part I of Schedule V to the Excise Tax Act (the Act).

8. You have made a previous inquiry with our XXXXX office concerning this ruling to XXXXX and you have been informed of the following:

•   In order to be considered "residential units", the cabins/cottages at XXXXX must be affixed to land. The word "affixed" is not defined the Act. In the far XXXXX buildings lacking foundations or substantial footings are not uncommon and they are considered "residential units". The cabins/cottages at XXXXX qualify as "residential units" and the exemption under section 7 Part I Schedule V applies to the supply of the land.

•   The fact that the licence lots are not serviced does not prevent the cabins/cottages from qualifying as "residential units".

As a consequence, you have been charging tax on licence fees for lots on which no cabin or cottage has been constructed, while no tax was charged on licence fees for lots on which cabins or cottages have been constructed.

Ruling Requested

1. You are asking for a confirmation of the GST status of the supply of land by licence by your client.

2. You are also requesting a ruling on the future sale of the subdivided lots which are currently supplied by licence.

Ruling Given

Based on the facts set out above, we rule that:

1. Your client's supply of "licence lots" by way of licence qualifies for exemption from GST under subparagraph 7(a)(i) of Part I of Schedule V to the Act in cases where there is a cabin or cottage which qualifies as a "residential unit" on the "licence lot" and the "residential unit" is affixed to land in the same manner as a house. Whether this residential unit is affixed to land is a question of fact which is determined by examining as a whole factors such as:

a) the type of residential unit (cabin cottage)

b) the use of the cabin cottage and the applicable land

c) the actual degree of permanency of the affixation of the cabin cottage with the land

d) applicable provisions of the licence agreement relating to the permanency and means of affixation of the cabin cottage to the land.

In the case at hand, based on our review of all the facts, including submitted photographs, the majority of the factors noted above have been met.

Where there is no cabin or cottage affixed to a lot, the supply of the lot (vacant land) by licence is subject to GST under subsection 165(1) of the Act. However, after the licencee builds a qualifying residential unit on his lot, subsection 136.1(1) of the Act deems the subsequent annual licence fee payment to be consideration for a separate supply, i.e. no longer a supply of vacant land, but a supply of a residential unit. Accordingly this subsequent separate supply will qualify for exemption from GST under subparagraph 7(a)(i) of Part I cited above.

2. Your client's supply of a subdivided lot by way of sale will qualify for exemption from GST under paragraph 5.2(a) of Part I of Schedule V to the Act if, immediately before the earlier of the time of transfer of ownership and the time of transfer of possession, the lot was subject to a licence which is exempt under paragraph 7(a) mentioned above, and, if a supply by sale were made of the residential complex immediately before that earlier time, the supply would be an exempt supply under any of sections 2 to 5 of the same Part I of Schedule V to the Act.

Where the lot does not form part of a residential complex, or where, immediately before the earlier of the time of transfer of ownership and the time of transfer of possession, it was not subject to a licence exempt under paragraph 7(a), the sale of the lot will be subject to GST under subsection 165(1) of the Act.

3. Your client is subject to self-supply under subsection 190(3) of the Act if the possession of the land is transferred under a licence after March 27, 1991, and if the licence holder is not acquiring the land for the purpose of constructing a residential complex in the course of a commercial activity or for resupply by way of licence or similar arrangement which is exempt under section 6.1 of Part I of Schedule V to the Act. After your client supplies the land by licence, your client must remit tax to the Department on the deemed sale (and purchase) of the "licence lot" based on the fair market value of the "licence lot" immediately before its supply to the licence holder.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST 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 departmental 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) 952-9587.

Yours truly,

Bao Tran
Rulings officer
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate

Dear XXXXX

Thank you for your letter of October 28, 1997, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the services provided by the XXXXX[.]

Our understanding of the facts is as follows.

Statement of Facts

1. XXXXX is incorporated as a non-profit organization that began operating on XXXXX, 19 xx.

2. XXXXX is in the process of applying to Revenue Canada, Taxation for status as a registered charity.

3. The types of services offered by XXXXX involve facilitating and or supervising visits between children and their non-custodial parents, personal consultation and counselling, and seminars for children, youth, and adults.

4. Through its XXXXX provides a drop-off and pick-up service for children during exchanges between custodial and non-custodial parents. It also offers an on-site supervised access service where the non-custodial parent and child remain in the facility and the visit takes place under the supervision of a third party. Other family members such as grandparents who are entitled to access to a child may also use the supervised access services.

5. XXXXX also provides counselling for children, support groups, and informal educational workshops. Through its youth and adult programs, XXXXX provides counselling, parenting seminars, and support groups.

6. XXXXX is not funded by any government program and charges user fees for its programs. These fees are evaluated based on the recipient's ability to pay.

Ruling Requested

Is XXXXX required to collect the GST on the amounts it charges for its services?

Ruling Given

Based on the facts set out above, we rule that the services provided by XXXXX are taxable supplies. Unless XXXXX a small supplier, it is required to register with Revenue Canada and collect and remit the GST on its taxable supplies.

The definition of "small supplier" is contained in the enclosed GST Memoranda Series 2.2, Small Suppliers. Effective April 23, 1996, the $30,000 threshold amount mentioned in the Memoranda was increased to $50,000 for public service bodies (which include charities and non-profit organizations). To summarize, XXXXX is a small supplier if its revenues from taxable supplies for the previous four consecutive calendar quarters, and for the current calendar quarter, do not exceed $50,000. Should its taxable supplies exceed $50,000 at any time in the course of one calendar quarter, XXXXX would no longer be a small supplier from the time immediately before the taxable sale that placed XXXXX above the $50,000 small supplier threshold, and it would be required to register at that time. Where its taxable supplies do not exceed $50,000 in any particular quarter, but exceed $50,000 cumulatively in the previous four calendar quarters, XXXXX remains a small supplier until the end of the month following the fourth quarter.

As a GST registrant, XXXXX would be entitled to claim input tax credits to recover the GST it paid on its purchases used to make taxable supplies. Please note that if the XXXXX is a small supplier, it may voluntarily register for the GST in order to charge the tax on its taxable supplies and to claim input tax credits.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST 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 departmental interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

It is our understanding that XXXXX is in the process of applying for status as a registered charity. Please note that the ETA provides a general exempting provision for charities under which their services, such as those offered by XXXXX are exempt from the GST. A charity that makes only exempt supplies is not entitled to be registered for the GST. Such a charity would not collect the GST on its supplies nor would it be entitled to claim input tax credits. However, it would be entitled to a 50% rebate for the GST it pays on its purchases.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division

c.c.:      E. Vermes, A/Director
M. Place
S. Eastman
XXXXX

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, Ontario
 XXXXX                                                                                K1A 0L5

Dear XXXXX

Thank you for your letter of July 17, 1997, with attachments, concerning the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to the subcontract between XXXXX and XXXXX a division of XXXXX[.]

Our facts were taken from the following documents and telephone conversations:

•   your letter dated December 20, 1995, addressed to the XXXXX Tax Services Office, Revenue Canada;

•   your letter dated April 17, 1996, addressed to XXXXX Tax Services Office, Revenue Canada;

•   the subcontract agreement, XXXXX, between XXXXX and XXXXX that was attached to your letter of April 17, 1996, including XXXXX to the subcontract;

•   a copy of the GST Application Ruling XXXXX dated April 29, 1996, that was issued by XXXXX Tax Services Office, Revenue Canada;

•   your letter dated May 15, 1996, addressed to the XXXXX Tax Services Office, Revenue Canada;

•   a copy of the GST Interpretation (XXXXX dated July 14, 1997, that was issued by C XXXXX Region, Revenue Canada;

•   your letter dated July 17, 1997, addressed to XXXXX Revenue Canada;

•   a copy of the Project Summary Sheet attached to your letter of July 17, 1997;

•   a revised Statement of Work XXXXX to XXXXX received by facsimile transmission on September 23, 1997;

•   a telephone conversation on October 7, 1997, between XXXXX Region and yourself; and

•   our telephone conversation of January 8, 1998.

Our understanding of the facts is as follows:

Statement of Facts

1. XXXXX is a GST-registered resident. XXXXX is a XXXXX[.]

2. XXXXX is an unregistered non-resident that has no permanent establishment in Canada.

3. XXXXX and XXXXX entered into a subcontract XXXXX on November 15, 1995, with modification, January 3, 1996, for fabrication and testing of an enhanced ignition system to reduce cold-start emissions in an ethanol XXXXX light-duty truck engine.

4. The Statement of Work, XXXXX of the subcontract states that the specific goal of the project is for the selected XXXXX vehicle with the enhanced ignition system to meet or approach XXXXX emissions levels without using a large amount of ignition energy. Also, the enhanced ignition system shall demonstrate the potential to be cost competitive with an electrically heated catalyst system (another emission reduction approach the vehicle manufacturers are investigating).

5. The scope of the project shall involve fabricating XXXXX previously designed enhanced ignition system, conducting tests to determine interactions of the enhanced ignition system and engine controls system calibrations, and optimizing the enhanced ignition system to reduce cold-start hydrocarbon emissions.

6. The project is split into tasks as specified in the subcontract.

XXXXX

XXXXX

XXXXX

XXXXX

7. The deliverables of the project as specified in the subcontract are:

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

8. The subcontract provides for travel outside Canada in relation to the Program Review deliverable. XXXXX must make a presentation in XXXXX to defend their project before a group of their peers and an impartial panel of technical reviewers.

9. Upon completion of system testing and design update, XXXXX may request that an enhanced ignition system be sent to XXXXX for further evaluation of XXXXX dedicated ethanol vehicle. This work will fit either under XXXXX subcontract with XXXXX or become a new subcontract.

10. The subcontract specifies, in part, that in full consideration of XXXXX performance, XXXXX shall pay XXXXX the total price of XXXXX which is a firm fixed price. XXXXX shall pay this firm fixed price in amounts specified in the subcontract, upon receipt and acceptance of specified deliverables.

11. XXXXX technical proposal dated October 24, 1995, together with any revisions is incorporated by reference in the subcontract. This proposal was not submitted for review. Certified in the proposal is an agreement between XXXXX and XXXXX that all work to be performed would be done at XXXXX address. Further, in the event that XXXXX must contract out a specific area of work in relation to the project, the proposal stipulates that the subcontract will have to be modified.

12. On April 29, 1996, you were issued a GST application ruling letter XXXXX from XXXXX Tax Services Office, that ruled the work to be performed under this subcontract to be taxable at the rate of 7% for GST purposes. This was in response to your letters of December 20, 1995, and April 17, 1996.

13. In your letter of May 15, 1996, you indicate that you feel that there has been misinterpretations provided in the explanation of the GST application ruling issued April 29, 1996. In defining "research" you feel there should be an acknowledgment of legitimacy of "applied research". The subcontract has a definite, specific application in view and may include "work that might be undertaken or performed as a result of the plans and recommendations which may follow the inquiries and investigations performed in the course of rendering the research service". Further, you state, the design of the service has the prime purpose of examining the feasibility of using an enhanced ignition system to allow the test vehicle to achieve XXXXX standards. The Statement of Work explains that XXXXX goal is the advancement and the development of technology that allows for optimum use of alternative transportation fuels.

14. Your client recognizes that research is required to understand the ultimate potential durability and emission performance of vehicle engines using alternative fuels. They are willing to pay you a substantial sum for research that will produce technical reports that will add to the base of knowledge on the emissions, energy efficiency, performance, durability, driveability, coldstart ability, safety and range of XXXXX fuelled vehicles.

15. You further state in your letter of May 15, 1996, that the Statement of Work provides guidelines for test methods and apparatus. It enumerates in great detail what you plan to do to generate the technical reports. The remuneration is linked directly to technical reports which relate to the feasibility of XXXXX vehicles achieving XXXXX standards. The test apparatus including both the base vehicle, a prototype "mule" supplied by XXXXX and the enhanced ignition system, specified in the contract to be "of laboratory grade components", are simply experimental devices for testing the hypothesis. The test ignition system has no commercial value and will be of limited further experimental value (disassembled for components) at the end of the project. The components may be used in other experimental projects, but are never sold. The contract provides for the supply of a similar test apparatus (enhanced ignition system of laboratory grade components) to be built for XXXXX if warranted by the test results. This experimental device would be designed and fabricated for immediate export to XXXXX if required. Furthermore, you stated in our telephone conversation of October 7, 1997, that each time a new concept is tested, a new test bed is created.

16. On July 14, 1997, you were issued a GST interpretation letter (XXXXX Region; this letter provided you with a further explanation of the ruling issued on April 29, 1996. This interpretation letter was in response to your letter of May 15, 1996.

17. In your letter of July 17, 1997, you provide further clarification to the language used in the Statement of Work.

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

18. You clarify in your letter of July 17, 1997, that the XXXXX tested was equipped with a prototype ignition system and related engine control system/calibration strategy modified from the gasoline version of this 2.2 litre 4-cylinder engine. The "enhanced ignition system" was a test apparatus replacing, for this project, the XXXXX ignition system. It was constructed in your laboratory, using the expertise and experience gained in your earlier work. As Intellectual Property Rights to some of your earlier methanol ignition system work are held by the Government of Canada, through the Ministry of Natural Resources, you felt that it was germane that the wording of the Statement of Work would make it perfectly clear that XXXXX did not, as a result of the contract, gain any property rights to any proprietary information used in the design and application of the research program. This apparatus was installed and tested, and the test results published in a ninety-eight page technical report to XXXXX[.] Further, you state that the XXXXX is an experimental engine test bed, the "enhanced ignition system" is a laboratory apparatus constructed to test a concept. Neither prototype (particularly in retrospect, as the engine will not be built) has any commercial value. XXXXX receives the technical report (s) on the feasibility of having light-duty trucks fuelled with 80% ethanol/20% gasoline meet XXXXX emission standards.

19. With respect to the subject invention in which XXXXX retains title XXXXX government has a non-exclusive, non-transferable, irrevocable, paid-up licence to practice or have practiced for or on behalf of XXXXX he subject invention throughout the world. XXXXX[.]

20. XXXXX government has unlimited rights in contract data except as otherwise provided in XXXXX with respect to proprietary data owned by XXXXX obtains a copyright to the contract data, XXXXX reserves for itself, and others acting on its behalf, a royalty-free, non-exclusive, irrevocable, world-wide licence for governmental purposes to publish, distribute, translate, duplicate and exhibit any such data.

22. Pursuant to our telephone conversation of January 8, 1998, you confirmed that research work on this contract did not generate a patent for an invention.

Ruling Requested

What is the GST/HST tax status of Contract XXXXX between XXXXX and XXXXX[.]

Ruling Given

Based on the facts set out above, we rule that the research services provided to XXXXX are taxable at the rate of 7% in accordance with subsection 165(1) of the Excise Tax Act ("ETA").

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST 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 departmental interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Section 23 of Part V of Schedule VI to the ETA, zero-rates the supply of an advisory, professional or consulting service made to a non-resident person but excludes a supply of a service enumerated in paragraphs (a) to (d) of that section. Specifically, paragraph 23(c) of Part V of Schedule VI to the ETA excludes from the zero-rating provision, a service in respect of tangible personal property that is situated in Canada at the time the service is performed.

For purposes of paragraph 23(c) of Part V of Schedule VI to the ETA, The Department's administrative position as explained in our Policy Paper P-169, copy enclosed, is that there must be more than a mere indirect or incidental nexus or connection between a service and the underlying tangible personal property, before the supply of the service will be excluded from zero-rating.

Whether the relationship between the service and the property is sufficiently direct for the service to be considered by the Department to be "in respect of" the property will depend on the particular circumstances of each case.

The following guidelines will be applied by the Department to aid in the determination of whether the connection between the service and the tangible personal property is sufficiently direct for the service to be "in respect of" the property for purposes of paragraph 23(c) of Part V of Schedule VI to the ETA:

a) Was the service designed, developed or undertaken to fulfill or serve a particular need or requirement arising from or relating to the property? This guideline involves determining the purpose or objective of the service. The purpose or objective of the service may often be determined by examining a written contractual agreement for the supply between the supplier and the recipient of the service, in order to ascertain whether the supply is a zero-rated supply under the ETA.

b) Is the relationship between the purpose or objective of the service and the property reasonably direct? The relationship between the service and the tangible personal property must be more direct than indirect in order for the service and the property to be considered by the Department to be "in respect of" each other. If some object comes between the service and the property, the connection becomes increasingly remote.

XXXXX objective, under the subcontract, is to fabricate and test an enhanced ignition system (tangible personal property), that will reduce start-up emissions of high ethanol content XXXXX fueled vehicles. XXXXX designed and constructed the enhanced ignition system in their own laboratory, tested it, and then published the test results in a XXXXX technical report to XXXXX[.] A direct relationship exists between the research service and the enhanced ignition system as the duties performed are being undertaken to provide acceptable emission standards relating specifically to the XXXXX vehicle with the enhanced ignition system.

In applying the above guidelines, the research service rendered to XXXXX is in respect of tangible personal property that is situated in Canada at the time the service is performed. Therefore, the research service is not zero-rated pursuant to section 23 of Part V of Schedule VI to the ETA; it is taxable at the rate of seven per cent in accordance with subsection 165(1) of the ETA.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0419.

Yours truly,

Michèle Routhier
a\Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

attachment

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Ottawa ONT
XXXXX                                                                                 K1A 0L5

                                                                        March 31, 1998

Dear XXXXX

Thank you for your letter of June 13, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the membership dues of the XXXXX. On the basis of the information you provided, as well as our telephone conversation of January 23, 1998, our understanding of the facts is as follows:

Statement of Facts

1) You are in the process of starting an association for non-management employees of XXXXX to be named the XXXXX[.]

2) The XXXXX is primarily involved in labour relations between employees and employers and aims to standardize the XXXXX industry. It may also become involved in training courses and seminars.

3) The XXXXX will originate in XXXXX and you intend for it to receive national recognition and support.

4) Membership in the XXXXX is voluntary and employees who join will pay annual membership dues. These dues entitle members to:

•   advice on labour regulations within their province of jurisdiction;

•   suggestions regarding contractual items or topics;

•   legal advice on an individual basis pertaining to a particular problem or to labour regulations in a member's province of jurisdiction; and

•   employment information in the member's area or elsewhere in the member's province.

Rulings Requested

You are asking whether the XXXXX would be required to collect the GST/HST on the membership dues it charges to its members. In addition, you inquired as to whether the membership dues be deductible for income tax purposes against the members' earnings.

Rulings Given

On the basis of the information provided, there are two possible exempting provisions, as described below, that should be considered with respect to the XXXXX memberships. It should be noted that if no exemptions apply to the XXXXX memberships, they will be "taxable supplies" for GST/HST purposes. If the total of all taxable supplies exceeds $50,000 annually, the XXXXX will be required to register for the GST/HST and charge the tax. As a registrant, it will be entitled to fully recover the tax it paid on related purchases by claiming input tax credits.

Ruling 1

Based on the information provided, the exemption for memberships provided under section 17 of Part VI of Schedule V of the Excise Tax Act (the "ETA") will not apply to the XXXXX[.]

Section 17 of Part VI, Schedule V of the ETA provides an exemption from tax to supplies of memberships made by a public sector body, including a non-profit organization. However, this exemption does not apply to clubs whose main purpose is to provide dining, recreational, or sporting facilities. Memberships to a non-profit organization may be exempt pursuant to section 17 provided that the member does not receive any benefit from the membership, other than certain "allowable" benefits listed in that section. These benefits are:

a) an indirect benefit that is available to all members collectively;

b) the right to receive services supplied by the non-profit organization relating to the investigation and settling of disputes involving its members;

c) the right to vote at or participate in meetings;

d) the right to purchase goods or services at a cost equal to the fair market value of the supply;

e) the right to receive discounts on supplies to be made by the organization where the total value of such discounts is insignificant in relation to the amount paid for the membership fee; or

f) the right to receive periodic newsletters, reports or publications as long as the value is insignificant in relation to the membership fee, or publications that provide information on the activities of the organization or its financial status, other than such publications which have a significant value in relation to the membership and for which a fee is ordinarily charged by the organization to non-members.

Based on the information provided, it is the Department's view that the following supplies to be provided by the XXXXX to its members constitute direct benefits received by those persons in respect of their membership fees and are in excess of the permissible benefits listed in section 17 of Part VI of Schedule V of the ETA:

a) advice on labour regulations within their province of jurisdiction;

b) suggestions regarding contractual items or topics;

c) legal advice on an individual basis pertaining to a particular problem or to labour regulations in a member's province of jurisdiction; and

d) employment information in the member's area or elsewhere in the member's province.

Consequently, the membership dues would not be exempt under this section. When members pay their annual membership fee to the XXXXX they are paying consideration for the right to receive supplies provided to them throughout the year according to the mandate of the XXXXX[.] It is important to note that is not necessarily the actual benefit provided to the member but rather the right to receive benefits that determines the tax status of the supply of the membership.

Please note that we have ruled that an "indirect benefit" under paragraph 17(a) of Part VI of Schedule V to the ETA is a benefit which accrues to members in an incidental or secondary manner. That is, the benefit to members must be incidental to a broader objective of the organization. It does not appear that the benefits that may accrue to the XXXXX members are "indirect".

Ruling 2

On the basis of the information provided, it is not possible to rule definitively whether the XXXXX memberships are exempt under the provision of section 189 of the ETA. However, if the XXXXX is a trade union as defined in section 3 of the Canada Labour Code, its memberships will be exempt under this provision.

That is, pursuant to paragraph 189(a)(i) of the ETA:

"... where an amount is paid by a person to an organization as

(a) a membership due paid to a trade union as defined

(i) in section 3 of the Canada Labour Code ...

... the organization shall be deemed to have made an exempt supply to the person and the amount shall be deemed to be consideration for the supply."

Section 3 of the Canada Labour Code defines a "trade union" as "any organization of employees, or branch or local thereof, the purposes of which include the regulation of relations between employers and employees." In other words, membership dues paid to a defined trade union are described in paragraph 189(a)(i) of the ETA as consideration for an exempt supply and therefore the trade union would not be required to collect tax on these dues.

On April 1[,] 1997, the HST replaced the GST and the provincial sales tax in the three participating provinces of Nova Scotia, New Brunswick, and Newfoundland with a harmonized rate of 15%. If the association supplies goods that are delivered or made available in a participating province, services to be performed in a participating province, or intangible property that may be used in a participating province, to the extent that they are taxable supplies, tax must be collected at the harmonized rate.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST Memoranda Series. We are bound by these rulings 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 departmental interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

If you would like additional information, you may contact your local Tax Services Office at the following address:

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

Deduction of Membership Dues From Employment Income

As we discussed by telephone, the issue of deducting membership dues from employment income for income tax purposes falls under the responsibility of Revenue Canada, Taxation. The Income Tax Rulings Directorate interprets the provisions of the Income Tax Act and related statutes, and establishes the Department's policy regarding these interpretations. You can mail written requests for advance rulings or technical interpretations on complex issues to:

Income Tax Rulings Directorate
Revenue Canada
875 Heron Road
Ottawa ON K1A 0L8.

You can also fax requests to the following number: (613) 957-2088, or telephone the Directorate at (613) 957-8953.

Should you have any further questions or require clarification on the above matters, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Ottawa ON
XXXXX                                                                                 K1A 0L5

Dear XXXXX

This letter is in regard to your telephone conversation with Michael Place of this Directorate in which you requested written confirmation of the Goods and Services Tax (GST/HST) treatment of the XXXXX (the "Committee") as a result of the annulment of its charitable registration status by Revenue Canada, Taxation. Our understanding of the facts is as follows.

Statement of Facts

1. In a letter dated July xx, 1997 to the Charities Division of Revenue Canada, Taxation ("Charities Division"), the Committee requested that its charitable registration be voided retroactive to the date it was registered, January 1, 1992.

2. Charities Division replied in a letter dated November x, 1997, that because the Committee applied for charitable registration in error, it agreed to annul its registration, effective January 1, 1992.

3. Charities Division further stated that it will honour all official donation receipts issued by the Committee prior to the date of its letter (i.e., prior to November x, 1997).

Ruling Requested

The Committee requests confirmation that it will not be subject to a recapture of charity rebates from the date it was registered as a charity (i.e., January 1, 1992) until the date it was advised that its charity status was annulled (i.e., November x, 1997).

Ruling Given

Based on the facts set out above, we rule that the Committee is recognized as a charity for the purposes of the Excise Tax Act (the "ETA") from the date it became a registered charity for income tax purposes (January 1, 1992) until, but not beyond, the date that its registered charity status was annulled (November x, 1997). Therefore, the Department will not recapture rebates for that period.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST 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 departmental interpretative policy; and that you have fully described all necessary facts for which you requested a ruling.

Explanation

Notwithstanding that, by annulment, the Committee's charity status is "deemed to never have existed", the Department's administrative policy is to recognize its status as a registered charity for purposes of the ETA from the date it was registered as such until the date its charitable status was annulled. Since the Committee did in fact have registered charity status during the period, it will be treated as charity for rebate claim periods during the period January 1, 1992 to November x, 1997 with respect to all provisions affecting the tax status of its supplies and entitlement to rebates.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Charities, Non-Profit Organizations, and Educational Services Unit
Public Service Bodies and Governments Division

Legislative References:           section 259

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5

Dear XXXXX

Thank you for your letter of April 2, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below. This ruling applies to the outstanding issues that were not addressed by XXXXX Tax Services Office in their letter of 29 September 1997.

Our understanding of the facts is as follows:

Statement of Facts

1.  XXXXX (Board) is part of the XXXXX for GST purposes.

2. Unions are required to file financial statements and compensation statements in accordance with regulations made under XXXXX[.] Pursuant to subsection XXXXX employees represented by a union may request copies of these documents. The regulations stipulate that a XXXXX fee is charged for this service.

3. The Board also charges fees to search for certain outputs of the Board. The relevant regulation states:

4. Fee for search - Where a request is made for a copy of written reasons for decision, an arbitration award, a collective agreement, a board certificate, or a board order for decision and a search is required to locate the requested document due to the absence of an award number, certificate or identification number or marker acceptable to the board, the fee payable for the search is XXXXX[.]

Ruling Requested

1. Does the GST apply to fees charged for supplying union financial and compensation statements?

2. Does the GST apply to fees charged for searches of outputs of the XXXXX Board?

Ruling Given

Based on the facts set out above, we rule that these services do not come within the exemptions for Public Sector Bodies listed in Part VI of Schedule V to the Excise Tax Act (ETA). Therefore, these supplies will be subject to the imposition of tax in accordance with subsection 165(1) of the ETA.

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 departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Paragraph 20(d) of Part VI of Schedule V to the ETA exempts fees charged by governments for providing:

(d) a supply of a service of providing information in respect of, or of any certificate or other document evidencing, the vital statistics, residency, citizenship or right to vote of any person, the registration of any person for any service provided by the government or any other status of any person,

The exemption in 20(d) relates to information maintained by governments in respect of characteristics which identify a person's public status. Financial statements and compensation statements may provide indications of the financial status of the persons concerned, however, they do not convey information about the public status of those persons and as such fall outside the scope of 20(d).

With respect to the search fees, paragraph 20(b) of Part VI of Schedule V of the ETA exempts government services of providing:

(b) a supply of a service of the filing or procuring of a document in a court,

(b.1) a supply of a service of the filing of a document in accordance with legislative requirements,

The term "court" in paragraph 20(b) has consistently been interpreted as not extending to administrative tribunals. These bodies are found to come within the more limited exemption in paragraph 20(b.1) which refers only to to fees charged for filing documents. Therefore, the exemptions do not apply to the present case. These services also fall outside the exemption in paragraph 20(d) for the reasons mentioned above.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9580.

Yours truly,

Oscar Jacobs
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate