GST/HST Ruling

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

XXXXX

Case: HQR0001197 Business Number: XXXXX

                                                                        September 30, 1998

Dear Mr. XXXXX

This is in response to your request for a review of a GST Application Ruling issued by XXXXX Tax Services Office (TSO) on January 24, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to levies used to fund the activities of the above noted organizations. The ruling advised that the member's deductions and buyer charges for XXXXX and the auction receipts and other contributions XXXXX for XXXXX are not subject to GST as there is no direct benefit of a supply to a recipient. Furthermore, the ruling advised that XXXXX is not required to register for GST purposes. XXXXX TSO asked that we respond to your request.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX is incorporated as a non-profit organization and is registered for GST/HST purposes. The primary activity of XXXXX is to maintain XXXXX through advertising, government liaison, finance, research and education. Its membership consists of XXXXX[.] The primary source of funding for XXXXX is levies on auction receipts of its members based on a percentage of total receipts from the sale of XXXXX and identified in the financial statements as "members deductions." Another source of funding for XXXXX is a "buyer charge."

2. XXXXX is a non-incorporated non-profit association of XXXXX. It is not registered for GST/HST purposes. The primary activity of XXXXX is the global XXXXX produced in Canada and XXXXX through advertising and promotion. The primary source of funding for XXXXX (as identified in its financial statements) is from levies on the auction receipts of members based on a percentage of the total receipts from the sale of XXXXX. "Other contributions" refers to a one-time levy to promote a specific type XXXXX[.]

3. The levies are based on total receipts and charged on revenues from the sale of XXXXX, which is controlled by XXXXX[.]

4. XXXXX arrangement with XXXXX at the time of XXXXX TSO response was pursuant to XXXXX. The current agreement was entered into by the same parties on XXXXX and is in effect until XXXXX. It is substantively the same as the previous agreement. Although there is no formal agreement between XXXXX the arrangement is the same as that between XXXXX and could be formalized through an agreement if necessary.

5. Pursuant to the current XXXXX including its wholly owned subsidiary hereinafter called the Corporation ...:

"Corporation's Services and Obligations

2. The Corporation agrees to discharge the following obligations and to render the following services to the Association and to its members ...

(u) The Corporation shall deduct a XXXXX membership levy and a XXXXX research levy from the total sale proceeds on all XXXXX sold under the terms of this agreement. The Association may from time to time direct the Corporation in writing, as to the amount or amounts of such levies, as determined or confirmed by vote or an annual or special general meeting of the Association. All said deductions shall be for the exclusive account of the Association and shall be remitted to the Association ...

Minimum Price and Buyer's Charge

4. ... (b) The Corporation shall collect from the purchaser, the levy of  XXXXX based on a percentage of all proceeds from all XXXXX on behalf of the Association members. Such percent shall be determined annually by written agreement between the XXXXX Notice of XXXXX Charge shall appear in the Corporation's legal conditions of sale. The annual distribution of XXXXX charge collected from buyers as between XXXXX and the Association will be agreed in writing amon XXXXX the Association and the Corporation by XXXXX[.]

6. Pursuant to a sample Consignment Agreement XXXXX Association Deduction" of XXXXX[.]

7. There is no Act of Parliament or legislative authority that imposes the levies charged by the associations.

Ruling Requested

Are the:

(a) members' deductions and buyer charges paid to XXXXX

(b) the auction receipts and other contributions paid to XXXXX

subject to GST/HST?

Ruling Given

Based on the facts set out above, we rule that

(a) members' deductions and buyer charge paid to XXXXX and

(b) the auction receipts and other contributions paid to XXXXX

are consideration for taxable supplies and thus are subject to GST/HST where the supplier is a GST/HST registrant.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. If you supply goods that are delivered or made available in a participating province, services to be performed in a participating province or intangible personal property that may be used in a participating province, please contact the local Tax Services Office for further information regarding the application of HST to your particular situation.

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

The definition of supply in subsection 123(1) of the ETA includes the provision of property or a service in any manner.

The primary activity of XXXXX A is to maintain the XXXXX advertising, government liaison, finance, research and education. The primary activity of XXXXX is the global promotion of XXXXX through advertising and promotion.

It is the Department's view that these activities consist of making supplies. Furthermore, the activities are funded by consignees XXXXX members and other XXXXX who, pursuant to XXXXX are required to make payments to fund these activities when they sell their XXXXX through XXXXX. Notwithstanding that the XXXXX undertake their activities in relation to the interests of the consignees as a group, each consignee is making the payment for the purpose of funding supplies made by the XXXXX. On this basis the levies are viewed as consideration for these supplies, even though there may be no discernable benefit for any particular consignee. Since the consignees have a vested commercial interest in the services provided by the XXXXX we would not view the levy as a "gift" or "grant". Since XXXXX supplies do not fall within any exemptions set out in the ETA, they are taxable and the levies are subject to GST/HST.

Whether the purchasers' levy is collected by XXXXX on behalf of the XXXXX or is consideration for a supply provided to XXXXX the amount received by XXXXX is subject to GST/HST.

A non-profit organization (and its associates) does not have to register for GST/HST purposes if the total consideration for taxable supplies other than sales of capital property in the preceding year (or in a particular calendar quarter) does not exceed $50,000. If XXXXX exceeds this threshold, it is required to register for GST/HST purposes and account for GST/HST on its taxable supplies.

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 Grannary
Charities and Non-profit Organizations Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

c.c.:

P. Bertrand J.M. Place XXXXX L. Grannary

Legislative References:

NCS Subject Code(s):

R-

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

XXXXX XXXXX

Case: HQR0001213

Attention: XXXXX

September 29, 1998

Subject:

GST/HST APPLICATION RULING XXXXX - Sale of Residential Complex

Dear XXXXX

This is in reply to your letter to XXXXX TIS Centre 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 transaction, and the purpose of the transaction is as follows:

1. XXXXX is a non-resident for GST/HST purposes.

2. A residential complex located at XXXXX was acquired by XXXXX on XXXXX for the purpose of an a XXXXX[.] We understand that XXXXX purchased this property for XXXXX[.]

3. In order to accommodate its use as an XXXXX residence, XXXXX contracted to have another person to carry on the substantial renovation (as defined in subsection 123(1) of the Excise Tax Act) of this residential complex.

4. An Agreement of Purchase and Sale (Agreement) for this complex was entered into on XXXXX between XXXXX and two individuals. These individuals were not GST/HST registrants nor was the complex acquired by them primarily in the course of commercial activities. Under the Agreement, legal ownership or possession of the complex was transferred from XXXXX to these individuals.

5. At that time, the substantial renovations to the complex were incomplete and it was being sold on an "as is" basis. The transaction was to close on XXXXX[.] The complex was sold for XXXXX[.]

6. Clause 7 of the Agreement states "GST: If this transaction is subject to Goods and Services Tax (G.S.T.), then such tax shall be ... included in ... the Purchase Price. If this transaction is not subject to G.S.T., Vendor agrees to certify on or before closing, that the transaction is not subject to G.S.T."

7. As XXXXX you wrote to XXXXX TIS Centre to request confirmation on the tax status of the sale of this residential complex.

8. In order to determine the extent of the renovations made to the complex, an on-site visit was conducted by a Revenue Canada official on XXXXX with the approval of XXXXX[.] At that time, it was determined that the renovations made to the interior of this residential complex were 56% complete.

9. As a result of a verbal request made by you to Donna Harding of the Government's Unit, Revenue Canada issued a letter to you on May 6, 1998, indicating that XXXXX is not entitled to a rebate of GST payable by the recipient of the supply of the residential complex by XXXXX as the GST was not imposed on XXXXX[.] At that time, the extent of the renovations had not yet been determined by the Department .

10. On behalf of XXXXX you remitted an amount of XXXXX as GST to Revenue Canada with respect to the sale of this residential complex. In your letter of June 30, 1998, which accompanied the remittance, you indicated that the payment was made in protest and that it is XXXXX intention to appeal both the liability and assessment of this tax.

Transaction

XXXXX supplied, by way of sale, a residential complex located at XXXXX[.]

Ruling Requested

The supply of this residential complex by XXXXX is not subject to GST.

Ruling Given

Based on the facts set out above, we rule that the supply of the residential complex located at XXXXX is 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 transaction(s) for which you requested a ruling.

Explanation

A supply of real property situated in Canada is subject to GST/HST unless the transaction is specifically exempt under the Excise Tax Act (ETA). Most exemptions that apply to residential real property are found in Part I of Schedule V to the ETA.

Generally, the sale of a previously occupied residential complex is exempt from GST/HST. However, where the supplier of such a complex is a builder who substantially renovated the complex or engaged another person to carry on the substantial renovation of the complex prior to its sale, the complex is treated as if it were newly constructed and subject to GST/HST at time of its sale by the builder.

Although the residential complex sold by XXXXX was not substantially renovated at the time of its sale, XXXXX did contract to have it substantially renovated prior to that time. As a result, XXXXX is treated as a builder for GST/HST purposes since "builder" is defined under the ETA to include a person who, at the time when the person has an interest in the real property on which the residential complex is situated, carries on or engages another person to carry on for the person the construction or substantial renovation of the complex. As no exempting provisions apply to a sale of this type, when made by a builder, as in the case of the residential complex sold by XXXXX its supply is taxable.

Section 165 of the ETA imposes GST/HST on every recipient of a taxable supply. Generally, the responsibility to collect GST/HST on a taxable supply rests with its supplier. However, paragraph 221(2)(a) of the ETA provides that where a taxable supply of real property is made by a non-resident person, in this case XXXXX, the obligation to account for tax on the supply rests with the recipient of the real property. In accordance with subsection 228(4) of the ETA, it is the recipient who is required to self-assess and remit any tax payable on the purchase to the Receiver General. The recipient is required to file form GST 60 "Goods and Services Tax Return for Acquisition of Real Property" with the Minister of National Revenue to account for the tax. (Please note that form GST 60 is only used where the recipient is not registered for GST/HST purposes and the complex is not being acquired by the recipient primarily in the course of commercial activities. If the facts show that the recipient is registered and is acquiring the complex primarily in the course of commercial activities, then the recipient would be required to report the tax on the purchase of the complex on its regular GST/HST return rather than file a GST 60.)

However, as the tax status of the supply of the residential complex in question had not been ascertained at its time of sale, and the Agreement of Purchase and Sale contained a GST-inclusive clause, an amount of XXXXX of the XXXXX purchase price was held in trust by you pending confirmation from XXXXX TIS Centre as to the status of the supply.

In reviewing your request, it was unclear at that time whether this sale by XXXXX which would have been considered a commercial activity for GST/HST purposes if found taxable, was in conflict XXXXX[.] As such, your enquiry was forwarded to this office from XXXXX TIS Centre for reply. On June 17, 1998, we wrote to the XXXXX[.]

XXXXX purchase price that XXXXX collected was remitted by you to Revenue Canada, on behalf of XXXXX[.] This amount was remitted in the event that the supply was found taxable. The Department has established that the supply of the complex is taxable. Since the Agreement of Purchase and Sale included a GST-inclusive clause, the amount of XXXXX was collected by XXXXX as or on account of tax. In accordance to subsection 222(1) of the ETA, XXXXX was deemed to hold the amount in trust for Her Majesty until its remittance to the Receiver General. Pursuant to subsection 225(1) of the ETA XXXXX was required to include this amount in its net tax calculation for the reporting period in which it was collected and remit any resulting positive amount of net tax in accordance with subsection 228(2).

Section 261 of the ETA provides in part for a rebate to a person who has remitted an amount as or on account of net tax where the amount was not remittable by the person. As previously stated, the amount of XXXXX that was collected as tax by XXXXX was required to be included in its net tax and the resulting net tax was required to be remitted. Since a rebate is only available under section 261 if the amount was not remittable, XXXXX is not entitled to the rebate in respect of the net tax that XXXXX remitted.

However, XXXXX is entitled to a rebate of tax paid on renovations carried out on the residential complex prior to its sale, pursuant to subsection 257(1) of the ETA. Under this provision, a non-registrant builder or other person who makes a taxable supply of real property is entitled to claim a rebate equal to the lesser of the basic tax content of the property, or the tax that is, or would be payable in respect of the particular supply. XXXXX[.]

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 954-7952 or Donna Harding, A/Manager, Governments Unit at 954-3551.

Yours truly,

Lynn F. Renner
Rulings Officer
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

c.c.:

D. Harding L. Renner

ATIP

John Bain (Costa Dimitrakopoulos)
Jean Lauziere (Foreign Affairs)
XXXXX

Legislative References:

Sections 123, 165, 221, 222, 257

NCS Subject Code(s):

R-3

Mr. John Dione Department of Indian Affairs and Northern Development 10 Wellington Street, Room 1135 Hull, Quebec K1A 0H4Attention: Mr. Dione, Internal Control and Audit Officer

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Road Vanier, Ontario K1A 0L5Case: HQR0000106October 2, 1998

Subject:

GST/HST APPLICATION RULING Territorial Lands Act and Federal Real Property Act

Dear Mr. Dione:

Thank you for your facsimile transmission of March 29, 1996 to XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees charged pursuant to the subject legislation. We apologize for the delay in this response.

Our understanding of the facts is as follows:

Statement of Facts

1. The Department of Indian Affairs and Northern Development (DIAND) is a branch of the federal government. The federal government is registered for GST/HST purposes.

2. The Minister of DIAND controls, manages and administers certain Crown lands in the Yukon Territory and the Northwest Territories for the purposes of protection, control, use, purchase, or lease in accordance with the Territorial Land Use Regulations, the Territorial Lands Regulations and the Territorial Quarrying Regulations made pursuant to the Territorial Lands Act.

3. In accordance with the Federal Real Property Regulations, made pursuant to the Federal Real Property Act, no sale, lease or other disposition of federal real property and no licence in respect of federal real property can be made or given by any Minister of a federal department unless it is in accordance with that Act and accompanying regulations.

Territorial Lands Act

4. The Territorial Lands Act (TLA) gives the Governor in Council authority to set apart and appropriate, as a land management zone, any territorial lands in the Yukon Territory or the Northwest Territories for the protection of the ecological balance or physical characteristics in that area. Under the TLA, the Governor in Council may make regulations respecting the issuance of permits for the use of surface land in a land management zone and the terms, conditions and fees payable for those permits.

5. The TLA also provides the Governor in Council with the authority to sell, lease or otherwise dispose of territorial lands, and to make regulations authorizing the Minister to do the same, subject to such limitations and conditions that may be prescribed.

6. Subsection 9(2) of the TLA states that "A notification may be issued to a registrar directing the registrar to issue a certificate of title to a person named therein in respect of territorial lands ..." According to subsection 9(4), the issue of a notification pursuant to this subsection has the same force and effect as a grant of territorial land made by letters patent under the Great Seal. "Notification" is defined under the TLA as a direction in a form prescribed by the Governor in Council pursuant to paragraph 23(k) and issued pursuant to subsection 9(2). Registrar has the same meaning assigned by the Land Titles Act.

7. Section 12 of the TLA provides the Governor in Council with the authority to make regulations for the leasing of mining rights in, under or on territorial lands and the payment of royalties. Regulations made pursuant to this provision must provide for the protection of and compensation to the holders of surface rights.

8. Out of every grant of territorial lands, section 15 of the TLA deems all mines and minerals whether solid, liquid or gaseous that may be found to exist in, under or on those lands, together with the right to work the mines and minerals and for this purpose to enter on, use and occupy the lands or so much thereof and to such extent as may be necessary for the working and extraction of the minerals; and all rights of fishery and fishing occupation in connection therewith on or around or adjacent to those lands to be reserved to the Crown.

9. Paragraphs 23(i) and (k) of the TLA authorizes the Governor in Council to

"(i) prescribe a tariff of fees for copies of maps, plans, field notes, documents, papers and other records pertaining to territorial lands, and for the preparation of documents evidencing a sale, lease or other disposition of territorial lands and for the registration of any documents pertaining to territorial lands ...

(k) prescribe the form of notification that may be issued pursuant to section 9 and the fee for the issue thereof ..."[.]

Territorial Land Use Regulations

10. Sections 8 and 9 of the Territorial Land Use Regulations (TLUR) prohibits persons from carrying on any work or undertaking on territorial lands unless they are holders of a Class A or B Permit.

11. Subsection 22(1) of the TLUR provides that a person who is eligible for a permit can submit an application for a permit to the engineer designated by the Minister of DIAND to serve the area in which the lands are located. Every permit application must be accompanied by the application fee set out in Schedule I, the land use fee set out in Schedule II and a preliminary plan. A blank "Application for Land Use Permit" was submitted for review[.]

12. Subsection 22(2) of the TLUR states that "Every permit application submitted pursuant to subsection 1 shall be accompanied by the application fee set out in Schedule I, the Land use fee set out in Schedule II and a preliminary plan ..."[.]

13. Subsection 34(2) of the TLUR provides that where an application for a land use permit is refused, the land use fee submitted with the application shall be refunded to the applicant. Subsection 34(3) states that no application fee shall be refunded.

14. Schedule I to the TLUR sets out the fees charged by DIAND relating to land use permits; namely,

(a) a land use permit application - $150;

(b) assignment of the permit - $50; and

(c) copies of documents set at $1 per page.

15. Schedule II to the TLUR describes the category of land use permits issued and fees charged by DIAND for each.

The fee payable for a land use permit is based upon the number of hectares to be used in the land use operation; namely,

(1) where area of lands proposed to be used as shown on the preliminary plan is less than or equal to 2 hectares a permit fee of $50 is charged;

(2) where area of lands proposed to be used as shown on the preliminary plan is greater than 2 hectares a permit fee of $50 is charged plus $50 per hectare for each hectare or portion of a hectare in excess of 2 hectares.

Territorial Land Regulations

16. Section 4 of the Territorial Lands Regulations (TLR) provides that an application to lease or purchase territorial lands must be made to land agent, designated by the Minister of DIAND, and the application fee set out in the schedule must accompany that application.

17. Section 6 of the TLR requires every person wishing to purchase territorial lands to enter into an agreement for the sale with the Minister. A generic "Agreement of Sale" was provided for our review.

18. Section 12 of the TLR states that "Every lease of territorial lands shall contain ... a reservation of

(a) all mines and all minerals whether solid, liquid or gaseous which may be found to exist ... together with the full powers to work the same and for the purpose to enter upon, use and occupy the lands ...

(b) the rights of the recorded holders of mineral claims and other claims or permits ..."[.]

A generic lease agreement was provided for our review.

19. Section 14 of the TLR states that a lessee who wishes to assign his lease shall pay all outstanding rent ... of the lease together with the registration fee set out in the schedule ...[.]

20. The "Schedule" to the TLR sets out the fees charged by DIAND relating to the lease and purchase of territorial lands; namely,

(1) application for lease, purchase or other disposition - $150;

(2) preparation of document evidencing lease, sale or other disposition - $50;

(3) renewal of lease - $50;

(4) registration of assignment - $50;

(5) issue of letters patent - $50;

(6) issue of notification - $50;

(7) copy of document -$1 per page;

(8) copy of survey plan or map - $5 per page;

(9) preparation of submission to the Governor in Council - $50.

It is assumed that the fee charged under (2) above is for a copy of the document; under 3 is to cover DIAND's cost in renewing a lease; and (5) is to cover DIAND's cost in arranging to have a certificate of title issued to its client.

Federal Real Property Act

21. Section 4 of the Federal Real Property Act (FRPA) states "Subject to any other Act, no sale, lease or other disposition of federal real property shall be made and no licence shall be given in respect of federal real property except in accordance with this Act. "Federal real property" means real property belonging to Her Majesty, and includes any real property of which Her Majesty has the power to dispose ..."[.]

22. Subsection 16(2) of the FRPA states that "The Governor in Council may, on the recommendation of the Treasury Board, make regulations

(a) respecting the sale, lease or other disposition of federal real property for which sale, lease or disposition there is no provision in or under any other Act ...

(j) imposing fees for the provision of copies of maps, plans, field notes, documents, papers and other records pertaining to federal real property, for the preparation of documents evidencing a sale, lease or other disposition of federal real property and for the deposit in a department of documents relating to federal real property ..."[.]

Federal Real Property Regulations

23. Subsection 4(2) of the Federal Real Property Regulations states that

"(2) A Minister may, in respect of real property,

 (a) give a licence or acquire a licence ..."[.]

24. A generic "Licence" agreement (Agreement) was provided for review. The preamble to the Agreement states that "in consideration of the Licence fees ... Her Majesty grants unto the Licencee in accordance with the Federal Real Property Regulations Section 4(2)(a) for a period of thirty (30) years ... a Licence to enter, construct, operate, maintain, inspect, alter, remove, replace, reconstruct or repair an electrical power transmission line upon the lands described ..."[.]

25. Clause 1 of the Agreement states that "The Licencee will pay to Her Majesty...an annual fee of one hundred fifty ($150.00) dollars ..."[.]

26. Clause 20 states that the Agreement "operates as a Licence only and does not confer any exclusive possessory right or leasehold interest in the said lands."

Transaction(s)

DIAND charges fees for permits issued pursuant to XXXXX or services rendered in connection with the issuance of those permits.

DIAND leases and/or sells territorial lands pursuant to the Territorial Lands Act.

DIAND supplies licences pursuant to the Federal Real Property Act.

Ruling Requested

DIAND is required to charge GST on the supplies it provides, as described XXXXX Schedules I and II to the Territorial Land Use Regulations[.]

DIAND is required to charge GST on the supplies it provides, as described in XXXXX Schedule to the Territorial Lands Regulations[.]

DIAND is required to charge GST on the supply of a right to enter federal real property, as provided for through a Licence agreement, made pursuant to the Federal Real Property Regulations[.]

Ruling Given

Based on the facts set out above, we rule that

Territorial Land Use Regulations

Land Use Permit Application Fee ($150) and

Land Use Fee (Dependent Upon Land to be Used)

Pursuant to subsection 162(1) of the Excise Tax Act (ETA), a land use permit application is not subject to GST provided that the permit for which the application is made is for the supply of a right described in paragraph 162(1)(b) of the ETA.

Land use, regardless of the area of lands to be used, is deemed not be a supply pursuant to paragraph 162(1)(b) of the ETA provided that the land use operation relates to a right to explore for or exploit a natural resource described in paragraph 162(1)(a) of the ETA.

Where a land use permit application does not relate to a right described in paragraph 162(1)(b), both the land use permit application fee and land use fee are consideration for a taxable supply and therefore subject to GST as no exemption provisions within the ETA apply.

Assignment of the Permit ($50)

The registering of an assignment of a permit is an exempt supply pursuant to paragraph 20(a) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Copies of Documents ($1 per page)

Paragraph 20(e) of Part VI of Schedule V to the ETA exempts a supply of a service of providing information, or of any certificate or other document, in respect of (i) the title to, or any right or estate in, property, (ii) any encumbrance or assessment in respect of property, or (iii) the zoning of real property. Paragraph 20(f) of the same Part and Schedule to the ETA exempts a supply of a service of providing information under the Privacy Act, the Access to Information Act or any similar provincial legislation. Copies of documents, as described in paragraph 23(i) of the Territorial Lands Act, are not subject to GST where the conditions of paragraph 20(e) or (f) of Part VI of Schedule V to the ETA are met.

An example of when one of these exempting paragraphs would not apply is where a supply of a commercial map is made.

Territorial Land Regulations

Application for Lease, Purchase or Other Disposition x ($150)

An application for the lease, purchase or other disposition of territorial lands is a taxable supply and therefore subject to GST as no exempting provisions within the ETA apply.

Preparation of Document Evidencing Lease, Sale or Other Disposition XXXXX

A copy of a document evidencing lease, sale or other disposition is an exempt supply pursuant to subparagraph 20(e)(i) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Renewal of Lease ($50)

The renewal of a lease is a taxable supply and therefore subject to GST as no exempting provisions within the ETA apply.

Registration of Assignment ($50)

The registration of an assignment of a lease is an exempt supply pursuant to paragraph 20(a) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Issue of Letters Patent ($50)

The issue of letters patent is an exempt supply pursuant to paragraph 20(e) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Issue of Notification ($50)

The issue of notification is an exempt supply pursuant to paragraph 20(e) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Copy of Document ($1 per page)

A copy of a document, as described in paragraph 23(i) of the Territorial Lands Act, is an exempt supply and therefore not subject to GST where the conditions of paragraph 20(e) or (f) of Part VI of Schedule V to the ETA are met.

Copy of Survey Plan or Map ($5 per page)

A copy of a survey plan or map is a taxable supply and therefore subject to GST unless paragraph 20(e) or (f) of Part VI of Schedule V to the ETA applies.

Preparation of Submission to the Governor in Council ($50)

The preparation of a submission to the Governor in Council is a taxable supply and therefore subject to GST as no exempting provisions within the ETA apply.

Federal Real Property Regulations

For GST/HST purposes, supplies of real property are taxable unless specifically exempted under the ETA. The supply of real property through the Licence Agreement is taxable and therefore subject to GST as no exempting provisions within the ETA apply.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%[.] Example: Goods that are delivered or made available in a participating province are subject to the HST, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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

The supply of natural resource property rights listed below is deemed under subsection 162(1) of the Excise Tax Act not to be a supply, and any consideration paid or due, or any fee or royalty charged or reserved, is deemed not to be consideration. As such, GST does not apply to the consideration charged for the supply of these rights. Subsection 162(1) of the ETA reads as follows:

"162.(1) Natural resources - For the purposes of this Part, the supply of

(a) a right to explore for or exploit a mineral deposit, a peat bog or deposit of peat or a forestry, water or fishery resource,

(b) a right of entry or user relating to a right referred to in paragraph (a), or

(c) a right to an amount computed by reference to the production (including profit) from, or to the value of production from, any such deposit, bog or resource,

shall be deemed not to be a supply and any consideration paid or due, or any fee or royalty charged or reserved, in respect of the right shall be deemed not to be consideration for the right."

The exception to this rule is where supplies of this nature are made to a consumer or to a non-registrant who is in the business of making supplies of the products, minerals or peat to consumers.

"Mineral" is defined in the ETA and includes petroleum, natural gas and related hydrocarbons and sand and gravel.

Section 20 of Part VI of Schedule V to the ETA exempts the following supplies when made by a government.

"(a) a supply of a service of registering any property or filing any document in a property registration system ...

(c) a supply of a licence, permit quota or similar right (other than such a right supplied in respect of the importation of alcoholic beverages), and the supply of any service in respect of an application for such a right ...

(d) a supply of a service of providing information, or of any certificate or other document, in respect of

(i) the title to, or any right or estate in, property,

(ii) any encumbrance or assessment in respect of property, or

(iii) the zoning of real property ..."

Paragraphs (k) and (l) of the above-mentioned paragraph specifically excludes from exemption, and therefore taxes, the following supplies:

"(k) a supply of a right to take or remove forestry products, products that grow in water, fishery products, minerals or peat, where the supply is made to

(i) a consumer, or

(ii) a person who is not a registrant and who acquires the right in the course of a business of the person of making supplies of the products, minerals or peat to consumers, or

(l) a supply of a right to enter, to have access to or to use property of the government. ..."

For greater certainty, section 146 of the ETA deems the supplies made under paragraphs 20(k) and 20(l) above, to be made in the course of a commercial activity.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 954-7952.

Yours truly,

Lynn F. Renner
Governments Unit
GST/HST Rulings and Interpretations Directorate

c.c.:

D. Harding L. Renner

ATIP
Legislative References:	Sections 146, 162 and Paragraphs (a), (e), (k) and (l) of section 20 of Part VI of Schedule V to the ETA
NCS Subject Code(s):	11847-6

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Avenue Vanier, ON K1A 0L5XXXXXAttention: XXXXX XXXXX

Case: HQR0001416Business Number: XXXXXNovember 20, 1998

Subject:

GST/HST APPLICATION RULING Tax Status of Drug & Alcohol Level Determination

Dear Mr. XXXXX

At your request, XXXXX TIS Centre has transferred your file to our directorate for further review and a written response with respect to the subject matter.

Statement of Facts

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

1. XXXXX is a Canadian-controlled private corporation that is in the business of providing occupational-health programs for your clients (i.e., companies).

2. XXXXX is a GST/HST registrant, having Business Number XXXXX[.]

3. XXXXX provides it's clients with the following services: education and training; records retention; medical referral and arranges for laboratory testing. XXXXX issues separate invoices for each of the different services provided.

4. From time to time, clients may request XXXXX to arrange for laboratory testing for drug and/or alcohol levels in urine samples obtained from specific employees of the client. This testing is performed by an independent laboratory on the order of a medical practitioner.

Transaction(s)

The independent laboratory invoices XXXXX for determining drug and/or alcohol levels in the samples submitted XXXXX in turn invoices it's client for the fee charged for laboratory testing, shipping, handling administration costs and an appropriate mark-up.

Ruling Requested

Amounts charged to XXXXX by the private laboratory to determine drug and/or alcohol levels in urine samples and those charges by XXXXX to its clients for laboratory testing, shipping, handling, administration costs and an appropriate mark-up are exempt of the GST/HST under section 10 of Part II of Schedule V to the Excise Tax Act (ETA).

Ruling Given

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

Amounts charged by private laboratories to XXXXX to determine drug and/or alcohol levels in urine samples are subject to the GST/HST. Amounts charged by XXXXX to it's client companies for arranging for the testing of urine samples, shipping, handling, administration and an appropriate mark-up are subject to the GST/HST.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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

In general terms, most health care services are exempt of the GST/HST where the service is medically necessary for the purpose of preventing disease in, or diagnosing or treating an injury, illness or disability of, an individual. While the exempting categories are quite wide ranging, they are still very specific. If a particular service does not fall within the listed exemptions found in Part II of Schedule V to the ETA, it is taxable unless provided by a small supplier, or exempt under some other provision in the ETA.

Section 10 of Part II of Schedule V to the ETA exempts the supply of a prescribed diagnostic, treatment or other health care service, when made on the order of a medical practitioner or practitioner. For purposes of the ETA, the word prescribed means prescribed by regulation or determined in accordance with rules prescribed by regulation. The Health Care Services (GST) Regulations have prescribed laboratory, radiological and other diagnostic services generally available in a health care facility. Consequently, if a medical practitioner or practitioner (as defined in section 1 of Part II of Schedule V to the Act) order such diagnostic services, the consideration charged for the testing procedures is exempt of the GST/HST pursuant to section 10 of Part II of Schedule V to the ETA.

For example, if the medical review officer (MRO) orders a laboratory, radiological or other diagnostic test for an individual, the consideration for the supply of this service is exempt whether billed to an individual patient, XXXXX or other entity. It is important to note the exempting provision applies only to those services that are diagnostic in nature such as routine urinalysis which may include microscopic examination of centrifuged specimens plus any of S.G., pH, protein, sugar, hemoglobin, ketones, urobilinogen, bilirubin, LAPA chest x-ray or sonography).

DORLAND'S ILLUSTRATED MEDICAL DICTIONARY defines "diagnostic" to mean:

"pertaining to or subserving diagnosis; distinctive of or serving as a criterion of a disease, as signs and symptoms."

HEALTH CARE TERMS - Vergil N. Slee MD & Debra A. Slee, JD defines "diagnostic" to mean:

"done for the purpose of assisting in the making of a diagnosis"

Based on the information provided to this office, we understand the intent of your drug and/or alcohol testing program is to help maintain a drug free workplace, improve productivity, reduce absenteeism, reduce accident rates, lower insurance rates etc. This testing for drug and/or alcohol levels in the course of an occupational-health program supplied by XXXXX to their clients is not ( i.e., by definition) diagnostic in nature. Consequently, consideration for such services do not meet the exempting provision of section 10 of Part II of Schedule V to the ETA and are therefore taxable.

In addition, XXXXX does not perform any laboratory, radiological or other diagnostic services. Rather, it obtains urine samples and arranges for the testing to take place in an independent testing laboratory and invoices their client for the shipping, handling, administration costs and an appropriate mark-up. There are no provisions in the ETA to exempt such activities. Consequently, such services are taxable.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-952-9264.

Yours truly,

Lance G. Dixon, MHA., CHE
Municipalities & Health Care Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

c.c.:

Enikö Vermes Lance Dixon XXXXX XXXXX

Encl.:	(Nil)
Legislative References:	Excise Tax Act (ETA)
NCS Subject Code(s):	R-11865-17; 11865-21

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Avenue Vanier, ON K1A 0L5C. Antonelli National Defence Headquarters 90 Elgin Street Lorne Bldg., 5th Floor Ottawa, Ontario K1A 0K2Mrs. Frances Bertrand Director Financial Policies and Procedures

Case: HQR000261File #11848-7DND, 11710-1November 18, 1998

Subject:

GST/HST APPLICATION RULING Taxable status of reimbursements to the Crown (DND) for loss/damage of property

Dear Mrs. Bertrand:

This refers to an earlier request from XXXXX with attachments, concerning the application of the Goods and Services Tax (GST) to reimbursements made to the Crown for loss or damage of public and non-public property. We apologize for the delay in providing a written response. However, this case was outstanding pending the completion of our policy with respect to damage payments. The Departmental policy on the tax status of damage payments was recently released as policy statement P-218.

Our understanding of the facts based on our review of the documentation submitted with XXXXX letter is as follows:

•   Pursuant to XXXXX an officer XXXXX who is found to be liable under the regulations for damage, loss, deficiency, theft, destruction, deterioration or improper expenditure of public property or any property under the control of the Minister, or of any non-public property, is liable to reimburse the Crown for the financial loss incurred, or is liable to reimburse the non-public property organization concerned for the financial loss incurred.

•   Recovery for any loss or damage referred to in the XXXXX is obtained by way of deduction or set-off against any sum of money that may be payable by the Crown to such person found liable unde[r] XXXXX[.] For the most part, in the case of DND XXXXX the cost of the damageloss is recovered by way of an administrative deduction or reimbursement by way of cash, cheque or money order by the member.

•   A member of the Canadian Forces or DND may be required to reimburse the cost of damage/loss in respect of the following:

1. Living accommodations, commonly known as "Married Quarters and Single Quarters", or any other property associated with a member's occupancy.

1.1 Member found liable for repairs to quarters

Where repair, replacement or servicing of the buildings are the result of neglect, carelessness or mischief, a member found liable for such damage under QR&O is required to reimburse the Crown for costs. Any work necessary in respect of the damageloss is carried out by internal components of DND. A member found liable reimburses the Crown through an administrative deduction off his/her wages or the member may pay by cash or cheque.

1.2 Occupant Requested Repairs

In other circumstances, a member or occupant may request that certain work be carried out, i.e., repairing a broken window. Occupants have the option of calling the Construction Engineering Section of DND to perform the work or calling any other trades person. The occupant is invoiced for labour and material. In this situation the occupant is admitting responsibility for damages and is seeking repair services which he/she freely pays.

The Canadian Forces Administration Orders (CFAO) 38-1 sets out the policy and procedures when ordering an administrative deduction pursuant to QR&O, Chapter 38. It provides guidance as to the circumstances in which the ordering of an administrative deduction should be considered. In particular, paragraph 18 of the CFAO 38-1 states:

"The maintenance or servicing of MQs normally does not fall within the legal interpretation of "loss" or "damage". Consequently, such costs cannot be recovered under QR&O Chapter 38 and this order. Where, however, repair or replacement of public property is involved, liability under QR&O Chapter 38 may arise. Examples of items for which reimbursement by way of an administrative deduction does not arise are the cleaning of dirty walls, stoves and refrigerators, the unplugging of toilets or sinks, and the cutting of grass. However, where the cleaning of an MQ was necessary to restore the premises from a state of deterioration that is not attributable to reasonable wear and tear and that deterioration has been wilfully or negligently caused, permitted or contributed to or by the occupant, an administrative deduction may be processed but only if the local representative of the JAG has stated in writing that liability under QR&O Chapter 38 exists."

2. Public Property

Liability may also arise under QR&O 38.01(b) where a person "wilfully or negligently causes, permits or contributes to damage to or the loss, deficiency, theft, destruction, deterioration, or improper expenditures of public property or any property under the control of the Minister;"

Repair for damage to a military vehicle is covered under this provision. Vehicle repairs are carried out internally by DND. Where a person is found liable under QR&O 38.01(b), following appropriate investigation, declaration of liability by an authorized military authority, the individual reimburses the Crown for the damagesloss.

Ruling Requested

Determination of the taxable status of amounts reimbursed to DND for loss or damage to:

1. Residential units (Married Quarters and Single Quarters); and

2. Public property.

Ruling Given

Based on the facts set out above, we rule as follows:

1. Living accommodations, commonly known as "Married Quarters and Single Quarters", or any other property associated with a member's occupancy.

1.1 Member found liable for repairs to quarters

GST/HST is not applicable to amounts reimbursed to DND in respect of damage or loss to living quarters by a member found liable to reimburse the Crown for such costs.

1.2 Occupant Requested Repairs

(i) GST/HST is not applicable to amounts reimbursed to DND in respect of damage or loss to living quarters by a member who voluntarily accepts liability for damages by initiating the request for repairs to DND.

(ii) GST/HST is applicable where the member contracts with an outside third party to repair the damage. The third party is making a taxable supply of a service to the member. The member is the recipient of a taxable service and is liable to pay GST/HST to the third-party registrant.

2. Public Property

GST/HST is not applicable to amounts reimbursed to DND in respect of damage or loss to public property by a member found liable to reimburse the Crown for such costs.

Explanation

An amount reimbursed to DND pursuant to QR&O, Chapter 38, by an officer or man who is found liable under the regulations for damage or loss does not constitute consideration for a taxable supply. It is compensatory in nature, intended to restore the Crown to the position it was in prior to the loss or damage occurring. A damage payment is the payment of an amount of money from one person to another as compensation or indemnification for damages that the first person has caused the second person to suffer, or allegedly suffer. It is not viewed as consideration for a taxable supply, and thus no GST/HST is applicable.

However, a distinction must be made between those situations where a person compensates another by payment of money and those where the person contracts with a third party to repair the damage. For example, if an occupantmember contracts with an outside third party to repair a broken window, the third party is making a taxable supply of a serving of repairing a window to the occupantmember. As the person who is liable for the payment under the contract with the third party, the occupantmember is the recipient of the service and is liable to pay GST/HST on the supply to the third party, if a registrant.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0328.

Yours truly,

C. Antonelli
Specialty Tax 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, ON K1A 0L5XXXXXAttention: XXXXX

Case: HQR0001385Business Number: XXXXXNovember 18, 1998

Subject:

GST/HST APPLICATION RULING Prepaid funeral agreement

Dear XXXXX

Thank you for your letter of October 5, 1998 concerning the application of the Harmonized Sales Tax (HST) to the transaction described below.

Statement of Facts

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

1. A client entered into a prepaid funeral agreement with your company in August of 1990.

2. In 1990, the person paid $800.00 before discontinuing payment for financial reasons.

3. In February of 1998 the person's family resumed making payments on the person's behalf.

The following additional facts were provided in our telephone conversation of October 28, 1998:

1. The prepaid funeral agreement in question was entered into in writing.

2. The funds were held in trust by XXXXX who is responsible for acquiring funeral services for the individual named in the agreement.

3. At the time the agreement was entered into it was reasonable to expect that all of the funds would have been able to be advanced to the trustee XXXXX prior to the named individual's death.

4. The individual named in the agreement is still alive.

Ruling Requested

Is HST now applicable to the agreement because payment was suspended between 1990 and February 1998 when the family assumed responsibility for payment on the person's behalf?

Ruling Given

Based on the facts set out above, we rule that pursuant to the provisions of subsections 344(2)(3) and 360(2)(3) of the Excise Tax Act (ETA) there is no GST or HST payable in respect of the supply of funeral services provided by the trustee under the agreement.

Explanation

For GST purposes, the contract meets the transitional criteria for supplies of funeral services entered into before September of 1990. The suspension of payment by the client after 1990 and the subsequent resumption of payment by the client's family in February, 1998 does not change the tax status under section 344 of the ETA. Therefore, the supply will not be subject to the GST.

Section 360 provides the same treatment with respect to the provincial component of the HST for contracts entered into before the implementation date, April 1, 1997, for HST in the participating provinces.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-9700.

Yours truly,

Fred Adair
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Encl.:	Chapter one, GST/HST Memoranda Series
Legislative References:	Section 344 & 360 ETA, P-071, TIB B-077
NCS Subject Code(s):	R-11745-5

Analysis

SUBJECT: Individual under a prepaid funeral agreement. There has not been a material alteration in the contract such as a transfer of trustee under the agreement. The provisions of subsection 344(2) that would grandfather a contract entered into before September 1990 have been met. Therefore, the supply is still not subject to GST.

Section 360 of the ETA parallels the provisions of section 344 with respect to supplies made before the implementation date for HST on April 1, 1997. The facts related to this case do not affect the tax status of the supply and the provincial component of the HST is not exigible.

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Avenue Vanier, ON K1A 0L5XXXXX

Case: HQR0001320Business Number: XXXXXNovember 19, 1998

Subject:

GST/HST APPLICATION RULING XXXXX

Dear XXXXX

Thank you for your letter of August 19, 1998, (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX energy bars.

Statement of Facts

1. XXXXX has introduced XXXXX to the Canadian market.

2. The Bars come in XXXXX flavours: XXXXX[.]

3. The Bars qualify as nutritional supplements, but not meal replacements, under the regulations to the Food and Drugs Act.

4. The Bars are marketed towards active, healthy individuals who may use it as a source of energy and nutrition. The marketing of the Bars emphasizes their key attributes (e.g., their value as a source of energy and nutrition and XXXXX[.]

5. The Bars are to be sold through various retail channels including sporting goods stores, supermarkets and grocery and convenience stores.

6. The XXXXX main ingredients in the XXXXX[.]

7. The three main ingredients in the XXXXX[.]

9. The Bars are advertised as XXXXX[.]

10. Bars are sold individually from merchandising cartons. Relevant marketing literature indicates a suggested retail price of XXXXX[.]

Rulings Requested

Supplies of the Bars are zero-rated under section 1 of Part III of Schedule VI.

Ruling Given

Based on the facts set out above, we rule that supplies of the Bars are taxable at 7% (or 15% where the supplies are made in a participating province).

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate[.]

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

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). Nevertheless, "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 Excise Tax Act.

Section 1 of Part III of Schedule VI, entitled "Basic Groceries", zero-rates supplies of food or beverages for human consumption, and many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(e) excludes supplies of "candies, confectionery that may be classed as candy, or any goods sold as candies, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, and including fruits, seeds nuts and popcorn when they are coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners". Further, paragraph 1(l) excludes supplies of "fruit bars, rolls or drops or similar fruit-based snack foods".

In our view, supplies of the chocolate flavoured Bars fall under paragraph 1(e), and supplies of the fruit flavoured Bars fall under either paragraph 1(e) or paragraph 1(l). Consequently, supplies of the Bars are excluded from the application of section 1 of Part III of Schedule VI and are therefore subject to tax at 7% (or 15% where they are made in a participating province).

Should you have any further questions or require clarification on the above matter, please do not hesitate to call me at (403) 231-4104.

Yours truly,

John W. Smith
Goods Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Legislative References:	123(1) zero-rated supply; 165; 1/III/VI.
NCS Subject Code(s):	R-11850-2

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Avenue Vanier, ON K1A 0L5XXXXXAttention: XXXXX

Case: HQR0001156File: 11925-1November 20, 1998

Subject:

GST/HST APPLICATION RULING XXXXX

Dear XXXXX

Thank you for your letter of September 30, 1997 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX is a not-for-profit company registered for GST/HST. The purpose of XXXXX is to manage the forest on behalf of the local forest industry and for the benefit of XXXXX[.]

2. XXXXX entered into a new business relationship with XXXXX forest industry. This involved the transfer of forest renewal and forest management planning responsibilities to the forest industry. This transfer would occur through the issuance from the XXXXX of a XXXXX, as legislated by XXXXX[.]

3. XXXXX encouraged the industry to form cooperative partnerships or forest industry consortiums for the purpose of obtaining a XXXXX is a consortium made up of XXXXX shareholders and XXXXX logging shareholders. These shareholders were the traditional forest operators on the land base in question.

4. The shareholders have surrendered their traditional Forest Resource Licences in exchange for shares in this new forest management company. The shares have been distributed on a pro rata basis, relative to the distribution of traditional harvesting rights held by each member before the establishment of XXXXX[.] The distribution of these shares is the mechanism by which the shareholdersmembersowners maintain their traditional rights (i.e. the right to harvest).

5. The main benefit for the land base and XXXXX as a whole, is the dedication and guarantee of funds to plan and complete the forest renewal activities. This funding comes from the XXXXX (the Fund) which is financed through the collection of crown stumpage fees paid by the local forest industry to the XXXXX for harvested timber. XXXXX does not collect GST on these fees. As forest renewal activities are completed, XXXXX will submit invoices for the reimbursement of eligible expenses from the Fund. Those eligible expenses amount to about XXXXX annual budget.

6. Most of the actual forest renewal activities provided by XXXXX are completed by contractors. These contractors invoice XXXXX for services rendered and include GST. XXXXX pays GST on all invoices but does not collect GST with respect to amounts it receives from the Fund. XXXXX only receives reimbursement from the Fund for its actual costs, excluding taxes.

7. Further, only expenses attributed to the direct delivery of the forest renewal program are eligible for reimbursement from the Fund. Expenses not directly attributed to this program must be financed directly by the shareholders. These expenses are costs associated with forest management planning and administration. That portion amounts to about XXXXX annual budget. Each shareholder contributes directly its annual pro rata share of that planning and administration cost. XXXXX has not been collecting GST from the shareholders/owners of XXXXX[.] Although XXXXX is paying GST on the goods and services purchased, it has not collected GST from its funding sources and thus has not been remitting GST.

Ruling Requested

You have requested that we rule with respect to your "current GST remittance procedure" in which you "have not been remitting GST because we have been paying GST for goods and services rendered and (are) are not able to collect GST from our funding sources."

Rulings Given

It is our ruling that, since XXXXX is registered for the GST/HST, it is required to collect and remit GST with respect to its taxable supplies. Based on the facts given, the services provided to shareholders (the services of forest planning and administration, and the harvesting rights) in return for their contributions are taxable supplies. However, the payments from the Fund to XXXXX are grants, and not consideration for supplies.

XXXXX may claim input tax credits in order to recover the GST paid on purchases used to make taxable supplies, and it may claim a 50% rebate of the remaining (i.e. non-creditable) tax for any claim period in which it is a qualifying non-profit organization. For your information and assistance, we are providing the following explanations concerning this ruling.

1. Is the payment from the Fund to XXXXX a grant or consideration for a supply, and what is the tax status of the contributions paid by the shareholders?

As indicated in the above-noted ruling, the payment from the Fund to XXXXX is a grant and not consideration for a supply. However, the services of forest planning and administration, and the harvesting rights, provided by XXXXX to its shareholders are taxable supplies. Therefore, the reimbursements received from the shareholders are consideration for taxable supplies.

That is, the payments received from the Fund are not directly linked to a supply of any activity which would benefit the XXXXX or the Fund. Rather, the payments in question are made for a public purpose, which is to manage the forest renewal program for the benefit of the people of Ontario. Therefore, the payments from the Fund to XXXXX are grants rather than consideration for a supply and therefore are not subject to GST.

As outlined in the Facts, the reimbursements received from the shareholders are used to fund forest planning and administration. As well, shareholders are provided the right to harvest in return for their contributions. Since there is no exemption for these supplies, they are taxable, and their reimbursements are subject to GST.

2. Is XXXXX required to be registered for GST/HST purposes?

XXXXX is required to be registered when its revenues from annual taxable supplies (i.e. forest planning and administration) exceed $50,000.

Pursuant to subsection 148(1) of the Excise Tax Act (ETA), a public service body, such as XXXXX is a small supplier if its total revenues for taxable supplies (other than supplies of financial services and sales of capital property) for its previous four quarters or for any particular quarter are $50,000 or less. Where its annual revenues from taxable supplies is $50,000 or less, it may voluntarily register for GST/HST purposes. If its annual revenues from taxable supplies exceeds $50,000, it is required to register for the GST/HST. If XXXXX is a small supplier, it may apply to deregister using form GST 11, "Request for Cancellation of Registration", which is available at any Revenue Canada tax services office.

3. To what extent may XXXXX claim input tax credit or rebates ?

As XXXXX is already registered, the organization is required to charge GST on its taxable supplies and is entitled to claim input tax credits to recover the GST paid on its purchases used to make taxable supplies (i.e. forest planning and administration).

Further, since XXXXX received XXXXX of its funding from the government for the period(s) in question, it is a qualifying NPO and therefore is eligible for a 50% rebate of the tax paid on purchases in respect of which it is ineligible for ITCs. This is referred to as "non-creditable tax". XXXXX will remain a qualifying NPO as long as it meets the 40% government funding requirement described below for any particular fiscal year.

A qualifying non-profit organization is a non-profit organization that receives at least 40% of its annual revenues in the form of "government funding" in either its current fiscal year or over its two immediately preceding fiscal years.

"Government funding" means an amount of money that is readily measurable and is paid or payable to a non-profit organization by a grantor (e.g. government or municipality) for the purpose of:

-    financially assisting the organization in carrying out its objectives and not as consideration for supplies made by the organization, or

-    payment for exempt supplies of property or services provided to persons other than the grantor or a person related to the grantor.

We trust the information above will assist you in making a determination as to whether XXXXX is a qualifying non-profit organization for any particular fiscal year.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. To the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0329.

Yours truly,

Gabrielle Nadeau
Charities, Non-Profit Organizations Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

c.c.:

M. Place L. Grannary S. Eastman L.Renner

Legislative References:
NCS Subject Code(s):	R

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Avenue Vanier, ON K1A 0L5XXXXXAttention: XXXXX

Case: HQR0001033Business Number: XXXXXNovember 19, 1998

Subject:

GST/HST APPLICATION RULING XXXXX

Dear XXXXX

Thank you for your letter of September 3, 1997, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of XXXXX. We apologize for the delay in our response.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX, has recently introduced a new product called XXXXX[.]

2. XXXXX come in two flavours: XXXXX[.]

3. XXXXX qualify as nutritional supplements, but not meal replacements, under the Food and Drugs Act and corresponding regulations.

4. XXXXX are sold as nutritional snacks intended to "... XXXXX[.]

5. XXXXX[.]

6. You attest that the fruit content of each XXXXX is approximately XXXXX, although, according to the list of ingredients, the fruit content may be as high as XXXXX calculated as follows:

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

7. The XXXXX flavoured XXXXX contain a significant amount of sweeteners, with high maltose and high fructose corn syrup listed as the principal ingredients, together making up XXXXX of the content of each bar. XXXXX a key ingredient in the manufacture of XXXXX, is listed as the fourth ingredient.

8. The anticipated sales volume for XXXXX by type of retail outlet can be expressed as follows:

XXXXX

9. XXXXX are sold in the pharmacy section of grocery stores. They are sold individually from merchandising cartons containing XXXXX bars each. The recommended retail price is XXXXX each.

Ruling Requested

Supplies of both types of XXXXX are zero-rated for GST/HST purposes under section 1 of Part III of Schedule VI to the Excise Tax Act.

Ruling Given

Based on the facts set out above, we rule that supplies of both XXXXX are subject to the GST at 7%, except supplies made in Nova Scotia, New Brunswick and Newfoundland, which are subject to the HST at 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, or to departmental 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). Nevertheless, "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 Excise Tax Act.

Section 1 of Part III of Schedule VI, entitled "Basic Groceries", zero-rates supplies of food or beverages for human consumption, as well as many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(e) excludes supplies of "candies, confectionery that may be classed as candy, or any goods sold as candies, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, and including fruits, seeds nuts and popcorn when they are coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners". Further, paragraph 1(l) excludes supplies of "fruit bars, rolls or drops or similar fruit-based snack foods".

In our view, supplies of XXXXX fall under paragraph 1(e), and supplies of XXXXX fall under either paragraph 1(e) or 1(l). Consequently, supplies of both types of bars are excluded from the application of section 1 of Part III of Schedule VI and are therefore subject to tax at 7% (or 15% where the supplies are made in a participating province).

Should you have any further questions or require clarification on the above matter, please do not hesitate to call me at (403) 231-4104.

Yours truly,

John W. Smith
Goods Unit
General Operations & Border Issues Division
GST/HST Rulings and Interpretations Directorate

Legislative References:	123(1) zero-rated supply; 165; 1/III/VI
NCS Subject Code(s):	R-11850-2

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Road Vanier, Ontario K1A 0L5XXXXXXXXXXAttention: XXXXX

Case: HQR0000703December 7, 1998

Subject:

GST/HST RULING Payments from XXXXX

Dear Mr. XXXXX

Thank you for your fax of January 27, 1997 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the payments received by XXXXX from XXXXX (Township) for the provision of transit services in the Township.

Statement of Facts

1. XXXXX has been determined to be a municipality and is a transit authority for purposes of the Excise Tax Act. It is the only provider of municipal transit services in the Township (as well as in XXXXX[).]

2. Neither XXXXX or the Township is required by law to provide, nor does either provide, a public transportation service in the Township.

3. Under XXXXX the province may subsidize expenditures in respect of agreements between a municipality and a public utilities commission for the supply of public transportation. The Act also provides that a municipality may contribute toward the cost of any public transportation service provided within the municipality.

4. Under XXXXX a council of a local municipality may pass by-laws, including one for entering into an agreement with an adjoining municipality with respect to the terms upon which public bus transportation shall be furnished by the municipality in the adjoining municipality.

5. XXXXX entered into a Transit Agreement dated XXXXX with the Township to provide public bus transportation services in the Township, linking with XXXXX existing routes in XXXXX[.]

6. The following facts are drawn from the Transit Agreement:

•   XXXXX provides: buses, equipment, route information, manpower, licenses and permits, supervision, and maintenance.

•   XXXXX has the sole right to establish fares and passes for routes.

•   XXXXX is responsible for insuring against liability arising from its areas of responsibility which include bus operation.

•   XXXXX is empowered to, and does in fact, seek operating cost subsidies from the province to support the provision of public bus transportation services in the Township.

•   XXXXX is responsible for promotion of public transit.

•   XXXXX agrees to invoice the Township monthly for the costs of operating the public bus transportation services net of fare box revenue and any provincial subsidy, based on XXXXX budget. Any increase in the amount charged will be tied to the Consumer Price Index.

•   The Township has the exclusive right to determine the service areas, routes, frequency and the associated levels of service.

•   The Township agrees to provide for, locate and maintain bus stops, shelters and benches.

•   The Township agrees to pay for the public bus transportation services provided by XXXXX[.]

Rulings Requested

1. Is the municipal transportation subsidy provided by XXXXX for the provision of public transportation services in the Township subject to GST/HST?

2. Are the payments made by XXXXX pursuant to the Transit Agreement of XXXXX subject to the GST/HST?

Rulings Given

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

1. The municipal transportation subsidy provided by XXXXX to the XXXXX for the provision of public transportation services in the Township are grants that are not subject to the GST/HST.

2. The payments made by XXXXX pursuant to the Transit Agreement of XXXXX are grants that are not subject to the GST/HST.

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7947.

Yours truly,

Darlene Wladyka
Senior Rulings Officer
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

c.c.:

D. Harding D. Wladyka

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Road Vanier, Ontario K1A 0L5XXXXX XXXXXXXXXX

Case #: HQR0001470XXXXXFile #: 11595-2December 7, 1998

Subject:

GST/HST APPLICATION RULING Services Provided by XXXXX to XXXXX

Dear XXXXX

I refer to your facsimile message of November 24, 1998 requesting a ruling with respect to the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the service provided by XXXXX to XXXXX[.] This matter was the subject of a Notice of Objection for which a Notice of Decision, dated November 20, 1998, was issued to XXXXX[.]

Statement of Facts

•   XXXXX is registered for the GST.

•   In the course of its business activities, XXXXX may direct their clients to seek XXXXX a mortgage with the XXXXX[.]

•   If the client receives XXXXX will compensate XXXXX for directing their client to them.

•   The service provided by XXXXX consists of XXXXX completing a form entitled XXXXX[.] The form is an internally produced document and is not provided by XXXXX[.]

•   The form contains the following information:

•   name, current address and phone number of purchaser;

•   address of the property purchased;

•   a space for notes which may indicate that the purchaser is a previous XXXXX customer;

•   Preprinted statements on the form include the following:

•   "A referral fee if any up to and including XXXXX will be paid to XXXXX[";]

•   "XXXXX[";]

•   "When completing the XXXXX application, please ensure XXXXX numbers are completed."

•   XXXXX does not prequalify the customer for XXXXX, nor completes a XXXXX application form or performs any other verification activity on behalf of the bank.

Ruling Requested

What is the tax status of the service provided by XXXXX to XXXXX[.]

Ruling Given

Based on the facts set out above, we rule that the supply of the service provided by XXXXX is subject to the GST at a rate of 7% pursuant to subsection 165(1) of the Excise Tax Act.

With respect to your request for our comments regarding GST which was due on services provided, I have enclosed GST Memorandum 500-2, Returns and Payments which discusses the liability to collect and remit the GST.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. Example: Goods that are delivered or made available in a participating province are subject to the HST, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate

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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8222.

Yours truly,

Tim A. Krawchuk
Rulings Officer
Financial Institutions Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate

Attachment

Legislative References:	123(1); 165(1); 221(1)
NCS Subject Code(s):	R-11595-2