GST/HST Ruling

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transportation of a parcel by XXXXX(Company A) and XXXXX (Company B). We apologize for the delay in responding.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

We understand the facts as follows:

1. XXXXX Company A and Company B concluded an Interline Agreement (the Agreement).

2. XXXXX the Agreement provides that nothing contained in the Agreement shall be deemed to or/be construed as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto XXXXX.

3. XXXXX the Agreement states, in part, that each carrier shall pay their respective licences and registration fees, taxes, added value taxes, assessments or charges, levied or rated or charged all in connection with each carrier performing the interline services contemplated under this Agreement.

4. XXXXX the Agreement provides that Company A and Company B agree to provide Interline Service between, at and to approved locations only all to service Company A and Company B XXXXX in Interline Service. XXXXX.

5. Under XXXXX the Agreement, the parties agree to reclaim revenue from each other with respect to XXXXX carried by Company A or Company B in interline services. XXXXX.

6. XXXXX a shipper, XXXXX, arranged for the delivery of a parcel on a COD basis to XXXXX. The shipper transferred the parcel to Company A XXXXX. Company A hauled the parcel to XXXXX. Company B then hauled the parcel from XXXXX.

7. XXXXX.

8. The freight-collect charge, as indicating on Company A's COD invoice, was $XXXXX and GST of $XXXXX.

9. Company B's interpretation of the GST/HST Memoranda Series 28.2 Freight Transportation Services and Guide RC4080 is that on an "Incoming Collect" Company B is acting as agent for Company A, which on the domestic freight movement is the "invoicing carrier". Company A is thus responsible for collecting any applicable GST. Therefore, Company B would do the following with the $XXXXX:

•   Submit XXXXX% of the express charge of $XXXXX to Company A for their share under the Company Agreement, which is $XXXXX.

•   Submit the GST collected on behalf of Company A, to Company A, which in this case is $XXXXX. Company A would presumably account for the GST on its GST/HST net tax return.

•   Report the remaining $XXXXX collected XXXXX as income earned, which is zero-rated under the interline rules.

Ruling Requested

You would like to know whether you are using the correct procedure in collecting and remitting the GST on interline freight shipments.

Ruling Given

Based on the facts set out above, we rule that the transportation of the parcel from XXXXX to the parcel consignee, XXXXX, is a taxable supply at the GST rate of 6% made by Company B, which is required to collect and account for the tax. We also rule that the interline settlement between Company B and Company A, with respect to the movement of the parcel in question, is zero-rated under section 11 of Part VII of Schedule VI.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

When a carrier receives payment for a taxable domestic freight movement from a shipper (or consignee in the case of a freight-collect movement), that carrier, under subsection 1(2) of Part VII of Schedule VI to the ETA, is considered to have supplied the freight service, even if part of the payment is collected as agent for any other interline carriers involved in the movement. As such, that carrier is required to collect and remit the tax to the Canada Revenue Agency, whether or not the carrier makes use of its own invoice or one issued by any other interline carrier.

Therefore, in this instance, Company B would be required to collect and account for the GST.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8223.

Yours truly,

Daniel Chamaillard
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/03/06 — RITS 85838 — Lease Agreement Entered into Prior to March 10, 2004

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) and XXXXX eligibility to claim a new residential rental property rebate. We apologize for the delay in providing you with our response.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (the "Operator") is an incorporated for profit company that currently maintains two separate operating divisions that consist of retirement homes and long-term health care facilities.

2. The Operator constructed and operates a long-term care facility in XXXXX. The Operator also constructed an addition to another long-term care facility that it operates in XXXXX, and an addition to a long-term care facility that it operates in XXXXX. The Operator is licensed by the XXXXX under the XXXXX Act XXXXX to operate these long-term care facilities (the "Facilities") as nursing homes XXXXX.

3. XXXXX regulates access to long-term care facilities. Further, the Operator is required to operate the Facilities in accordance with policies, procedures and manuals published by the XXXXX.

4. In addition to accommodation, residents XXXXX of the Facilities receive nursing and personal care under the direction or supervision of qualified medical and nursing care staff or other personal and supervisory care according to the individual requirements of the residents.

5. The Operator also assists residents of the Facilities with daily living and provides residents with social, recreational and other related services to meet the psycho-social needs of the residents. The Operator also provides meals to all residents of the Facilities

6. Residents of the Facilities have limited physical/mental capacity for self-supervision and self-care.

7. The Operator is not able to supply strictly accommodation or personal care services. All residents of the Facilities receive the services discussed above to the extent that the services are necessary.

8. XXXXX Act indicates the maximum amount that the Operator can charge a resident in respect of various types of accommodations XXXXX. The XXXXX pays an operating subsidy to the Operator to assist in defraying the maintenance and operating costs incurred or to be incurred by the Operator in providing accommodation, care, services, programs and goods to the residents of the Facilities.

9. The Operator specifically assigns rooms to its residents and does not possess the authority to move a resident. The authority must come from either the resident or the person who has power of attorney over the resident.

10. The Operator requires a minimum payment of one month's rent from its residents. The intention is that residents will remain at one of the Facilities for a minimum of a year.

11. The Operator has paid GST on all contractor invoices relating to the construction of, and additions to, the Facilities.

12. An individual wishing to live at one of the Facilities must complete an application for admittance to a nursing home. A XXXXX reviews the application and determines the individual's eligibility for admission. The Operator is not permitted to admit individuals who have not met the eligibility criteria or who have not successfully applied for admittance to a nursing home through a XXXXX.

13. The determination as to whether the eligibility criteria are met involves an assessment of an individual made by a health care practitioner relating to the individual's impairment or incapacity and/or assessment of information relating to the individual's requirements for medical treatment, health care or other personal care. Admissions occur on a priority and chronological basis.

14. The XXXXX requires that a facility-specific written admission contract or residency agreement between the Operator and the resident delineate the accommodation, care, services, programs and goods that will be provided to the resident and the obligations of the resident with respect to their responsibilities and payment for service.

15. Residents of a Facility are generally in varying needs of assistance with activities of daily living, e.g., bathing, dressing and personal hygiene. The Operator is required to develop a personalized plan of care that meets each individual resident's requirements, that is subject to revision as a resident's needs change. The plan must clearly describe the care to be given to the resident including treatments, diet and medications to be given, the assistance with the activities of daily living to be provided and the safety and security precautions to be taken with respect to the resident.

16. The Operator must ensure that 24-hour nursing service is available in a Facility. The XXXXX has established requirements with respect to staffing, such as a medical director (physician), director of nurses (registered nurse), etc. Nursing stations must be located on each floor of a Facility. The list of procedures and services to be provided at a Facility as part of the nursing and personal care services are extensive.

Ruling Requested

You would like to know whether the Operator is eligible to claim a new residential rental property rebate (the "NRRP rebate") pursuant to section 256.2 in respect of the Facilities?

Ruling Given

Based on the facts set out above, we rule that the Operator is not eligible to claim the NRRP rebate in respect of the Facilities.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

A person who begins construction of a residential complex or an addition to a multiple unit residential complex after February 27, 2000, will qualify for the NRRP rebate if all the conditions in section 256.2 are met.

One of the conditions that must be met for the NRRP rebate is set out in subparagraph 256.2(3)(a)(ii). To meet this condition, the Operator must make a supply of a residential unit in a residential complex by way of lease, licence or similar arrangement where the supply is exempt under section 6 of Part I of Schedule V to the ETA. Further, that supply would have to result in the Operator being deemed to have made and received a taxable supply by way of sale of the complex under section 191.

In determining whether the Operator is making a supply that is exempt under section 6 of Part I of Schedule V to the ETA, it is first necessary to consider whether the Operator is making a single supply or multiple supplies. In that regard, policy statement P-077R2, Single and Multiple Supplies, provides assistance.

In our view, the context in which accommodation, meals, care and other services are provided to residents of the Facilities demonstrates that the Operator is making a single supply that is beyond that covered by the exemption in section 6 of Part I of Schedule V to the ETA.

Accommodation is a necessary aspect of the service that the Operator provides to the residents of the Facilities. However, it is clear from the facts provided that the purpose of being admitted to and lodged in the Facilities is to receive care and services. The accommodation, care and services are interconnected where each is an integral part of a composite whole.

Pursuant to the standards and criteria for resident care established by XXXXX, the Operator is required to enter into an admission contract that describes the accommodation, care, services, programs and goods that will be provided to a resident and the obligation of the resident with respect to their responsibilities and payment for service. The resident receives all of the care and services in return for the basic fee payable by the resident as provided in the admission contract and set out in the XXXXX policies and procedures. It is not possible for the Operator, at least in a nursing home scenario, to provide only accommodation to the exclusion of the other programs and services. The accommodation included in the basic care services provided by the Operator is an integral component of an overall supply of providing care, but is nonetheless only an element of that supply and that element is not the predominant element of the supply.

Since the Operator's supply to a resident is not a supply contemplated by section 6 of Part I of Schedule V to the ETA, at least one of the conditions for claiming the NRRP rebate is not met and a rebate eligibility does not arise.

If you require clarification with respect to any of the issues discussed in this letter, please call Mr. Marcel Boivin, Manager of the Real Property Unit directly at 613-954-3772.

Yours truly,

Béatrice Mulinda
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

XXXXX

2007/03/30 — RITS 59629 — Services Provided to Residents of a Condominium Complex

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to insurance premiums and carry over charges with respect to a vehicle lease agreement.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

XXXXX (your client) which is involved in motor vehicle leasing in Canada. The following scenario was provided for purposes of this interpretation.

Scenario

A customer (the Lessee) wants to lease a vehicle from a XXXXX dealer (the Dealer). The Dealer and Lessee will enter into a vehicle lease agreement (VLA). The Lessee agrees to lease the vehicle subject to the terms of the VLA. Upon signing the lease, subject to acceptance by your client, ownership of the vehicle is transferred from the Dealer to your client and the lease is assigned to your client.

The Lessee has the option to elect to take out life and/or disability insurance offered by an insurance company (the Insurer). The coverage offered by the Insurer provides that in the event of the death or disability of the Lessee, the Insurer will pay the balance of the Lessee's remaining obligations under the VLA. It is assumed that the Insurer meets the definition of an insurer under the ETA. The Dealer pays the insurance premium to the Insurer on behalf of the Lessee and the amount is added to the balance owing by the Lessee under the VLA.

In some cases the Lessee may have a VLA on another vehicle with your client which has ended just prior to the beginning of the new VLA and amounts are still owing under the terms of the prior VLA. Such amounts may be owing because one or more lease payments have not been made, the maximum mileage allowed under the terms of the VLA have been exceeded, or the vehicle has excess wear and tear for which Lessee is liable.

Subject to your client's approval, the Dealer may agree to pay off the balance owing by the Lessee under the pre-existing VLA, including all applicable taxes (GST/HST and PST) on behalf of the Lessee. The amount paid is then added to the balance owing by the Lessee under the terms of the new VLA.

Interpretations Requested

Confirmation is requested that where:

1. A Dealer pays a life and/or disability insurance premium on behalf of the Lessee, the portion of the monthly lease payment that represents repayment of the premium amount is not subject to GST/HST.

2. A Dealer pays any amounts owing by a Lessee on an existing lease, which has been assigned to your client, on behalf of the Lessee, the portion of the monthly lease payment that represents repayment of the carry over amount is not subject to GST/HST.

Interpretation Given

The tax status of insurance as it relates to the lease of motor vehicles

As no sample contracts related to the transactions described above have been provided for our review, we are providing the following general information on the application of the GST/HST to insurance.

An insurance policy is a financial instrument, and the issue or granting of a financial instrument is a financial service. As defined in subsection 123(1), an insurance policy includes a policy or contract of insurance (other than a warranty in respect of the quality, fitness or performance of tangible property, where the warranty is supplied to a person who acquires the property otherwise than for resale) that is issued by an insurer. The term "insurer" is also defined in subsection 123(1), as a person who is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an insurance business or under the laws of another jurisdiction to carry on in that other jurisdiction an insurance business.

Where an insurer, as defined in subsection 123(1), provides life and/or disability insurance, the supply of the insurance is exempt where the insurance policy is in respect of an individual who is resident in Canada.

In the scenario described, it indicates that the Dealer pays the insurance premium to the Insurer on behalf of the Lessee. Whether the Dealer is acting as the agent of the lessee or the insurer, or is the recipient of the supply of insurance by the Insurer is a question of fact. A review of the documentation of a particular case would be necessary to determine whether the portion of the monthly payments that relate to the insurance premiums is exempt or subject to GST/HST.

The tax status of carry over charges as they relate to the lease of motor vehicles

A Lessee may owe one or more lease payments that have not yet been paid, or may owe an amount in respect of excess mileage, or may owe an amount in respect of excess wear and tear. XXXXX refers to these amounts when transferred to a subsequent VLA as "carry over charges". These charges occur where under the terms of the VLA, the individual is required, at the termination of the VLA, to pay an amount to the lessor if the value of the vehicle at the end of the lease is less than a guaranteed value. The individual enters into a VLA for a new vehicle with the Dealer. The Dealer allows the individual to transfer the carry over charges from the first VLA to the new VLA, increasing the cost of the new leased vehicle by the amount of the carry over charges. The carry over charges are then included in the monthly lease payments and paid over the course of the new lease. It is our general view that a payment made by the Lessee in respect of the carry over charges in the lease is similar to making a payment in respect of "lease deficiency" amounts.

This issue is addressed in GST/HST Technical Information Bulletin B-084, Treatment of Used Goods (B-084). It states, "Where a lessee is obligated under the terms of a lease agreement to pay the lessor for any shortfalls below the guaranteed amount in the vehicle's value at the termination of the lease period, any shortfall in that amount is considered for GST purposes to be additional consideration paid in respect of the vehicle."

Section 152 outlines when the consideration for a taxable supply is due. Subsection 152(2) applies specifically to the consideration for a taxable supply when the supply is made under a lease agreement: "Notwithstanding subsection (1), where property is supplied by way of lease, licence or similar arrangement under an agreement in writing, the consideration, or any part thereof, for the supply shall, for the purposes of this Part, be deemed to become due on the day the recipient is required to pay the consideration or part to the supplier pursuant to the agreement." A lease deficiency is due on the date that the individual is required to pay the lease deficiency under the lease agreement.

The GST/HST on carry over charges is payable on the earlier of the day the carry over charges are paid, or the day the carry over charges are due. The individual does not pay the carry over charges at the time they are due, but transfers them to the new VLA. The earlier of the two days is the day that the carry over charges are due under the VLA. Therefore, GST/HST on the carry over charge amount is due at the termination of the first lease, on the day that the carry over charge amount is due under the VLA.

The Dealer allows the individual to transfer the carry over charges from the first VLA to the new VLA. The carry over charges are then included in the monthly lease payments and paid over the course of the new lease. More information, including copies of the lease agreements and other relevant documents, is required to determine how GST/HST applies to the portion of the lease payment that corresponds to carry over charges.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9585.

Yours truly,

Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/03/26 — RITS 64509 — Tax Status of Memberships

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the definition of "practitioner" in section 1 of Part II of Schedule V to the Excise Tax Act (the ETA). You are also inquiring about the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by licensed practitioners and other persons of chiropractic and psychological services, as well as optometric, physiotherapy, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, and dietetic services.

All legislative references are to the ETA and the regulations thereunder, unless otherwise specified.

Interpretation Requested

You would like to know whether chiropractic, psychological, optometric, physiotherapy, podiatric, osteopathic, audiological, speech-language pathology, and occupational therapy services rendered to an individual are exempt supplies described in section 7 of Part II of Schedule V when supplied by a person that is not a licensed practitioner (e.g., a corporation) and when supplied by a person that is a licensed practitioner. You would also like to know whether a dietetic service rendered to an individual is an exempt supply described in section 7.1 of Part II of Schedule V when supplied by a person that is not a licensed practitioner (e.g., a corporation) and when supplied by a person that is a licensed practitioner. In addition, you would like our comments on the tax status of the supply when the supplier (whether a corporation or a licensed practitioner) invoices the individual or a third party for these services.

Interpretation Given

Sections 7 and 7.1 of Part II of Schedule V exempt from GST/HST supplies of certain services when the supply is made by a "practitioner" of the service. For purposes of these exempting provisions, a "practitioner" is defined to mean a person who practises the profession of optometry, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech therapy, occupational therapy, psychology or dietetics and who is licensed or otherwise certified to practise that profession in the province in which the person supplies the service. If no license or certification is required in the province where the service is supplied, then the supplier must have the qualifications equivalent to those necessary to be licensed or certified in another province.

The services listed in section 7 of Part II of Schedule V are optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech therapy ^[xxiv]footnote 1, occupational therapy and psychological services when rendered to an individual. Section 7.1 of this Part exempts a supply of a dietetic service made by a practitioner of the service where the service is rendered to an individual or the supply is made to a public sector body or to the operator of a health care facility.

We understand that regulated practitioners must be members of a provincial regulatory authority to practise their health profession. The role and authority of these authorities are set out in provincial legislation. For example, XXXXX these authorities include the College of Chiropractors XXXXX, the College of Physiotherapists XXXXX, and the College of Psychologists XXXXX and their role and authority are set out in the XXXXX and other legislation for regulated health professions, i.e., Chiropractic Act, Physiotherapy Act, and XXXXX. Under the XXXXX, practitioners who are members of a College are permitted to establish a professional health corporation for the purpose of practising their profession XXXXX. Practitioners incorporate under the Business Corporations Act. Following incorporation, the professional health corporation must apply to the applicable College for a certificate of authorization for a corporation to practise a health profession, e.g., chiropractic, physiotherapy, psychology, etc. This certificate, which must be renewed annually, is issued under the XXXXX and without it the corporation may not practise a health profession.

It is our view that where a professional health corporation holds a valid certificate of authorization to practise a profession listed in the definition of "practitioner" in the ETA issued under provincial legislation governing a health profession, that corporation would fall within the meaning of "practitioner" as defined in the ETA.

The application of section 7 of Part II of Schedule V is not dependent on who pays for the supply, as this section does not require that the supply be "made to" a particular recipient. For instance, when a licensed speech therapist treats an individual for a speech dysfunction, this supply remains exempt notwithstanding that another person other than the individual (a third party) pays the consideration to the licensed speech therapist for that supply. Similarly, the wording in section 7.1 of Part II of Schedule V provides that a practitioner of dietetics may render a dietetic service to an individual but bill another person for payment of that service.

Essentially, the exempting provisions apply to practitioners of the listed services who practise independently under their own name and who are licensed or otherwise certified to practise their profession in the province in which they supply their services. These exempting provisions do not apply to services supplied by other persons such as governments, municipalities, institutions, corporations (other than professional health corporations as discussed above) and other organizations ^[xxv]footnote 2. For instance, whether the supply of physiotherapy services rendered to an individual is exempt pursuant to paragraph 7(c) of Part II of Schedule V depends on the status of the supplier. If the supplier is not a "practitioner" of physiotherapy services as defined in the ETA, this exempting provision will not apply to the physiotherapy services supplied by this supplier.

Generally speaking, when a person such as a corporation employs or subcontracts with a practitioner in the course of making supplies, the corporation's supplies are not exempt under section 7 or section 7.1 of Part II of Schedule V. If a practitioner is an employee of another person, please note that under the ETA services provided by employees to their employers are not supplies and therefore no GST/HST applies to wages and salaries paid to employees. However, section 7 and section 7.1 of Part II of Schedule V would not apply to the employer's supplies, notwithstanding the qualifications of its employees. The employer is a separate legal entity from the practitioner and the fact that an employee may be a practitioner does not confer any benefit to the employer such that the employer would qualify as a practitioner for purposes of the ETA. The same principle would also apply where a practitioner is an independent contractor hired by another person. In both scenarios, the employer or other person's status as a "practitioner" as defined in the ETA is evaluated separately from the practitioners that it employs or otherwise subcontracts with in the course of making its supplies.

You advised that you have copies of two GST/HST interpretations XXXXX regarding the application of section 7 of Part II of Schedule V. It is your understanding that the interpretations given were that:

•   A chiropractic service rendered to an individual by a licensed chiropractic is an exempt supply notwithstanding that a corporation is either the supplier of the service or an agent of the chiropractor;

•   A psychological service rendered to an individual by a licensed psychologist is an exempt supply even in circumstances where the psychologist is an employee of a corporation; and

•   The key factor in determining the tax status of the service is the nature of the service being rendered by the practitioner to the individual and the manner used to obtain the payment is not relevant.

As you are aware, the correctness of the application of the GST/HST to a supply is based on the law and the facts. Sections 7 and 7.1 of Part II of Schedule V make it clear that several conditions need to be met in order for a supply to fall within those sections:

•   The supplier must be a "practitioner" of the service, as that term is defined in the ETA. If the supplier is not a practitioner, then neither of these sections will apply to the supply regardless of whether the remaining conditions are met;

•   The supply must be a service listed in these sections; and

•   For section 7 that service must be rendered to an individual, or

•   For section 7.1, that service must be rendered to an individual or the supply of the dietetic service must be made to a public sector body or to the operator of a health care facility.

Please note that the Summer 2005 edition of the Excise and GST/HST News included an article entitled "Health care services supplied by corporations that are not medical practitioners or practitioners" to advise corporations who do not meet the definition of "medical practitioner" or "practitioner" that their supplies may not fall within the exemptions in the ETA.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/03/10 — RITS 81842 — [Third Party Authorization]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of occupational therapy services.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

On the basis of your letter and our telephone conversation XXXXX our understanding of the transactions and the facts is as follows:

1. You are registered to practise the profession of occupational therapy with the College of Occupational Therapists XXXXX.

2. You wholly own and operate a professional health corporation, XXXXX, which is also registered to practise the profession of occupational therapy with the College of Occupational Therapists XXXXX.

3. XXXXX contracts with other registered occupational therapists for occupational therapy assessments of individuals. These individuals are generally insurance claimants and you advised that these assessments are "independent" occupational therapy assessments because they are done at the request of a third party, i.e., an insurer, and they do not include any therapeutic or treatment component of the individuals.

4. The independent occupational therapy assessments are understood to be expert opinions supplied to insurers following a health assessment of an individual who is of interest to the insurer. An occupational therapist assesses an individual and provides a report of findings, which often involves responding to a set of questions posed by the insurer. These assessments are not insured services under any provincial or territorial health insurance plan.

5. XXXXX notifies the individuals, whom you have referred to as "clients", by letter about their appointments for assessments at which time a consent form is provided for their perusal. The consent is usually obtained at the time of the assessment to ensure that the client fully understands the form. Background medical documentation from a variety of sources, including physicians, is provided to the corporation, which in turn provides this documentation to the assessing occupational therapist.

6. The occupational therapists contracted by XXXXX meet with clients inside their homes. The assessment services include taking a history of the individuals relative to their health, performing a physical examination, and rendering an expert opinion involving a diagnosis and prognosis of the individual's occupational health in a report, which is supplied to XXXXX.

7. You review the occupational therapists' reports for quality assurance, consult with them to address any necessary changes, provide feedback, if necessary suggest other diagnostic tests, and discuss the findings with them to produce a final report, which is supplied to the insurer or other recipient. The final report is prepared on the letterhead of XXXXX and it includes the signature of the occupational therapist that performed the assessment and gave the expert opinion. The consideration for the supply of the final report includes an amount that is attributable to your services.

8. You maintain all client records at the office of XXXXX. Clients may call you directly if they wish to discuss anything relative to the report.

9. XXXXX charges cancellation fees when a client cancels an appointment for an assessment. It is understood that where an appointment is cancelled, XXXXX does not provide an assessment, report or other service to the client or the insurer requesting the assessment. The fee is simply intended as compensation for the client having cancelled the appointment.

Ruling Requested

You would like to know whether the following supplies are exempt from GST/HST based on the policy expressed in GST/HST Policy Statement P-248, The Application of the GST/HST to the Supply of Independent Medical Examination ("IME") and to Other Independent Assessments: the supply of an independent occupational therapy assessment made by an occupational therapist to XXXXX and the supply of an independent occupational therapy assessment made by XXXXX to an insurer. In our telephone conversation XXXXX you also asked for a ruling on the GST/HST status of fees paid for cancellations of appointments.

Ruling Given

The release of GST/HST Policy Statement P-248 on September 21, 2006, represents a change in the CRA's policy regarding the scope of the exemptions in sections 5 and 7 of Part II of Schedule V. Prior to its release it was the CRA's position that an independent occupational therapy assessment as described in the Facts above was a taxable supply. With the release of the Policy Statement, this position was revised to include these supplies within paragraph 7(i) of Part II of Schedule V.

Accordingly, a supply of an independent occupational therapy assessment when made by an occupational therapist to XXXXX and when made by XXXXX to an insurer is exempt from the GST/HST pursuant to paragraph 7(i) of Part II of Schedule V.

As a result of the revised policy, XXXXX is not required to remit GST/HST relating to cancellation fees charged for cancelled appointments. Prior to the release of GST/HST Policy Statement P-248, such fees would have been subject to subsection 182(1) pursuant to which XXXXX would have been required to remit GST/HST equal to 6/106 of the total amount collected as a fee for a cancellation in relation to its supplies of taxable independent occupational therapy assessments, as the 6% GST/HST would have applied to the consideration for these supplies.

Note that the remittance of 6/106 would apply to cancellation fees charged after June 30, 2006. The rate of the GST was reduced from 7% to 6% and the HST from 15% to 14% effective July 1, 2006; accordingly, the remittance of 7/107 (or 14/114 if it applies) would have applied to cancellation fees charged prior to this date.

Explanation

Occupational Therapy Services

Paragraph 7(i) of Part II of Schedule V exempts from GST/HST a supply of an occupational therapy service when rendered to an individual and a "practitioner" of the service makes the supply. For purposes of this exempting provision, a "practitioner" is defined to mean a person who practises the profession of occupational therapy and who is licensed or otherwise certified to practise that profession in the province in which the person supplies the service. If no licence or certification is required in the province where the service is supplied, then the supplier must have the qualifications equivalent to those necessary to be licensed or certified in another province.

We understand that regulated practitioners must be members of a provincial regulatory authority to practise their health profession. The responsibilities of these authorities are set out in provincial legislation. For example, XXXXX these authorities would include the College of Occupational Therapists XXXXX and its responsibilities are set out in the XXXXX and the Occupational Therapy Act.

XXXXX practitioners who are members of a College are permitted to establish a professional health corporation for the purpose of practising their profession XXXXX. Practitioners incorporate under the Business Corporations Act. Following incorporation, the professional health corporation must apply to the applicable College for a certificate of authorization for a corporation to practise a health profession, e.g., occupational therapy. This certificate, which must be renewed annually, is issued under the XXXXX and without it the corporation may not practise a health profession.

It is our view that where a professional health corporation holds a valid certificate of authorization to practise a profession listed in the definition of "practitioner" in the ETA issued under provincial legislation governing a health profession, XXXXX that corporation would fall within the meaning of "practitioner". Accordingly, as XXXXX holds a valid certificate of authorization, this corporation would fall within the meaning of "practitioner" as defined in the ETA.

The ETA does not regulate or define health care services; rather it incorporates the qualifications necessary to practise particular health professions in the provinces in order to determine whether a person is a "practitioner" for purposes of the ETA. Because the provinces have delegated authority to specific regulatory bodies for the regulation and registration of those who are qualified to practise certain health care professions such as occupational therapy, we consider how these health care professions are regulated in the provinces to determine the weight to give the inferences to be drawn in identifying what services fall within the scope of practice of a health care profession.

Accordingly, we considered how occupational therapy services are described in the XXXXX Occupational Therapy Act XXXXX as well as the services that are recognized by the College of Occupational Therapists XXXXX. It is our understanding that the activities that fall within the practice of occupational therapy are the assessment of function and adaptive behaviour and the treatment and prevention of disorders that affect function or adaptive behaviour to develop, maintain, rehabilitate or augment function or adaptive behaviour in the areas of self-care, productivity and leisure.

After consultation with members of the health care community and the insurance industry, the CRA released GST/HST Policy Statement P-248 to announce its change in position that for purposes of the exemptions in sections 5 and 7 of Part II of Schedule V, independent assessments (including independent occupational therapy assessments) would be considered a service rendered to an individual, notwithstanding that these assessments do not include a therapeutic or treatment component of the individual and that these assessments are done at the request of an insurer or other third party.

We understand that the supplies in question involve the activities of two or more occupational therapists; i.e., yourself and a second and sometimes a third occupational therapist. You requested our comments on how the GST/HST would apply to these supplies. The GST/HST is a transactional tax and therefore, the services rendered by each occupational therapist in the capacity of an independent contractor represents a separate transaction the tax status of which is evaluated separately. This evaluation requires an understanding of the nature of the services provided by the supplier in each transaction. Although each supplier contributes to a single report, their services are distinguishable transactions in this chain of events.

Essentially, we understand that XXXXX contracts with a second occupational therapist who is an independent contractor; i.e., not an employee of the corporation, for an independent occupational therapy assessment. The second occupational therapist assesses an individual in an autonomous capacity to provide his or her own expert opinion. The facts of this transaction indicate that the second occupational therapist has made a supply to XXXXX of an occupational therapy service rendered to an individual. This is an exempt supply described in paragraph 7(i) of Part II of Schedule V.

The services rendered by XXXXX involve applying professional expertise to an occupational therapy report pertaining to an individual for the purpose of providing input and feedback, determining whether further diagnostic testing is necessary, and discussing the findings with the occupational therapist who prepared the report to ensure all occupational therapy issues are addressed. An occupational therapy expert opinion is then supplied by XXXXX to the insurer.

We consider the expert opinion supplied to the insurer by XXXXX to be an occupational therapy service rendered to an individual. This conclusion is supported by the fact that the services of XXXXX consist of applying professional expertise to the findings contained in the occupational therapy report as demonstrated by the input, suggestions, and discussion of the assessment with the second occupational therapist, and XXXXX also applies professional attention, custody and judgment with respect to the individual to whom the occupational therapy service was rendered. Therefore, this supply made by XXXXX to an insurer falls within paragraph 7(i) of Part II of Schedule V.

The application of paragraph 7(i) of Part II of Schedule V is not dependent on the services being rendered at a particular location. Therefore, occupational therapy services rendered to individuals in their homes or elsewhere are exempt when supplied by a practitioner of occupational therapy.

Cancellation Fees

It is the CRA's position that fees paid for cancellations of appointments, to the extent that these fees are not payment for a supply of property or a service, are not consideration for a supply. However, there are situations where the GST/HST is required to be remitted on such fees relating to taxable supplies. These situations are described in section 182.

Subsection 182(1) is a deeming provision where the amount paid for a breach, modification or termination of an agreement, such as a cancellation fee, is treated as consideration for the intended taxable supply. This provision deems the recipient of the supply to have paid and the registrant (the supplier) to have collected the GST/HST on that deemed consideration at the time the fee is paid so that the supplier is deemed to have collected tax equal to 6/106ths or 14/114ths of the amount paid a result of the cancellation. Accordingly, XXXXX would have been deemed to have collected GST/HST on the deemed consideration for cancellation fees charged in relation to supplies of taxable independent occupational therapy assessments.

However, cancellation fees charged in relation to exempt supplies are not covered by section 182 and therefore, XXXXX would not be required to remit any GST/HST on such fees.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Other Information

In our telephone conversation XXXXX you asked that our letter include information on how recipients of supplies made by XXXXX may recover any GST/HST they paid in error on supplies of exempt occupational therapy services.

Generally speaking, when a recipient of a supply pays an amount as GST/HST in error, e.g., on a supply that should have been exempt, the recipient can request a refund or credit of the amount from the supplier. Section 232 sets out the rules for when a supplier refunds or credits the tax. Pursuant to this section, the supplier must refund or credit the tax within two years after the day the amount was charged or collected and it must provide the recipient with a credit note containing prescribed information. A recipient therefore has recourse under section 232 to obtain an adjustment or refund from the supplier.

Provided specified requirements are met, the supplier may deduct the amount of tax refunded or credited when determining its net tax for the reporting period in which the credit note was issued, to the extent that the amount has been included in determining the net tax for that reporting period or a preceding reporting period. Similarly, the recipient is required to add the amount of the tax refund or credit when determining its net tax for the reporting period in which the credit note is issued, to the extent that the amount was deducted in determining its net tax for that reporting period or a preceding reporting period.

If recourse under section 232 is not feasible, the recipient may make an application for a rebate under section 261. If the recipient chooses to apply for a rebate from the CRA, it must complete and submit the GST189 General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST) application form. The time limit to apply for this rebate is two years from the day the recipient paid the tax.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/04/02 — RITS 86092 — Tax Status of XXXXX

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX in which you requested confirmation of the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to Clinical Services that will be supplied by a professional corporation of a physician.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX.

Statement of Facts

On the basis of your letter, we understand the facts and the transaction in question as follows:

1. XXXXX, is a physician who has incorporated a Contracting Company.

2. The Contracting Company will hold a valid certificate of authorization issued by the XXXXX under the laws of that province to practise the profession of medicine.

3. The Contracting Company will enter into a Services Contract with Partnership G in respect of Clinical Services to be provided by the Contracting Company as an independent contractor.

4. The Contracting Company will employ the Named Partner to provide Clinical Services for the benefit of the Contracting Company, pursuant to a written employment agreement, with a view to fulfilling its obligations to Partnership G in accordance with its Services Contract with Partnership G.

5. The fees payable by Partnership G to the Contracting Company pursuant to the Services Contract will be negotiated on a case-by-case basis and will vary with the number and type of Clinical Services to be supplied by the Contracting Company. The fees will equal the fair market value of the Clinical Services supplied.

Ruling Requested

You are requesting confirmation that to the extent the Clinical Services supplied by the Contracting Company to Partnership G are consultative, diagnostic, treatment or other health care services rendered to individuals, other than surgical or dental services performed for cosmetic purposes and not for medical or reconstructive purposes, the Clinical Services will be exempt supplies described in section 5 of Part II of Schedule V.

Ruling Given

To the extent that the Clinical Services are supplies of consultative, diagnostic, treatment or other health care services rendered to an individual, other than surgical or dental services performed for cosmetic purposes and not for medical or reconstructive purposes, and these supplies are made by a "medical practitioner" as that term is defined in the ETA, these supplies will be exempt pursuant to section 5 of Part II of Schedule V.

For purposes of the ETA, a "medical practitioner" means a person who is entitled under the laws of a province to practise the profession of medicine or dentistry. It is our understanding that in the province XXXXX, all physicians must be members of the XXXXX in order to practise medicine in that province. The role and authority of the XXXXX are set out in the XXXXX and the XXXXX. Under the XXXXX, physicians who are members of the XXXXX are permitted to establish a professional corporation for the purpose of practising medicine. Physicians incorporate a professional corporation under the XXXXX. Following incorporation, the professional corporation must apply to the XXXXX for a certificate of authorization for a corporation to practise medicine. This certificate, which must be renewed annually, is issued under the XXXXX and without it the professional corporation is not permitted to practise the profession of medicine.

Accordingly, where a professional corporation holds a valid certificate of authorization to practise the profession of medicine issued under the XXXXX, that corporation will fall within the meaning of "medical practitioner" as defined in the ETA.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/05/03 — RITS 87256 — [Application of the GST/HST to Clinical Services Supplied by a Medical Practitioner]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST) to services performed by XXXXX (the "Contractor") and XXXXX (the "Sub-Contractor").

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

We understand from the contracts attached to your XXXXX and from a letter XXXXX, the following:

The Contractor has an agreement with XXXXX (the "Company") from XXXXX to provide expertise and guidance as a XXXXX at the Company's heavy oil projects in the XXXXX.

The Contractor hires the Sub-Contractor to perform the service work outside Canada.

Ruling Requested

You would like to know if the supply of the services by the Contractor to the company is subject to 6% GST, GST exempt or zero-rated (taxable at 0%).

Further, you would like to know if the supply of services by the Sub-Contractor to the Contractor is subject to 6% GST, GST exempt or zero-rated (taxable at 0%).

Ruling Given

Based on the facts set out above, we rule that, the supply by the Contractor to the Company is not subject to GST as the supply is made outside Canada pursuant to paragraph 142(2)(d) of the Excise Tax Act by virtue of the fact that the services are in relation to real property situated outside Canada.

Furthermore, the services supplied by the Sub-Contractor is not subject to GST as the supply is made outside Canada pursuant to paragraph 142(2)(d) of the Excise Tax Act by virtue of the fact that the services are in relation to real property situated outside Canada.

Explanation

A taxable (other than zero-rated) supply made in Canada is subject to GST at 6% or HST at 14% if it is made in a participating province (Nova Scotia, New Brunswick and Newfoundland and Labrador).

Where the supply is made outside Canada, the supply is not subject to tax under Division II of the ETA; that is, the recipient of the supply is not liable to pay the tax and the supplier is not liable to collect the tax.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8220.

Yours truly,

Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/05/10 — RITS 91261 — Application of GST/HST to a XXXXX Levy

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) as applied pursuant to section 232 of the Excise Tax Act (ETA) to four different scenarios which you have outlined.

All legislative references are to the ETA and the regulations therein, unless otherwise specified.

You have provided us with the following facts:

1. ACo is registered for GST and supplies goods subject to 6% GST. ACo sells goods to numerous customers and collects the applicable GST. BCo is also registered for GST. Both ACo and BCo are monthly filers.

2. ACo sells $10,000 worth of goods to BCo, charging a total of $10,600 ($10,000 plus $600 GST). BCo pays ACo in full. There is a problem with the goods, and BCo later returns the goods to ACo under four different scenarios.

i) Situation 1: ACo pays a refund to BCo for the full $10,600. ACo issues a credit note to BCo for $10,600 in recognition of the refund payment.

ii) Situation 2: BCo is indebted to ACo for $20,000 in respect of other purchases and transactions at the time the goods are returned. ACo credits BCo with $10,600 towards payment of BCo's $20,000 existing debt to ACo. As a result, BCo's debt to ACo is reduced by $10,600 to $9,400. ACo issues a credit note to BCo for $10,600 in recognition of the credit.

iii) Situation 3: BCo is not indebted to ACo at the time the goods are returned. However, ACo issues a "credit note" to BCo for $10,600 to acknowledge that the goods have been returned, and that ACo owes $10,600 to BCo. There is no certainty that BCo will ever place any further orders or make any further purchases from ACo. If BCo does place an order in the near future, ACo will apply its $10,600 indebtedness against the purchase price of the goods. If BCo does not make a purchase from ACo within some unspecified period of time (say 4 months), the parties will require ACo to issue a refund cheque for the $10,600 amount owing to BCo.

iv) Situation 4: Same as Situation 3, except BCo issues a "debit note" to ACo for $10,600 to acknowledge that the goods have been returned and that ACo owes $10,600 to BCo.

You have provided us your views on the above four situations as follows:

Situation 1: The prerequisites to ss. 232(2) have been met, such that ss. 232(3) applies. That is, provided the credit note issued by ACo complies with paragraph 232(3)(a), ACo may deduct $600 deduction in calculating its net tax, and BCo is required to add the $600 to its net tax for their respective reporting periods in which the credit note is issued and received, respectively.

Situation 2: The prerequisites to ss. 232(2) have been met, such that ss. 232(3) applies. That is, provided the credit note issued by ACo complies with paragraph 232(3)(a), ACo may deduct $600 in calculating its net tax. BCo is required to add $600 to its net tax, for the respective reporting periods in which the credit note is issued and received.

Situation 3: The prerequisites to ss. 232(2) are not met unless and until such future time that ACo either (i) actually refunds the $10,600 owing to BCo, or (ii) BCo becomes indebted to ACo, and ACo applies the $10,600 owing to BCo (i.e. for the goods returned) in payment of BCo's indebtedness to ACo. Accordingly, ss. 232(3) does not potentially apply until such future time.

Situation 4: The same as Situation 3.

Interpretation Requested

You would like to know the interpretation in each of the four situations outlined above.

Interpretation Given

Section 232 of the ETA permits an adjustment, refund or credit of the GST in two situations: where an excess amount of tax has been charged or collected; or where consideration for a supply is reduced at some time after the tax has been charged or collected, and the supplier adjusts, refunds or credits the tax charged on the original consideration.

The rules relating to refunds or adjustments of tax are set out in subsection 232(3) to allow not only credit notes issued by suppliers, but also debit notes issued by recipients, to be used to document the tax adjustment in prescribed form. The only prerequisite pursuant to subsection 232(a) and (b) is that tax has been either charged or collected.

Subsection 123(1) of the ETA defines: "credit notes" and "debit notes" as follows:

"credit note" means a credit note issued under subsection 232(3);

"debit note" means a debit note issued under subsection 232(3);

Both the supplier and the recipient will have met their obligation by issuing the credit/debit note pursuant to the ETA, if all the requirements under SOR/91-44 Credit Note and Debit Note Information (GST/HST) Regulations have been met.

The issuance of a credit/debit note is for documentary purposes and whether a credit or debit is satisfied or ever acted upon is a business contractual matter between suppliers and recipients.

Our views with respect to the four situations are:

Situation #1:

ACo is correct in issuing a credit note to BCo for $10,600 ($10,000 plus $600 GST) in recognition of returned goods pursuant to subsection 232(2) and (3). Subsection 232(2) applies because there has been a reduction in the consideration on which Division II tax has been collected and an adjustment to Division II tax is therefore required. A note should be issued in prescribed form pursuant to SOR/91-44 Credit Note and Debit Note Information (GST/HST) Regulations.

Where the tax credited has already been remitted by the supplier as part of the supplier's net tax for the period or a preceding reporting period, the supplier is allowed to deduct such amount in determining the net tax for the period in which the credit note is issued. Conversely, the recipient of the credit note is required to add the tax amount credited in determining the net tax of the recipient for the reporting period in which the credit note is issued to the extent the tax amount in question had previously been deducted in calculating the recipient's net tax.

Situation #2:

ACo is correct in issuing a credit note in prescribed form pursuant to subsections 232(2) and (3) of the ETA.

As explained above, the supplier may adjust its net tax remittance for the reporting period in which the credit note is issued. Conversely, the recipient must adjust its net tax return for the reporting period in which the credit note is issued.

Situation #3:

As in situations 1 and 2, ACo is correct in issuing a credit note to acknowledge that goods have been returned by BCo and that a tax adjustment is required pursuant to subsection 232(2) and (3) of the ETA. The note must be in prescribed form and will serve to meet documentary requirements under the ETA. Subsection 232(2)(a) and (b) refers to the adjustment of tax in circumstances where it is charged but not collected or where the tax calculated was collected and to be refunded or credited. There is no mention of repayment of the consideration for a supply as this is a contractual matter between suppliers and recipients.

The reporting rules in this situation are similar to those in Situation #2.

Situation #4:

The issuance of a debit note is allowed in accordance with the ETA. BCo has met the documentary requirements of the ETA under subsection 232(3) by providing a prescribed debit note to ACo in consideration of the returned goods.

Where the recipient issues a debit note for the amount of the tax, the recipient must include the amount of the tax included on the debit note in its net tax calculation for the reporting period during which the debit note is issued. Conversely, the supplier may deduct the amount of tax from its net tax remittance for the reporting period in which it received the debit note.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call Michèle Lacasse, Rulings Officer, directly at (613) 954-9699.

Yours truly,

Owen Newell
Manager
General Operations Unit
Excise and GST/HST Rulings Directorate

2007/04/17 — RITS 86353 — Foreign Convention and Tour Incentive Program

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX wherein you questioned the availability of the 83% public service body (PSB) rebate of the Goods and Services Tax (GST) and the federal component of the Harmonized Sales Tax (HST) to a hospital authority with certain long-term care operations. XXXXX you discussed this issue with Elaine Bonnah of this office.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

We understand that your client (referred to as "TAXPAYER" in your letter) is a hospital authority operating a public hospital. XXXXX you advised that TAXPAYER has the authority of a province to operate a public hospital in the province and that it is totally funded by the province. XXXXX you advised that the public hospital had initially operated as a multi-purpose public hospital but has since come to specialize in the provision of long-term care. Acute care and palliative care are also provided at the public hospital. All of the health care supplied by TAXPAYER as a hospital authority to patients in its long-term care operations is provided in the public hospital building. TAXPAYER does not provide this health care to patients through a separate facility. The public hospital building where TAXPAYER supplies the long-term care has, among other things, an emergency room, x-ray facilities and laboratories.

XXXXX you also confirmed that prior to XXXXX, TAXPAYER had claimed and continues to claim the 83% PSB rebate as a designated hospital authority for GST/HST purposes in respect of its operations as a public hospital. Effective January 1, 2005, the 83% PSB rebate was extended to certain entities providing certain health care services, as defined in subsection 259(1). In your view, TAXPAYER qualifies for this 83% rebate in respect of its provision of long-term care to patients in the long-term care operations at the public hospital on the basis that it is a hospital authority making facility supplies at its long-term facility. Your position is based on the following:

•   The supply of care is made available or rendered to an individual at a public hospital or a qualifying facility. TAXPAYER is a public hospital and a qualifying facility.

•   Without TAXPAYER long-term care services, its patients would likely "fail to thrive". As such, its services are part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability, or for the purpose of palliative health care. For reasons of self care deficits (cognitive and physiological), individuals in receipt of services are unable to perform activities of daily living and/or are at risk of serious injury or death in the absence of said services.

•   Its services are undertaken in whole or part at the public hospital or qualifying facility.

•   All TAXPAYER's patients long-term care operations are under a "Consent to Treatment Agreement". Their treatment is provided by physicians on a regular basis, as well as other health care professionals, under the auspices of the attending physicians. In practice, the vast majority of physicians visit their patients at least on a weekly basis. Services are ordered and customized under the guidance of the attending physician in an effort to treat or prevent the worsening of present or incipient illness.

•   The patients in TAXPAYER long-term care operations are chronic care patients.

•   All patients are required to stay overnight. They must be admitted long-term or for a period of respite.

•   There is at least one full-time registered nurse (RN) at the facility at all times. Between 7:30 am and 4:30 pm, there are at least XXXXX RNs on each ward. After 4:30 pm, RNs make hourly rounds of each ward.

•   Because of the nature of its operations, there are physicians available at all times.

•   All patients in TAXPAYER long-term care operations require care that is described as Type III in nature by Statistics Canada for its purposes of collecting data on equivalencies of care. It is described as care requiring 24-hour availability of professional nursing care and supervision and medical management and/or therapeutic care with individual care a minimum 2.5 hrs/day.

•   Each resident is provided an Individualized Care Plan. In all cases, the Care Plan incorporates therapeutic services providing such licensed professionals as Occupational Therapists, Physical Therapists, Dieticians, Social Workers, Recreational Therapists, Pastoral Care professionals, Respiratory Therapists, Holistic Health professionals sanctioned by the attending physician and Pharmacists. On average, each patient is provided with 3.4 to 3.6 hours of such therapeutic health care per day. The amount of therapeutic services increases with the acuity of the resident's condition.

Interpretation Requested

You would like to know whether TAXPAYER qualifies for the 83% PSB rebate available under subsection 259(1) as a hospital authority making facility supplies.

Interpretation Given

As we have insufficient information with respect to TAXPAYER and the supplies it makes to patients in the long-term care operations at the public hospital to establish all the pertinent facts, we are unable to conclude whether TAXPAYER is making facility supplies and qualifies for the 83% PSB rebate available under subsection 259(1). Accordingly, we have provided the following comments for your review and guidance.

Comments

Pursuant to section 259, a "hospital authority" may claim the 83% PSB rebate of non-creditable tax charge to the extent that it intended to consume, use or supply property or services in activities engaged in by the person in operating a qualifying facility where facility supplies are made, or making facility supplies, ancillary supplies or home medical supplies.

If 90% or more of the purchases made by a hospital authority in a claim period are to operate the public hospital or to operate a qualifying facility where facility supplies are made, or to make facility supplies, ancillary supplies or home medical supplies, the hospital authority may claim the 83% PSB rebate on all of the GST and federal component of the HST that it paid or is payable on its purchases. If less than 90% of the purchases made by a hospital authority in a claim period are to operate a public hospital or to operate a qualifying facility where facility supplies are made, or to make facility supplies, ancillary supplies or home medical supplies the hospital authority may claim the 83% PSB rebate and the federal part of the HST that it paid or is payable on its purchases to the extent that they are used for these purposes. For example, if a hospital authority uses 70% of its purchases in the operation of a public hospital and 10% of its purchases to make facility supplies, it would be entitled to claim the 83% PSB rebate on 80% of its purchases.

Please note, a hospital authority that makes supplies at a public hospital that do not meet the requirements set out in the definition of "facility supply" would be limited to the 83% PSB rebate in respect of its operations as a public hospital, in accordance with the enclosed GST/HST Policy Statement P-245 - "Determination of"... Activities Engaged in by the Person in the Course of Operating a Public Hospital" for Purposes of the 83% Public Service Body Rebate for Hospital Authorities. In order to be designated as a "hospital authority" for purposes of claiming the 83% rebate in respect of its operations, an organization that operates a "public hospital" must encompass certain characteristics and meet all of the criteria described therein. Where a facility does not meet or ceases to meet all of these conditions, it is not a public hospital for GST/HST purposes and the hospital authority is not entitled to claim the 83% PSB rebate in respect of its operations. Where required, the CRA will issue a letter to the hospital authority revoking its designation.

You have advised that TAXPAYER is a hospital authority that has been claiming the 83% PSB rebate in respect of its operation of a public hospital.

You have also advised that the issue relevant for TAXPAYER is whether it makes facility supplies. As such, we have not addressed the matter of whether TAXPAYER makes ancillary supplies or home medical supplies.

To determine whether TAXPAYER is making facility supplies at a public hospital and therefore entitled to the 83% PSB rebate under section 259, we have first provided the definition of "facility supply" for ease of reference.

Facility supply

Subsection 259(1) defines the term "facility supply" as an exempt supply of property or a service in respect of which:

(a) the property is made available, or service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,

(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practice of medicine,

(B) a midwife acting in the course of the practice of midwifery,

(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practice of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that

(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and

(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier;

A "physician" is defined in subsection 259(1) of the ETA as a person who is entitled under the laws of a province to practise the profession of medicine.

In order for a supply of property made available or a service rendered by a hospital authority at a public hospital to be a "facility supply", the first requirement that must be met in its definition is that the supply must be an exempt supply for GST/HST purposes. Taxable supplies cannot qualify as facilities supplies. Therefore, only exempt supplies made by a hospital authority at a public hospital could qualify as facility supplies if the other requirements set out in the definition of "facility supply" are met.

The second requirement that must be met in the definition is that the exempt supply must be made as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability of the individual or providing palliative care and the process must reasonably be expected to take place under the active direction or supervision, or with the active involvement, of either a physician acting in the course of the practice of medicine or in certain circumstances, a midwife, a nurse practitioner or a person prescribed by regulation.

Where a hospital authority operates a public hospital that has chronic care patients who stay overnight at the public hospital, the additional requirements set out in clauses (a)(iii)(A) to (D) of the definition of "facility supply" must also be met. That is, the medically necessary process of health care for the individual must require, or reasonably be expected to require, that a registered nurse be at the public hospital at all times during the individual's stay; that a physician be at, or be on-call to attend, at the public hospital at all times during the individual's stay; and that the individual be subject to medical management and receive a range of therapeutic health care services, including registered nursing care, throughout the process for more than 10% of each calendar day or part of the day during which the individual stays at the public hospital.

You have advised that TAXPAYER operates a public hospital where chronic care patients in its long-term care operations located in the public hospital building stay overnight. An Individualized Care Plan is developed for each patient with patient treatment being provided on a regular basis by physicians. A vast majority of the physicians visit their patients at least on a weekly basis. Physicians are available at all times to provide care to patients in the long-term care operations at the public hospital. At least one RN is located in the long-term care operations at the public hospital at all times. On average, each patient in the long-term care operations receives 3.4 to 3.6 hours of therapeutic care each day from licensed professional therapists (e.g., occupational; physical; recreational; respiratory). The amount of therapeutic services is dependent upon the acuity of a patient's condition (e.g., increases with the acuity of illness).

In order to ascertain whether certain supplies made by TAXPAYER - a hospital authority - to the chronic care patients in the long-term care operations at the public hospital are facility supplies, each supply would have to be examined separately to determine whether the requirements set out in the definition of "facility supply" are met. For example, while an exempt supply of a cardiograph service made by a hospital authority on the orders of a physician to a chronic care patient staying overnight at a public hospital would fall within paragraph 259(a)(i) and (ii), the other requirements set out in clauses (a)(iii)(A) to (D) of the definition would have to be met in order for its supply to be a "facility supply".

To facilitate the provision of a more definition response to your query, we would have to review any agreements or other documentation relevant to the matter. If the information submitted to us is sufficient, we would be pleased to issue a GST/HST Ruling letter to you indicating whether TAXPAYER qualifies for the 83% PSB rebate in respect of certain supplies it makes to chronic care patients in the long-term care operations at the public hospital.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7952.

Yours truly,

Lynn Fournier Renner
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/05/03 — RITS 87246 — [Application of the GST/HST to Clinical Services Supplied by a Medical Practitioner]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX in which you request confirmation of our ruling XXXXX, concerning the application of the Goods and Services Tax (GST) to certain amounts charged in respect of a site in the XXXXX. The XXXXX GST/HST Rulings Centre forwarded your letter to us for response. We apologize for the delay in providing you with this reply.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Due to the confidentiality provisions of the ETA, we are unable to provide you with information relating specifically to the ruling referenced in your letter. However, we are pleased to provide you with the following ruling that addresses the application of the GST to amounts charged by your client, XXXXX.

Statement of Facts

Our understanding of the facts and transactions is as follows:

1. XXXXX (the "Original Landlord") was the sole owner of land that consists of XXXXX recreational vehicle sites (the "Park") located on XXXXX.

2. Prior to XXXXX, the Original Landlord managed the day-to-day operations of the Park.

3. Persons wishing to use a site in the Park (the "Lessees") entered into a "XXXXX agreement" with the Original Landlord that is a lease of a site in the Park. Under the agreement, a Lessee is given the right to the exclusive use of a specific site in the Park for a period of XXXXX years for the purpose of placing a vehicle or trailer designed for recreational use (the "Trailer") thereon. Upon entering into the agreement, a Lessee was required to make a payment that was more than nominal. The Lessee also agreed to pay a yearly fee to cover the Original Landlord's costs of operating the Park and to pay an amount in respect of the property taxes assessed against the Park.

4. The Park is serviced and accessible throughout the year. At least one of the Trailers is used as a primary place of residence. None of the Trailers qualify as a "mobile home", as defined in subsection 123(1).

5. A Disclosure Statement was filed and approved under the XXXXX to convert the Park into a "shared interest" development. The Disclosure Statement had the effect of dividing the fee simple estate in the Park into XXXXX undivided interests (the "Interests"). The Park is not governed by the XXXXX and an Interest is not a condominium or XXXXX lot. Persons purchasing an Interest are registered in the land titles office as a registered owner ("Owner") of an undivided 1/XXXXX interest in fee simple of the Park.

6. Lessees have the option of terminating their lease and purchasing an Interest. A Lessee pays nominal consideration to purchase an Interest (i.e., a minimal amount necessary to legally effect the purchase and become an Owner). A number of Lessees have opted to become Owners.

7. Owners are required to enter into a Co-Owners Agreement. Pursuant to the Co-Owners Agreement, ownership of an Interest confers upon an Owner the right to the exclusive use of a particular site within the Park and to use the common areas and facilities of the Park. ^[xi]footnote 1 Each Owner acknowledges that all other Owners have also been granted exclusive use of a site in the Park and the Owner agrees to refrain from interfering with any of the rights granted to the other Owners.

8. Persons who were not Lessees prior to the establishment of the shared interest development must now purchase an Interest if they wish to occupy a site in the Park and do not have the option of leasing a site under the "XXXXX agreement" previously made available by the Original Landlord. Such a person must pay more than a nominal amount to purchase an Interest.

9. Lessees who have opted to not become Owners continue to occupy their site in the Park pursuant to the agreement entered into with the Original Landlord. Given that the Original Landlord has sold some Interests, the yearly fee to cover the costs of operating the Park and the amount in respect of property taxes that is assessed against the Park are now payable to the Original Landlord and the other Owners (collectively, the "Interest Holders").

10. After an Interest was sold and prior to XXXXX, the Original Landlord collected, on behalf of the Interest Holders, the yearly fee and the amount in respect of the property taxes that are payable by the Lessees. However, the Original Landlord retained the Owners' share in these revenues in exchange for managing the day-to-day operations of the Park.

11. A number of sites in the Park have remained unoccupied since the Park was first developed in XXXXX. The Original Landlord has had the corresponding Interests listed for sale since the filing of the Disclosure Statement. The Original Landlord has ownership of the Interests that relate to the sites occupied by the Lessees and those Interests are not for sale.

12. XXXXX (the "Owners' Association") is a corporation that is a "non-profit organization" as that term is defined in subsection 123(1). Owners are members of the Owners' Association, which does not itself hold an Interest.

13. XXXXX the Owners' Association manages the day-to-day operations of the Park. The Owners' Association is registered for GST purposes.

14. On behalf of the Interest Holders, the Owners' Association now collects the yearly fee payable by the Lessees. Instead of physically giving the amounts collected to the Interest Holders, the Owner's Association retains these amounts in exchange for managing the day-to-day operations of the Park.

15. The Owners' Association sets an annual budget to estimate the costs (the Costs) involved in running the Park (e.g., the costs related to the maintenance of the Park, repairs, wages and benefits to staff and operating supplies). The Costs are recovered in the form of an annual maintenance fee (the "Fee") that is collected from the Interest Holders in proportion to their Interest. Although the Disclosure Statement indicates that certain amounts in respect of property taxes would be included in the Costs, we understand that such amounts are not included.

16. XXXXX of the Co-Owners Agreement provides that each Owner is to pay property taxes assessed against their site and an equal portion of the assessment made on the common areas of the Park. In the event that the assessing authority does not provide separate assessments against each site, the Interest Holders are to allocate the assessment for the Park against each site.

17. The Owner's Association pays the full property tax assessment on behalf of the Interest Holders then requests reimbursement of the property tax amount from the Interest Holders. Each Owner occupying a site contributes 1/XXXXX of the total property tax assessment while the Original Landlord is responsible for the remaining portion of the assessment taking into consideration the amounts in respect of the property taxes that is payable by the Lessees to the Interest Holders and collected by the Owners' Association.

Rulings Requested

You would like to know whether the Owners' Association is required to collect GST in respect of the yearly fee and the amount in respect of the property taxes that are payable by the Lessees. You would also like to know whether the Owners' Association is required to collect GST in respect of the Fee and the amount in respect of the property taxes that are payable by the Owners.

Rulings Given

Based on the facts set out above, we rule that

1. The Owners' Association is not required to collect GST in respect of the yearly fee payable by a Lessee and that it collects on behalf of the Interest Holders.

2. The Owners' Association is not required to collect GST in respect of the amount that relates to the property taxes that is payable by a Lessee and that it collects on behalf of the Interest Holders.

3. The Owners' Association is not required to collect GST in respect of the reimbursement of the property taxes it paid on behalf of the Interest Holders.

4. The Owners' Association is required to collect GST in respect of the day-to-day management service provided to the Interest Holders. The consideration for this service includes the Fee charged to the Interest Holders and an amount equal to the yearly fees paid by the Lessees that it collects on behalf of the Interest Holders and retains as consideration for its management service.

These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by these rulings provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect their validity, and all relevant facts and transactions have been fully disclosed.

Explanation

A "residential trailer park" of a person is defined in subsection 123(1) as:

"... the land that is included in a trailer park of the person or, where the person has two or more trailer parks that are immediately contiguous to each other, the land that is included in those contiguous trailer parks, and any buildings, fixtures and other appurtenances to the land that are reasonably necessary for

(a) the use and enjoyment of sites in the trailer parks by individuals residing in or occupying mobile homes, or travel trailers, motor homes or similar vehicles or trailers, situated or to be situated on those sites, or

(b) the purpose of engaging in the business of supplying those sites by way of lease, licence or similar arrangement,

but does not include such land and appurtenances or any part of them unless the land encompasses at least two sites and all or substantially all of the sites in the trailer parks

(c) are supplied, or are intended to be supplied, under a lease, license or similar arrangement under which continuous possession or use of a site is provided for a period of at least

(i) one month, in the case of a mobile home or other residential unit, and

(ii) twelve months, in the case of a travel trailer, motor home or similar vehicle or trailer that is not a residential unit, and

(d) if the sites were occupied by mobile homes, would be suitable for use by individuals as places of residence throughout the year".

A "trailer park" of a person is also defined in subsection 123(1) as:

"...a piece of land that is owned by or leased to the person and that is exclusively composed of

(a) one or more sites each of which is, or is intended to be, supplied by the person by way of lease, licence or similar arrangement to the owner, lessee or person in occupation or possession of a mobile home, or a travel trailer, motor home or similar vehicle or trailer, situated or to be situated on the site, and

(b) other land that is reasonably necessary for

(i) the use and enjoyment of the sites by individuals residing in or occupying mobile homes, or travel trailers, motor homes or similar vehicles or trailers, situated or to be situated on those sites, or

(ii) the purpose of engaging in the business of supplying the sites by way of lease, licence or similar arrangement".

Based on our understanding, the Park is a "residential trailer park" for purposes of the ETA.

Supplies of real property by way of lease, licence or similar arrangement are generally subject to the GST/HST unless a specific provision applies to exempt a particular supply. Section 7 of Part I of Schedule V to the ETA exempts the following:

"A supply

(a) of land (other than a site in a residential trailer park) made, under a lease, licence or similar arrangement which provides for continuous possession or use of the land for a period of at least one month, to

(i) the owner, lessee or person in occupation or possession of a residential unit that is or is to be affixed to the land for the purpose of its use and enjoyment as a place of residence for individuals, or

(ii) a person who is acquiring possession of the land for the purpose of constructing a residential complex on it in the course of a commercial activity,

(b) of a site in a residential trailer park made, under a lease, licence or similar arrangement which provides for continuous possession or use of the site for a period of at least one month, to the owner, lessee or person in occupation or possession of

(i) a mobile home, or

(ii) a travel trailer, motor home or similar vehicle or trailer,

situated or to be situated on the site, or ..."

The sites supplied by the Interest Holders to the Lessees by way of lease are exempt under paragraph 7(b) of Part I of Schedule V to the ETA and therefore not subject to the GST. The yearly fee and the amount in respect of the property taxes that are payable by a Lessee are additional consideration for the exempt supply of a site in the Park made by way of lease by the Interest Holders. As a result, the Interest Holders are not required to collect GST in respect of these amounts. The fact that the Owners' Association is collecting these amounts on behalf of the Interest Holders does not affect the tax status of the supply of a site by way of lease made by the Interest Holders to the Lessees even though the Owners' Association does not actually remit the amounts collected to the Interest Holders. The Owners' Association is not making a supply to the Lessees and is not required to collect GST in respect of these amounts that it collects on behalf of the Interest Holders.

The Owners' Association is also not required to collect GST when it seeks reimbursement of the property taxes that it paid on behalf of the Interest Holders. The Owner's Association is not making a supply to the Interest Holders when it seeks this reimbursement.

The Owners' Association is making a taxable supply of the day-to-day management service provided to the Interest Holders. There is no provision in the ETA that would exempt the service provided to the Interest Holders; the Owners' Association is therefore required to collect GST calculated on the total consideration for the supply of this service. The consideration for the supply includes the Fee charged to the Interest Holders. The consideration for the supply also includes an amount equal to the yearly fees paid by the Lessees that the Owners' Association collects on behalf of the Interest Holders and retains as consideration for its management service. The Interest Holders are required to pay the GST in respect of the day-to-day management service, calculated on the total consideration payable for the service, to the Owners' Association.

To explain further, the Owners' Association collects the yearly fees from the Lessees on behalf of the Interest Holders (fact 14). It is our view that the Interest Holders must pay to the Owners' Association an amount equivalent to those yearly fees as partial consideration for the supply of the management service provided by the Owners' Association. As such, the Owners' Association simply retains the yearly fees collected from the Lessees as consideration for that supply.

If you require clarification with respect to any of the issues discussed in this letter, please call Mr. Marcel Boivin, Manager of the Real Property Unit directly at 613-954-3772.

Yours truly,

Paul Hawtin
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/05/17 — RITS 64868 — [Application of the GST/HST to Public Service Bodies and Non-Profit Organizations]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (The Product).

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is packaged loosely in XXXXX-gram bags.

2. The Product consists of XXXXX.

3. The Product labelling describes it as XXXXX

4. The back of the package states, XXXXX.

5. You have provided samples of the Product's XXXXX varieties.

6. XXXXX.

7. XXXXX.

8. The Product is placed in the snack aisle near hard pretzels in XXXXX stores.

9. XXXXX.

Ruling Requested

You would like to know the GST/HST status of supplies of XXXXX the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 6% GST or 14% HST pursuant to section 165.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 6% on the value of the consideration for the supply (14% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated, pursuant to subsection 165(3). The tax rate in respect of a zero-rated supply is 0%, where a zero-rated supply is a supply that is included in Schedule VI.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI, zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section. Paragraph 1(f) excludes supplies of chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels (but not including any product that is sold primarily as a breakfast cereal) from zero-rating.

We consider the Product to be a brittle pretzel that is not sold primarily as a breakfast cereal. As a result, the Product falls under the exclusion pursuant to paragraph 1(f) of Part III of Schedule VI and its supplies are taxable at 6% GST or 14% HST, as applicable.

XXXXX.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9585.

Yours truly,

Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/03/21 — RITS 83621 — GST on Holdback Amounts

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning your eligibility to obtain a Goods and Services Tax (GST)/Harmonized Sales Tax (HST) refund or credit from your direct seller. We regret the delay in responding.

Statement of Facts

We understand that your client, XXXXX is not registered for GST/HST purposes. XXXXX

XXXXX.

•   XXXXX.

•   XXXXX, ...

•   XXXXX:

–   XXXXX ...

–   XXXXX.

XXXXX:

XXXXX

XXXXX

1. XXXXX.

4. XXXXX.

XXXXX

XXXXX

XXXXX:

XXXXX:

•   XXXXX;

•   XXXXX;

•   XXXXX.

•   XXXXX.

XXXXX has purchased some XXXXX products for use in XXXXX business and for XXXXX personal use. Occasionally, XXXXX resells a product to a customer or to another Consultant. These sales are made at the same price XXXXX paid to purchase the products. XXXXX.

XXXXX.

Ruling Requested

You would like to know if XXXXX is entitled to a refund or credit under the ACM on XXXXX purchases of exclusive products that were:

•   taken for personal use;

•   used in XXXXX business for demonstration purposes;

•   resold to a person other than another independent sales contractor (ISC) or

•   resold to another ISC .

If XXXXX is entitled to a refund or credit under the ACM, what documentary evidence would be acceptable to XXXXX?

If XXXXX provides XXXXX satisfactory evidence that the exclusive products that XXXXX is purchasing are for XXXXX own use at the time XXXXX orders the products, would XXXXX be permitted to charge GST/HST on the selling price rather than having to charge tax on the suggested retail price and then later pay or credit the difference in tax?

Lastly, you would like confirmation that transportation charges on zero-rated goods are also zero-rated.

Interpretation Given

In accordance with section 1.4 of the GST/HST Memoranda Series, a ruling can only be issued with reference to a clearly defined fact situation of a particular person. We are aware that you have given us everything that you could but from our perspective there is missing information. XXXXX. Therefore, we cannot provide you with a ruling. However, we are pleased to provide you with the following interpretation.

If XXXXX:

•   meets the definition of an ISC (described in paragraph 8 of GST/HST Memorandum 14.1, Direct Sellers (the Memorandum)) and

•   sells exclusive products (described in paragraph 7 of the Memorandum) and

•   is an ISC of XXXXX,

then XXXXX may ask XXXXX for a tax refund or a credit on XXXXX purchases of exclusive products taken for XXXXX own use or used in XXXXX business for demonstration purposes (described in paragraph 34 of the Memorandum). Similarly, XXXXX may ask XXXXX for a tax refund or a credit on XXXXX sales to a person other than another ISC (described in paragraph 33 of the Memorandum). Whether or not XXXXX refunds or credits the tax to XXXXX is a private matter between XXXXX and XXXXX direct seller.

When a supply of an exclusive product is made from one ISC to another ISC of the direct seller, the supply is deemed not to have been made by the first ISC and not to have been received by the other ISC provided that the tax has been accounted for by the direct seller when the product was supplied to the first ISC. In effect, supplies from one ISC of a direct seller to another ISC are ignored for GST/HST purposes. This is described in paragraph 28 of the Memorandum.

As to the issue of the documentary evidence to be provided by XXXXX to XXXXX when XXXXX requests a refund or credit, this is a matter between XXXXX and XXXXX direct seller. Paragraph 35 in the Memorandum specifies that in order to take a deduction in determining net tax, the direct seller must maintain evidence that the ISC has, for instance, appropriated the exclusive product for the ISC's own use or made a supply for less than the suggested retail price. The Canada Revenue Agency (CRA) may accept a variety of documents as evidence provided that the document(s) contain enough information about the transaction in question.

You have also asked if XXXXX provides XXXXX with satisfactory evidence that the exclusive products that XXXXX is purchasing are for XXXXX own use at the time XXXXX orders the products, would XXXXX be permitted to charge GST/HST on the selling price rather than having to charge tax on the suggested retail price and then later pay or credit the difference in tax? The answer to this question is no because the ACM does not permit this.

Lastly, you have asked if transportation charges on zero-rated goods are also zero-rated. This depends on the terms of sale. If you sell goods and deliver them directly to your customer at a price that includes delivery, and the terms of sale are FOB the customer's premises (i.e., title to the goods passes when the customer receives them), GST or HST applies to the full price charged for the goods at the appropriate tax rate:

•   14% in Nova Scotia, New Brunswick, and Newfoundland (the "participating provinces");

•   6% elsewhere in Canada; or

•   0% for zero-rated goods, regardless of where the supply is made.

This is not a separate supply of a freight transportation service in these circumstances, even where a delivery charge is itemized separately on an invoice.

If the goods are sold FOB the vendor (i.e., title to the goods passes when the goods are given to the carrier), the delivery service is a separate supply, and GST or HST applies to the service. This means that, even if the goods are zero-rated, such as basic groceries, the delivery charge is taxable at 6% (or 14% if the goods are delivered to a participating province), unless the freight transportation service itself is zero-rated.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the Excise Tax Act, regulations, or our interpretative policy could affect this interpretation.

At your request, we have searched our database for previous rulings written by our office that dealt with the issues discussed in this letter and did not find one that is similar to your case. If you require clarification with respect to any of the topics covered in this letter, please call me directly at 613-954-9700.

Yours truly,

Michèle Routhier
GST/HST Rulings Officer
Services and Intangibles Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

2007/06/13 — RITS 88506 — Tax Status of Maple Sap