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 supplies of t-shirts in a fund-raising campaign by XXXXX. We apologize for the delay in responding to your enquiry.

Statement of Facts

We understand that:

1. XXXXX is a national, private, non-profit organization committed to XXXXX.

2. XXXXX is registered for GST/HST purposes XXXXX with the effective date of XXXXX. XXXXX fiscal year end is XXXXX.

3. XXXXX is a registered charity within the meaning assigned by subsection 248(1) of the Income Tax Act and, therefore, XXXXX is also a charity for purposes of the Excise Tax Act (ETA).

4. XXXXX makes supplies of various merchandise as part of its fund-raising activities. It operates an XXXXX store called XXXXX offering XXXXX merchandise for sale including clothing, sporting goods, collectibles, jewellery, home accents, books and stationery.

5. You indicated that clothing for sale in the store is generally marked up on a XXXXX; for example, an item of clothing costing $XXXXX would generally sell for $XXXXX. XXXXX currently has long-sleeved t-shirts on sale for $XXXXX from its XXXXX store. XXXXX also has sales of clearance merchandise, including clothing, at reduced prices from time to time.

6. Another fund-raiser is XXXXX auction, where customers can bid on XXXXX merchandise XXXXX. In addition, XXXXX merchandise can be acquired at XXXXX fund-raising events which are held across Canada and from its gift shop located at XXXXX.

7. In the fall XXXXX, XXXXX began a fund-raising campaign with a solicitation mailed out to XXXXX on XXXXX. The solicitation letter stated that XXXXX was making a very special, limited-time offer and with a donation of $XXXXX or more, the person would receive a free XXXXX t-shirt. The donation would go towards continuing XXXXX efforts.

8. The reply form included with the solicitation gave a person the option to make a gift of $XXXXX or more and be sent the t-shirt in a desired size XXXXX or to make a gift of any amount with no t-shirt required. The reply form also indicated that an official tax receipt would be issued for donations of more than $XXXXX or on request.

9. The solicitation was also posted on XXXXX web site and offered through XXXXX toll-free XXXXX number XXXXX from XXXXX to XXXXX. XXXXX.

10. The t-shirts for this fund-raising campaign were acquired new from a supplier XXXXX regularly purchases XXXXX from to sell in its XXXXX store. However, the t-shirts were a special order and were only available through this fund-raising campaign and were not available for purchase from XXXXX store, auction or gift shop.

11. You indicated that this fund-raising campaign was the first time XXXXX offered an advantage. As the advantage was more than 10% and less than 80% of the contribution, you stated that XXXXX issued a tax receipt for $XXXXX to a person who made a contribution of $XXXXX and received the t-shirt, which XXXXX estimated had a fair market value of $XXXXX.

12. The solicitation mailed out XXXXX did not indicate the value of the t-shirt nor did it specify that the tax receipt would only be $XXXXX to those persons receiving the t-shirts.

13. XXXXX also allowed a person, who enquired about obtaining additional t-shirts, to acquire extra t-shirts for $XXXXX each after the initial contribution of $XXXXX.

14. XXXXX ordered a total of XXXXX t-shirts for this fund-raising campaign on XXXXX purchase orders: XXXXX. The cost to XXXXX on a per t-shirt basis was: XXXXX.

15. XXXXX received contributions and requests for the t-shirts on a weekly basis into the spring of XXXXX. XXXXX did a mail-out of the t-shirts to persons who sent in contributions and requested the t-shirts once each week from XXXXX until the last t-shirt was mailed out in XXXXX. All the t-shirts ordered for this fund-raising campaign were supplied to persons making contributions and there was no leftover stock.

16. Due to the success of the t-shirt fund-raising campaign, XXXXX offered a XXXXX in return for a contribution of $XXXXX for its fall XXXXX campaign and a XXXXX in return for a contribution of $XXXXXfor its spring XXXXX campaign. XXXXX.

Rulings Requested

1. Were the t-shirts mailed by XXXXX to persons who made contributions of $XXXXX exempt supplies?

2. Were the extra t-shirts mailed by XXXXX to persons who made additional contributions of $XXXXX exempt supplies?

Rulings Given

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

1. The t-shirts mailed by XXXXX to persons who made contributions of $XXXXX were taxable supplies and the GST or HST applied on the consideration of $XXXXX for each supply of a t-shirt mailed to an address in Canada.

2. The t-shirts mailed by XXXXX to persons who made additional contributions of $XXXXX were taxable supplies and the GST or HST applied on the consideration of $XXXXX for each supply of an extra t-shirt mailed to an address in Canada.

These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by these rulings 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.

Explanation

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

Under the ETA, the GST or HST is imposed on the value of the consideration for a taxable supply of property or a service made in Canada. "Consideration" is defined under subsection 123(1) to include any amount (monetary or non-monetary) that is payable for a supply by operation of law.

However, the GST or HST does not apply to gifts. A gift may be defined at common law as a voluntary transfer of property made without consideration. No right, privilege or material benefit may be conferred on the donor or on a person designated by the donor as a consequence of the gift, except where the benefit is of nominal value (e.g., a token of appreciation such as a pin or flower).

It is a question of fact whether a contribution made by a person to a charity is a gift.

In general, where a charity receives a contribution of money from a person made voluntarily and gratuitously and the charity does not provide anything in return for the contribution, then the amount contributed is considered a gift at law. If the charity provided the person with an item of nominal value as a token of appreciation that did not serve as an inducement to make the contribution, the amount contributed will still be considered a gift. As well, the item of nominal value given by the charity will be considered a gift made for no consideration.

However, where the charity provides the person making the contribution with property or a service of more than nominal value that served as an inducement to make the contribution, then for ETA purposes, the amount of the contribution is not regarded as a gift but as consideration for the supply of the property or service given in return by the charity. As well, the supply of the property or service made by the charity to the contributor is not a gift made for no consideration.

Based on the facts provided, XXXXX were solicited for contributions of $XXXXX with the offer of receiving a XXXXX t-shirt in return. The offer of the t-shirts to members served as an inducement to make a contribution to XXXXX. The t-shirts were not nominal in value and a person could only receive the t-shirt upon making a contribution. XXXXX did not offer the t-shirts unconditionally and only mailed out the t-shirts to persons after receiving their contributions. As a result, XXXXX supplies of the t-shirts were not gifts made for no consideration.

Therefore, where a person made an initial contribution of $XXXXX and was supplied with a t-shirt by XXXXX, the consideration for the supply of the t-shirt was $XXXXX. Where a person made an additional contribution of $XXXXX for the supply of an extra t-shirt, the consideration for the supply was $XXXXX. Whether tax applied on the consideration for the supplies of the t-shirts depends on whether XXXXX supplies of the t-shirts were taxable supplies or exempt supplies.

Exempt supplies are not subject to the GST or HST and are listed in Schedule V. Most supplies of property or services made by a charity are exempt supplies under section 1 of Part V.1 of Schedule V unless the supply is excluded in any of the paragraphs (a) to (n) of that section.

In particular, excluded from exemption under paragraph 1(d) of Part V.1 of Schedule V is a supply of tangible personal property (e.g., a t-shirt) acquired by a charity for the purpose of making a supply of the property and the property was neither donated to the charity nor used by another person before its acquisition by the charity.

As the t-shirts were not used or donated before being acquired by XXXXX, the supplies of the t-shirts to persons making contributions of $XXXXX and $XXXXX are excluded from exemption under paragraph 1(d) of Part V.1 of Schedule V.

However, there are other exemptions listed in Schedule V that may apply to certain supplies made by a charity. Particularly, section 3 of Part V.1 of Schedule V exempts a supply by way of sale of personal property or a service made by a charity in the course of a fund-raising activity except for supplies listed in paragraphs (a) to (c) of that section. For instance, excluded from exemption under paragraph 3(a) of Part V.1 of Schedule V is a supply by way of sale of any personal property or service made by a charity in the course of a fund-raising activity where:

•   the charity makes supplies of such property or services in the course of that activity on a regular or continuous basis throughout the year (any period of twelve consecutive months) or a significant portion (30% or more) of the year; or

•   the agreement for the supply entitles the recipient to receive from the charity property or services on a regular or continuous basis throughout the year or a significant portion of the year.

Please note that "sale", in respect of property, is defined under subsection 123(1) to include any transfer of the ownership of the property and a transfer of the possession of the property under an agreement to transfer ownership of the property.

As XXXXX transferred possession and ownership of the t-shirts to persons making contributions, its supplies of the t-shirts were made by way of sale for ETA purposes. Further, as XXXXX supplied the t-shirts to contributors on a weekly basis from XXXXX to early XXXXX, it sold the t-shirts on a regular and continuous basis throughout a significant portion of the year. As a result, XXXXX supplies of the t-shirts to persons making contributions of $XXXXX and $XXXXX were not exempt supplies under section 3 of Part V.1 of Schedule V.

As there are no other provisions to exempt these supplies, XXXXX supplies of t-shirts made in Canada were taxable supplies. The GST or HST will apply to the consideration XXXXX for the supply of a t-shirt to a contributor unless the supply was a zero-rated supply.

Zero-rated supplies are listed in Schedule VI and are taxable supplies subject to a tax rate of 0% (in other words, the GST or HST is not collected on the consideration for a zero-rated supply). For example, under paragraph 12(c) of Part V of Schedule VI, a supply of tangible personal property (e.g., a t-shirt) is a zero-rated supply where the supplier sends the property by mail or courier to an address outside Canada.

Thus, where a charity makes a supply of tangible personal property in Canada that is not an exempt supply under any provision in Schedule V and the charity sends the property by mail or courier to an address outside Canada, then the supply will be a zero-rated supply and the GST or HST will not apply to the consideration for the supply. However, section 12 of Part V of Schedule VI does not apply where the charity sends the property by mail or courier to an address in Canada.

As there are no other provisions in Schedule V or VI that apply, XXXXX supplies of the t-shirts to contributors that were mailed to addresses in Canada were taxable supplies and the GST or HST applied on the value of consideration XXXXX for the supplies of the t-shirts.

The HST will apply on the value of the consideration for supplies of the t-shirts XXXXX made in the participating provinces of Nova Scotia, New Brunswick and Newfoundland and Labrador. In general, a supply by way of sale of tangible personal property is considered to be made in a participating province if the property is delivered or made available in a participating province (including by means of mail, courier, or common carrier retained by the supplier) to the recipient of the supply. Alternatively, the GST will apply on the value of the consideration for supplies of t-shirts XXXXX delivered or made available in the rest of Canada.

More information on the application of the HST to taxable supplies can be found in our Technical Information Bulletin B-078, Place of Supply Rules under the HST, available on the Canada Revenue Agency's (CRA's) web site at http://www.cra-arc.gc.ca.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST or HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers on the CRA web site at http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html.

Other Information

You enquired whether similar fund-raising activities by XXXXX would attract the GST or HST where XXXXX offers an advantage. Whether the GST or HST would apply is determined on a case-by-case basis. However, where a charity that is a GST/HST registrant supplies tangible personal property in Canada to a person in return for a contribution in the course of a fund-raising activity and the property:

•   is more than nominal in value;

•   was acquired by the charity for the purpose of making a supply of the property;

•   was neither donated nor used by another person before its acquisition by the charity; and

•   is supplied by way of sale on a regular or continuous basis throughout the year or a significant portion of the year or the recipient is entitled to receive from the charity supplies of the property by way of sale on a regular or continuous basis throughout the year or a significant portion of the year;

then, generally the supply of the property will be a taxable supply subject to the GST or HST on the consideration for the supply (other than a zero-rated supply).

For more information on the tax status of supplies made by a charity, please refer to our guide RC4082, GST/HST Information for Charities, available on the CRA's web site.

As a note, we are aware that there are proposed amendments to the Income Tax Act to recognize that part of a contribution made by a person to a charity may qualify as a gift where the charity provides the person with an advantage in return and certain conditions are met under the proposed income tax legislation. However, at this time, there are no similar proposed amendments to the ETA.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9592.

Yours truly,

Nadine Kennedy, CMA
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/08/21 — RITS 64292 — Tax Status of Freight Transportation Service

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 supply of XXXXX (the Product).

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

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html on the CRA Web site.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is packaged in XXXXX-gram pouches in cartons containing XXXXX pouches.

2. The Product is approximately round in shape.

3. The Product is available XXXXX.

4. XXXXX.

5. XXXXX.

6. The labelling on cartons containing the Product describes the Product as follows: XXXXX.

7. The Product is not sold primarily as a breakfast cereal.

Ruling Requested

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

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 [P]art 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.

Under paragraph 1(l) of Part III of Schedule VI, the following products are excluded from zero-rating:

"fruit bars, rolls or drops or similar fruit-based snack foods."

"Fruit-based" implies a mixture of fruit and at least one other ingredient. Products having fruit as an important ingredient, such that the product is represented to consumers as being fruit-based, will be within this exclusion. It may also mean that a product is not dominantly composed of fruits and may refer to the use of fruit for flavouring purposes. However, snack foods containing 100% fruit in the form of bars also fall within the scope of this provision.

As the Product is considered to be a fruit based snack food for the purposes of this provision, it is excluded from zero-rating pursuant to paragraph 1(l) of Part III of Schedule VI and therefore taxable at the rate of 6% GST or 14% HST, as applicable.

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

2006/08/31 — RITS 82132 — Application of GST/HST to [Non-carbonated Fruit Juice or Fruit Flavoured Beverage]

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 and attachments XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of sprigs of XXXXX grass.

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

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the CRA Web site.

Statement of Facts

We understand the facts to be as follows, based on your submission and also on information obtained from the XXXXX web site and other Internet sources as indicated further on.

XXXXX grass is a warm-season, deep-rooted perennial grass that can be used for grazing or hay. However, the usage of this grass extends across lawns, golf courses, athletic fields, bowling greens, tennis courts, home putting greens, high traffic areas and landscaping areas of all kinds. It also has great soil erosion capacity for roadsides, water banks, ditch banks, and use for low maintenance area in the full sun. Depending upon the cultivar, it can be used in pastures and for haying purposes.

XXXXX grass has been found growing in many native forms all over the world. The grass is a drought tolerant, fast growing, full sun grass and can grow on soils of low fertility as long as they are well draining. This is a tenacious grass and in one form or another is found growing in approximately one third of the United States XXXXX.

XXXXX.

XXXXX.

XXXXX.

You are importing a type of XXXXX grass known as XXXXX grass, named after the company that developed and sells it. XXXXX grass is not a new strain of XXXXX grass. It was discovered growing in XXXXX. It is a naturally occurring mutant strain of XXXXX grass. It is like a hybrid in that it produces no viable seed, yet it was not a crossbreed of two other cultivars.

XXXXX grass is also being used on sports fields, lawns, and other high-traffic areas.

XXXXX. It is successfully growing as far north as XXXXX, but the company does not guarantee that it will do so in every case. In most cases, the further north the latitude, the more management the grass will require.

XXXXX grass only comes as "sprigs," which are live root material with some runner or stem material attached. They are approximately 6 to 9 inches long and are packaged by the box, with five bushels to the box. The sprigs can typically live out of the ground for approximately five days.

There are XXXXX primary methods for planting XXXXX grass:

•   XXXXX.

According to the Canadian Hay Association web site, the main forages in Canada are timothy, alfalfa and mixed hays (none of which were identified as containing XXXXX grass).

Ruling Requested

You would like to know whether the supply of sprigs of XXXXX grass is a zero-rated supply.

Ruling Given

Based on the facts set out above, we rule that the supply of sprigs of XXXXX grass is taxable at 6% GST or 14% HST.

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.

Explanation

Section 2 of Part IV of Schedule VI to the Excise Tax Act (ETA) zero-rates the following:

A supply of

(a) grains or seeds in their natural state, treated for seeding purposes or irradiated for storage purposes,

(b) hay or silage, or

(c) other fodder crops,

that are ordinarily used as, or to produce, food for human consumption or feed for farm livestock or poultry, when supplied in a quantity that is larger than the quantity that is ordinarily sold or offered for sale to consumers, but not including grains or seeds or mixtures thereof that are packaged, prepared or sold for use as feed for wild birds or as pet food.

It is our view that XXXXX grass is not ordinarily used as, or to produce, feed for farm livestock or poultry in Canada. Webster's Third New International Dictionary defines "ordinarily" as meaning "in the ordinary course of events" or "to the usual extent". It defines "ordinary" as meaning "occurring or encountered in the usual course of events, not uncommon or exceptional, not remarkable, routine, normal". In Canada, XXXXX grass is not commonly used as a forage crop or to produce hay. XXXXX grass is primarily a warm weather grass. The XXXXX web site acknowledges that although it is successfully growing as far north as XXXXX, the company does not guarantee that it will do so in every case.

As noted in the Statement of Facts, the Canadian Hay Association identifies the main forages in Canada as being timothy, alfalfa and mixed hays (none of which included XXXXX grass). A review of the web sites of some of the larger Canadian suppliers of forage grasses seeds showed that they do not list XXXXX grass among their products. We were not able to find any references indicating that XXXXX grass is a common forage crop in Canada.

It is therefore our conclusion that the use of XXXXX grass as or to produce feed for farm livestock or poultry is not common or normal in Canada. If sometime in the future, the use of XXXXX grass as a forage crop becomes common, we would be prepared to re-examine our position.

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 me directly at (613) 952-7909.

Yours truly,

Gunar Ozols
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/09/25 — RITS 52094 — Independent Medical Examinations and Other Independent Assessments

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 requesting a subsequent ruling on the application of Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to membership fees charged by XXXXX. We apologize for the delay in responding to your enquiry.

GST/HST Rulings of the XXXXX Tax Services Office previously issued a ruling XXXXX stating that XXXXX supply of the membership to a member is taxable at the rate of 7%. You have requested that we reconsider this ruling.

Statement of Facts

We understand that:

1. XXXXX is XXXXX incorporated under the XXXXX Act of XXXXX.

2. XXXXX goal and mission is to assist all charity/non-profit groups across XXXXX to earn funds to support cultural, sporting, religious, youth, educational and community services activities in XXXXX communities through XXXXX events.

3. XXXXX is not currently registered for GST/HST purposes and it is not a registered charity within the meaning assigned by subsection 248(1) of the Income Tax Act.

4. You stated that XXXXX is a non-profit organization as defined in the Excise Tax Act (ETA) and is therefore a public sector body under that legislation.

5. XXXXX:

6. Under the XXXXX Act and the XXXXX Regulation of XXXXX, and in accordance with the XXXXX, the XXXXX is delegated the authority to license, regulate and monitor XXXXX activities in XXXXX. While a XXXXX association must have a licence issued by the XXXXX to operate a XXXXX event in the province of XXXXX, the XXXXX association does not have to be a member of XXXXX to be licensed.

7. Under XXXXX By-laws, a "Member" means:

(a) Any XXXXX association holding a valid licence issued by the XXXXX for the purpose of holding XXXXX, which has made an application to become a member and paid all fees and dues as required by the By-laws XXXXX. A member in this category may enjoy all rights and privileges of XXXXX and shall be entitled to one vote at a general meeting either by the association representative or by the association manager, when duly appointed by their XXXXX association.

(b) Any XXXXX holding a valid licence issued by the XXXXX for the purpose of holding XXXXX, which has made an application to become a member and paid all fees and dues as required by the By-laws XXXXX. A member in this category may enjoy all rights and privileges of XXXXX.

(c) Any XXXXX holding a valid licence issued by the XXXXX, duly appointed to the Board of Directors by the XXXXX. A member in this category may serve on XXXXX Board of Directors and shall have voting privileges as a Director, but shall not have a vote at the annual or general meetings unless appointed as a representative by their XXXXX associations.

8. Under XXXXX the By-laws, the Board, upon approval of the membership, may prescribe annual and/or other non-refundable fees payable by the membership and set a date when such fees are due and payable.

9. XXXXX the By-laws provide that the membership may impose levies upon themselves for the purposes of enabling XXXXX to pursue its objects. For these purposes, a levy is a one-time assessment of funds payable equally by all members within the same category of membership within XXXXX. To date, XXXXX has not assessed any levies under this provision.

10. According to XXXXX the By-laws, a member in good standing may vote at all meetings of XXXXX (but only through its representative), participate in the general activities of XXXXX and attend all meetings of the membership through the attendance of its representative or any (non-voting) delegates as permitted by the membership.

11. Under XXXXX the By-laws XXXXX, if requested by the XXXXX for input into a concern, the Directors should canvass the member associations involved prior to making any announcement to the XXXXX. If a member asks for support on an issue affecting them with the XXXXX, then other groups that may be affected by the request are to be asked for their input prior to making a decision as to the support. If there is conflict then XXXXX should take no stance and just forward the request to the XXXXX with acknowledgement of same.

12. According to XXXXX the By-laws, members are not in good standing if their dues are more than XXXXX in arrears. Members in good standing will receive group rates that have been negotiated by XXXXX.

13. The XXXXX currently lists XXXXX association facilities in XXXXX and XXXXX of those XXXXX associations are XXXXX members. The number of XXXXX associations in XXXXX and the number of those XXXXX associations that are members of XXXXX fluctuate from year to year. At present, XXXXX does not have any XXXXX members.

14. XXXXX.

15. XXXXX charges its XXXXX association members a membership fee based on XXXXX. Membership fees for XXXXX association members range from $XXXXX to $XXXXX per year. XXXXX.

16. Members of XXXXX receive the following membership benefits:

Advocacy - XXXXX acts as an advocate representing its members' interests with respect to issues that arise. This is done through the media, in meetings with XXXXX and other industry stakeholders and in sessions with government departments, committees, elected officials and the XXXXX. XXXXX has made submissions with respect to XXXXX rules and regulations, XXXXX. The XXXXX considered XXXXX input on behalf of its members when drafting its XXXXX.

Advertising and promotion - According to its XXXXX newsletter, XXXXX produced and distributed XXXXX brochures on the benefits of XXXXX. The brochures were distributed to member XXXXX, various travel and tourist information centres and attractions, seniors' centres and motels and hotels throughout XXXXX. This brochure listed XXXXX association members and their locations, phone numbers and scheduled XXXXX events XXXXX. It also listed XXXXX website address and a few suppliers XXXXX. XXXXX published and distributed the brochures XXXXX in XXXXX. The XXXXX brochure was also distributed in XXXXX and XXXXX.

At the time of publishing the brochures, only XXXXX associations that were members of XXXXX could be listed. XXXXX asked its members for voluntary contributions of $XXXXX to help defray the costs of printing the brochures XXXXX but the majority of members did not respond. XXXXX also sold advertising XXXXX to one supplier for $XXXXX. All other suppliers provided services or merchandise in exchange for having their names on the brochure XXXXX.

XXXXX also lists its XXXXX association members on its website including their locations, phone numbers and scheduled XXXXX events XXXXX. In addition, XXXXX regularly issues news releases to the general media to promote XXXXX throughout the province. In the future, XXXXX may promote its XXXXX association members through radio advertising.

Insurance - XXXXX negotiated a special group rate on a custom-designed insurance program for its XXXXX association members through XXXXX. The insurer is XXXXX. Individual XXXXX associations are the policy holders of the insurance policies and pay the premiums. Under the insurance program designed for XXXXX members, XXXXX associations are eligible for a discount and higher deductible options for additional premium savings.

In a telephone conversation XXXXX with XXXXX GST/HST Rulings, XXXXX, indicated that XXXXX had negotiated a XXXXX% discount on the annual insurance premiums charged by the insurance company from what non-members would pay for the insurance. In your XXXXX, you stated that because XXXXX strongly encourages its members to use XXXXX, any XXXXX member is given a XXXXX% to XXXXX% discount on premiums. XXXXX lets XXXXX know who the XXXXX members are so that the discounts can be granted which you also stated are only available to XXXXX members.

Conferences - XXXXX negotiated reduced rates for its members to attend XXXXX conferences held each year. One conference is the XXXXX. The registration form for the XXXXX conference lists an early bird rate of $XXXXX and a regular rate of $XXXXX. XXXXX negotiated a reduced rate of $XXXXX (a reduction of $XXXXX off the early bird rate) for its members to attend the XXXXX conferences. Also, according to XXXXX newsletter, XXXXX negotiated a reduction in registration from $XXXXX to $XXXXX to attend the XXXXX.

With your XXXXX you attached a copy of the XXXXX registration form for the XXXXX conference which XXXXX did show a reduced rate of $XXXXX (a reduction of $XXXXX off the early bird rate) for members of XXXXX associations and workers within the XXXXX industry.

The other conference is the XXXXX. The registration form for the XXXXX listed early bird rates and regular rates for individuals and for groups XXXXX. The early bird group rate for XXXXX days of the conference was $XXXXX and for the full XXXXX days was $XXXXX. The regular group rate for XXXXX days was $XXXXX and for XXXXX days was $XXXXX. Due to XXXXX negotiations, its members were entitled to an early bird group rate of $XXXXX for XXXXX days and $XXXXX for XXXXX days; a discount of $XXXXX from the advertised early bird group rates. You indicated that XXXXX also negotiated the same discount for the XXXXX. To obtain the discounted rate, XXXXX association members must register through XXXXX as a group. It is XXXXX who sends the group registration to XXXXX.

In addition, according to XXXXX newsletter, it negotiated a reduction in the early bird registration fees (if a member registers through XXXXX as a group) to $XXXXX for members to attend the XXXXX (XXXXX indicated that this is a savings of approximately $XXXXX in the newsletter). Further, in its XXXXX newsletter, XXXXX informed its members that it would again be offering registration reductions for its members when they registered as one group to attend the XXXXX. XXXXX stated that the full conference discounted group rate was $XXXXX; a saving of approximately $XXXXX for each member.

Publications - XXXXX gathers information that affects XXXXX and the XXXXX association members and passes the information, with its comments, along to its members via its website, meetings, regular newsletters, mail-outs and faxes.

17. XXXXX has never charged the GST on its supplies of memberships to XXXXX associations.

Ruling Requested

What is the tax status of supplies of XXXXX association memberships made by XXXXX?

Ruling Given

Based on the facts set out above, we rule that the supply of a XXXXX association membership made by XXXXX in XXXXX is a taxable supply subject to the GST.

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.

Explanation

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

Generally, supplies of memberships made in XXXXX by an association will be taxable supplies subject to the GST unless the supply meets the conditions for exemption under a provision in Schedule V.

Section 17 of Part VI of Schedule V exempts a supply of a membership in a "public sector body" (other than a membership in a club the main purpose of which is to provide dining, recreational or sporting facilities or in a registered party) where each member does not receive a benefit by reason of the membership other than the "allowable benefits" listed in paragraphs 17(a) to 17(f) of that section. An organization that is a "non-profit organization" as defined in subsection 123(1) is also a "public sector body" for ETA purposes.

As stated in the ruling issued by GST/HST Rulings in XXXXX, generally, a "benefit" of membership is the right to any property or service of value regardless of the extent to which the right is actually exercised by individual members. All possible benefits accruing to members must be taken into consideration in determining the tax status of a membership.

Where the benefits members have the right to receive exceed the allowable benefits under section 17 of Part VI of Schedule V, then the supply of the membership will not be exempt under that provision even when those benefits are available to each and every member.

In your letter, you submitted that XXXXX association memberships are exempt under section 17 of Part VI of Schedule V and, in particular, the membership benefits do not exceed the allowable benefits found under paragraphs 17(a) and 17(d) of Part VI of Schedule V.

Paragraph 17(a) of Part VI of Schedule V

Under paragraph 17(a) of Part VI of Schedule V, a member of a non-profit organization may receive an "indirect benefit" that is intended to accrue to all members collectively without causing an otherwise exempt membership to be taxable.

Indirect is not defined in the ETA. However, we can look to its ordinary meaning as defined in the following dictionaries, in part, as:

•   not directly connected; secondary (Gage Canadian Dictionary);

•   not directly aimed at or achieved; not resulting directly from an action or cause; being the secondary goal of an action; roundabout (Webster's Third New International Dictionary); and

•   not direct in relation or connection; not having an immediate bearing or application; circuitous, not leading to aim or result by plainest course or method or obvious means, roundabout, not resulting directly from an act or cause but more or less remotely connected with or growing out of it (Black's Law Dictionary, 6th edition).

The fact that a benefit is available to all members does not necessarily mean that the benefit is indirect. A benefit can be direct and accrue to all members or to all members in a particular class of membership where an organization has set out different classes of membership with different rights and privileges in its governing documents.

A benefit has to be indirect and intended to accrue to all members collectively in order to fall under paragraph 17(a) of Part VI of Schedule V. Benefits that are meant to accrue only to members by reason of their membership are generally direct benefits.

Generally, activities carried out by a non-profit organization on behalf of a broad public sector so that both members and non-members alike benefit in a roundabout or secondary manner will be considered to be an indirect benefit.

On the other hand, where the activities are directly aimed at benefiting only the members of a particular organization, then the activities will generally be considered a direct benefit.

XXXXX association members had the right to acquire a listing that included their names, locations, phone numbers and scheduled XXXXX events in XXXXX promotional XXXXX brochures. The brochures were distributed beginning in XXXXX and have continued to be distributed to various travel and tourist centres, places of accommodation and other sites throughout XXXXX.

This benefit has commercial applications for XXXXX association members as the brochures specifically identify and promote the operations of the XXXXX association members. This benefit was aimed solely at XXXXX association members and any gain resulting from the advertising was meant to accrue directly to those members since non-member XXXXX associations and XXXXX did not have the right to acquire a listing in the brochures at the time XXXXX made the supply. As such, this benefit could not be considered a secondary or unintended consequence of membership and, therefore, is not an indirect benefit.

While it is a possibility that a XXXXX association, that did not renew its membership in XXXXX after XXXXX, may still benefit from its listing as a result of subsequent distributions of the brochures, this does not negate the fact that XXXXX association members receive a direct benefit that has commercial applications from the continuing distribution of the brochures.

Therefore, as XXXXX association members have the right to promotional and advertising benefits as a result of receiving listings in the brochures (as well as on XXXXX website), this is a direct benefit that will not fall under paragraph 17(a) or any other paragraph under section 17 of Part VI of Schedule V.

Paragraph 17(d) of Part VI of Schedule V

Under paragraph 17(d) of Part VI of Schedule V, the right to receive or acquire property or services supplied to the member for consideration that is not part of the consideration for the membership and that is equal to the "fair market value" of the property or services at the time the supply is made is an allowable benefit.

Under subsection 123(1), "fair market value" is defined as meaning the fair market value of a property or a service supplied to a person without reference to any tax excluded by section 154 from the consideration for the supply. According to GST/HST Policy Statement P-165R, Fair Market Value for Purposes of Part IX of the Excise Tax Act, the Canada Revenue Agency generally considers that fair market value represents the highest price, expressed in terms of money or money's worth, obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties acting at arm's length, neither party being under any compulsion to transact.

As such, where one of the benefits of membership in a non-profit organization is the right to receive or acquire property or services from the organization or a third party, that benefit will not cause the membership to be taxable as long as the members pay a separate consideration equal to the fair market value of the property or services.

Based on the facts provided, XXXXX association members are eligible to attend the XXXXX conferences for XXXXX negotiated group rates which are less than the fair market value group rates (that is, the higher group rates listed on the conference registration forms for other conference participants) when registering through XXXXX as a group. This benefit exceeds the allowable benefit under paragraph 17(d) of Part VI of Schedule V and is not an allowable benefit under any other paragraph in section 17 of Part VI of Schedule V.

XXXXX also negotiated discounts on a custom-designed insurance program for its XXXXX association members with XXXXX. XXXXX informs this agency of who the members are so that the discounts can be granted. You stated XXXXX that although other XXXXX in XXXXX can obtain the XXXXX insurance program through XXXXX, only XXXXX association members can obtain the XXXXX% to XXXXX% discounts on their premiums. As such, as members have the right to receive or acquire the custom-designed XXXXX insurance program for discounted rates by reason of their membership in XXXXX and these rates are not available to other non-member groups, this is not an allowable benefit under paragraph 17(d) of Part VI of Schedule V.

In conclusion, XXXXX association members do receive direct benefits by reason of their membership that exceed the allowable benefits listed in paragraphs 17(a) to 17(f) of Part VI of Schedule V and, as there are no other provisions in Schedule V to exempt XXXXX supplies of XXXXX association memberships made in XXXXX, they are taxable supplies subject to the GST.

Effective July 1, 2006, the rate of the GST was reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST or HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers on the CRA web site at http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html.

Other Information

You requested in your fax XXXXX that should we rule the XXXXX association memberships were taxable, to provide you with a clear indication of what XXXXX could do to satisfy the requirements of the exempting provisions in order to avoid XXXXX having to charge unrecoverable GST to its members. Please note that the Excise and GST/HST Rulings Directorate does not provide advice on tax planning or tax strategy and, therefore, we cannot advise XXXXX on how to structure its operations or transactions to get a desired tax result.

More information on our services can be found in GST/HST Memoranda Series 1.4, Goods and Services Tax Rulings, available on our website at: www.cra-arc.gc.ca. If you have any further questions or require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9592.

Yours truly,

Nadine Kennedy
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/09/25 — RITS 54717 — Independent Medical Examinations and Other Independent Assessments

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 fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of XXXXX (the Product).

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

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the CRA Web site.

Statement of Facts

We understand the facts to be as follows:

1. The Product is manufactured by XXXXX.

2. The Product is labelled as XXXXX.

3. The ingredients are XXXXX.

4. The Product is packaged in a XXXXX grams in weight.

5. The Product has a XXXXX flavour.

6. Based on the image on the front of the package, it appears that the Product is intended to be used as a topping for salads.

Ruling Requested

You would like to know how the GST/HST applies to supplies of 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.

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.

Explanation

Supplies of most basic groceries, that is, food and beverages marketed for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), are zero-rated. Certain categories of foodstuffs, for example, carbonated beverages, candies and confectionery, and snack foods are taxable at 6% or 14%. In particular, paragraph 1(g) of Part III of Schedule VI excludes from zero-rating "salted nuts or salted seeds".

The Product is seasoned sliced XXXXX. XXXXX are a nut. The list of ingredients includes salt as an ingredient. Furthermore, the flavouring is described as XXXXX, which would indicate a salty tasting flavour. It is the position of the CRA that nuts or seeds that are available in various flavours such as Cajun or barbeque are taxable at 6% or 14% if the seasoning or coating includes salt as an ingredient.

Although the Product is promoted as a salad topping and could therefore be viewed as an ingredient, paragraph 1(g) does not distinguish between various uses of salted nuts or salted seeds. It is sufficient that the nuts or seeds are salted for the item to be excluded from zero-rating. Neither is it a requirement of paragraph 1(g) that the nuts or seeds be whole.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-7909.

Yours truly,

Gunar Ozols
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/09/25 — RITS 82628 — Application of GST/HST to XXXXX Jerky 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:

This is in reply to the facsimile message XXXXX from XXXXX and further to our telephone conversation XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX Air Loss Mattress (the XXXXX mattress). XXXXX we advised that the supply of the mattress (invoiced on April 21, 2006) was subject to the 7% GST/HST.

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

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the Canada Revenue Agency (CRA) Web site.

According to the information previously provided by XXXXX we understand that the XXXXX mattress was purchased in XXXXX and the GST/HST was charged in the amount of $XXXXX. After further review and research of the qualities and features of the XXXXX mattress and in consideration of the additional information you provided in our telephone conversation, we have revised our position regarding the tax status of this mattress. XXXXX.

Statement of Facts

On the basis of the information provided and our additional research, our understanding of the facts is as follows:

•   The XXXXX mattress has features designed for individuals who are confined to beds for extended periods of time, which help to alleviate the effects of bedsores that occur in these situations.

•   The XXXXX mattress is typically used by hospitals as a component of a hospital bed in providing inpatient accommodation.

•   The XXXXX mattress is committed by design for use with hospital beds in that its inflated dimensions of 35 inches wide and 80 inches long match typical hospital bed frames. The dimensions of hospital bed frames are slightly smaller then the 'twin' sized residential bed frame (which is the smallest residential bed for adult use). As such, the XXXXX mattress is not reasonably expected to have an alternate use; i.e., with a residential bed frame.

•   The power cord for the XXXXX mattress's air cells has features that meet certain standards set by the XXXXX for the power cord's use in a hospital. It is referred to as "hospital grade plug".

•   The supplier of the mattress, XXXXX, advertises this mattress to the health care market, and sells it almost exclusively to hospitals and personal care homes. On occasion, the supplier will sell the XXXXX individuals to individuals for use in their homes. The individuals using the XXXXX mattress in their homes are patients who are confined to the bed and as a result, require the mattress for therapeutic purposes.

•   The XXXXX mattress was purchased for use XXXXX with a hospital bed in the home, and is the same mattress XXXXX used while in the hospital.

Ruling Requested

You would like to know whether sale of the XXXXX mattress is zero-rated, i.e., subject to the 0% GST/HST.

Ruling Given

Based on the facts set out above, we rule that the sale of the XXXXX mattress is zero-rated; i.e., subject to 0% GST/HST, pursuant to section 32 of Part II of Schedule VI.

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.

Explanation

The general rule under the ETA is that all supplies of goods and services are subject to the 6% GST (or to the 14% HST for supplies made in New Brunswick, Newfoundland and Labrador, and Nova Scotia), with a limited number of exceptions. These exceptions include specific supplies described in Schedule VI, which applies the tax at a rate of 0%. A limited number of medical devices are identified in Part II of Schedule VI. For instance, pursuant to section 32 of that Part, the supply of a part, accessory or attachment that is specially designed for a property described in that Part is zero-rated. A hospital bed is described in section 4 of that Part. On the basis of the facts set out above, we consider the XXXXX mattress to be a part that is specially designed for a hospital bed and therefore the sale of this mattress is zero-rated; i.e., subject to 0% GST/HST.

Additional Information

If you paid an amount as GST/HST on a supply that should have been zero-rated, you can request a refund or credit of the amount from the supplier or alternatively, you can apply for a rebate from the CRA under section 261. If the supplier refunds or credits the tax, it must do so within two years after the day the amount was charged or collected and it must provide you with a credit note containing prescribed information. If instead you choose to apply for the rebate from the CRA, you must complete and submit the attached 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 after the day you 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 Healthcare Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/09/21 — RITS 43690 — Independent Medical Examinations and Other Independent Assessments

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 request 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.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html on the Canada Revenue Agency Web site.

Statement of Facts

Our understanding of the fact is as follows:

1. The Product is sold in XXXXX litre plastic bottles.

2. The ingredients of the Product are: XXXXX.

3. The nutrition facts table on the Product container indicates that a XXXXX serving of the Product contains the following vitamins and minerals:

% Daily Value

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

4. The Product labelling states that the Product is XXXXX.

5. The Product contains XXXXX% natural juice by volume.

6. The Product is non-carbonated.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are zero-rated pursuant to section 1 of Part III of Schedule VI.

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.

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.

The terms "food" and "beverage" are not defined in the ETA. However, the Canada Revenue Agency (CRA) considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to allay hunger or quench thirst, or for enjoyment rather than for therapeutic or preventative effects.

GST/HST Policy Statement P-240, Application of GST/HST to Products Commonly Described as "Dietary Supplements", outlines the criteria that the CRA considers in determining whether a product is a food, beverage or ingredient for human consumption or a dietary supplement. These criteria consider the labelling, packaging, and marketing of the product.

The labelling, packaging, and marketing do not indicate that the Product is a dietary supplement. The Product is not identified as a supplement, but as a fruit juice beverage. The Product does not have a Drug Identification Number (DIN), a Homeopathic Medicine Number (DIN-HM), or a Natural Product Number (NPN). The only claims made on the label are general health claims. There are no restrictions on the amount of the Product that may be consumed, nor are there any warnings regarding the consumption of the Product. The Product is marketed as a beverage and is sold in grocery stores.

Based on the criteria in GST/HST Policy Statement P-240, the Product is a beverage for GST/HST purposes.

Supplies of non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk-based beverages, that contain less than 25% by volume of

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

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state,

or goods that, when added to water, produce such a beverage, are excluded from zero-rating under paragraph 1(d) of Part III of Schedule VI.

The Product is a non-carbonated fruit juice or fruit flavoured beverage containing XXXXX% natural fruit juice by volume. As a result, its supplies are not excluded from zero-rating pursuant to paragraph (d) of Part III of Schedule VI.

Supplies of beverages (other than unflavoured milk), or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding are excluded from zero-rating under paragraph 1(n) of Part III of Schedule VI, except

(i) when prepared and pre-packaged specially for consumption by babies,

(ii) when sold in multiples, pre-packaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving ^[x]footnote 1.

As a result of the application of subparagraph 1(n)(iii) in conjunction with section 1 of Part III of Schedule VI, supplies of the Product are zero-rated.

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

2006/10/16 — RITS 82614 — [Application of the GST/HST on Fruit Juice Beverages]

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 request 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.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html on the CRA Web site.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is packaged in XXXXX mL XXXXX containers and sold in shrink-wrapped multiples of XXXXX containers.

2. The packaging contains the following information about the Product:

•   it is identified as XXXXX;

•   it contains XXXXX;

•   there is a XXXXX;

•   the product has XXXXX; and

•   the label lists XXXXX.

3. XXXXX.

4. XXXXX.

5. The Product contains XXXXX% natural fruit juice.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product.

Ruling Given

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

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.

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.

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

GST/HST Policy Statement P-240, Application of GST/HST to Products Commonly Described as "Dietary Supplements", outlines the criteria that the CRA considers in determining whether a product is a food, beverage or ingredient for human consumption or a dietary supplement.

The terms "food" and "beverage" are not defined in the ETA. However, the Canada Revenue Agency (CRA) considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to allay hunger or quench thirst, or for enjoyment rather than for therapeutic or preventative effects.

Products that are labelled or marketed as products to be consumed to facilitate the intake of certain ingredients (nutritive or otherwise) or which place an emphasis on claims relating to the benefits of the product, for example, therapeutic or preventative effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying food or beverages. Rather, these products as represented as being for another purpose.

Specific criteria that GST/HST Policy Statement P-240 XXXXX considers to determine whether a product is a dietary supplement include its labelling, packaging/format, and marketing.

The labelling, packaging, and marketing indicate that the Product is a dietary supplement. The Product is identified on its label as a XXXXX, and not as a beverage. The XXXXX Web site describes XXXXX. The packaging and product name XXXXX content of the Product.

Although the Product is sold in a XXXXX format, this is merely a means of consuming the XXXXX contained therein. While the Product could be consumed to quench thirst, this is secondary to its primary purpose, which is to provide a means to consume the XXXXX that it contains. XXXXX.

As a result of the application of GST/HST Policy Statement P-240, the Product is considered to be a dietary supplement and not a beverage for GST/HST purposes and is not zero-rated under section 1 of Part III of Schedule VI. As there are no other applicable zero-rating or exempting provisions, the Product is taxable at 6% GST or 14% HST.

This letter confirms the ruling that we made, XXXXX in which we took the position that the Product is not a zero-rated beverage and is taxable at 7% GST or 15% HST.

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

2006/10/16 — RITS 82620 — Application of GST/HST to Pre-packaged Desserts

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 request 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.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html on the CRA Web site.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is sold in a XXXXX-gram plastic container.

2. The ingredients of the Product are: XXXXX.

3. The labelling on the Product container and lid state that XXXXX.

4. The XXXXX states that the Product is XXXXX.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are zero-rated pursuant to section 1 of Part III of Schedule VI.

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.

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.

The terms "food" and "beverage" are not defined in the ETA. However, the Canada Revenue Agency (CRA) considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to allay hunger or quench thirst, or for enjoyment rather than for therapeutic or preventative effects.

Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if the product added to flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, must be a food or beverage.

As none of the exclusions included in paragraphs (a) to (r) of section 1 of Part III of Schedule VI apply in this case, supplies of the Product are zero-rated.

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

2006/10/16 — RITS 82623 — [Application of the GST/HST on Fruit-Based Beverages]

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.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html on the CRA Web site.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is sold in XXXXX mL containers.

2. XXXXX, this ruling applies only to supplies of single XXXXX mL containers of the Product and not to supplies of multiples prepackaged by the manufacturer or producer.

3. The ingredients of the Product are: XXXXX.

4. The labelling indicates that the Product contains XXXXX.

5. The labelling also states that the Product is an XXXXX.

6. The nutrition facts table on the Product container indicates that a XXXXX mL serving of the Product contains the XXXXX:

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

7. No health claims are made on the Product packaging.

Ruling Requested

You would like to know how the GST/HST applies to supplies of 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, 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.

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.

Supplies of beverages (other than unflavoured milk), or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding are excluded from zero-rating under paragraph 1(n) of Part III of Schedule VI, except

(i) when prepared and pre-packaged specially for consumption by babies,

(ii) when sold in multiples, pre-packaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving ^[xii]footnote 1,

As a result of paragraph 1(n), supplies of the Product are taxable at 6% GST or 14% HST.

Please note that pursuant to paragraph 1(n) of Part III of Schedule VI, the GST/HST status of the supply of single servings of a beverage sold in multiples may under certain circumstances be different than that of the supply of individual single servings of the same product. This letter does not address the GST/HST status of the supply of packages containing multiple single servings of the Product.

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

2006/10/10 — RITS 82625 — Application of GST/HST to Seasoned Sliced Nuts

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 amounts XXXXX invoices the pension plan trust for the gross remuneration XXXXX pays to employees who are under the control and direction of the trust.

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

We understand the following from the letter you submitted including information pertaining to job descriptions, the XXXXX:

1. XXXXX established the XXXXX (the "plan") in XXXXX.

2. The plan is a single employer plan and is subject to the Pension Benefits Standards Act, 1985, and related regulations.

3. The plan is funded through a trust created pursuant to the Trust Deed between the XXXXX.

4. The XXXXX administers the plan and trust.

5. XXXXX

XXXXX.

6. XXXXX.

7. XXXXX pays salaries to employees that are classified as "other assistants and officers" in XXXXX stated above. By virtue of XXXXX paying their salaries, these employees are members of the plan and are also covered by benefit plans that are available to all XXXXX employees. XXXXX makes remittances, issues T4 slips, and performs all payroll functions relating to these employees.

8. XXXXX invoices the trust on a monthly basis the gross amount of remuneration XXXXX has paid to the employees classified as "other assistants and officers", and charges and remits GST/HST on the amount because it is XXXXX understanding that there is a re-supply of services from XXXXX to the trust.

9. These employees do not perform any duties for or on behalf of XXXXX. The trust controls and directs them, is able to terminate their employment and is legally liable for all termination payments required to be made.

Interpretation Requested

You would like to know if there is a taxable supply by XXXXX to the trust where XXXXX invoices the trust for the salaries and benefits XXXXX has paid to the employees that are "other assistants and officers" under the above circumstances.

It is your position that there is no taxable supply by XXXXX to the trust by virtue of the decision in Key Property Management Corporation v. The Queen (Tax Court of Canada, March 12, 2004), and two GST/HST application rulings issued by the Canada Revenue Agency XXXXX.

You summarized that in the court case in question, the Owner Corporations were the employers of the superintendents although Key paid the salaries of the superintendents, and therefore the fees paid by the Owner Corporations to Key were not subject to GST.

With respect to the two application rulings, you summarized that in both cases the seconded employee continued to receive salary and employment benefits from the previous employer and that it was ruled that the seconding organization was not required to pay GST/HST on the reimbursements paid to the other party.

In light of the court case and the two application rulings discussed above, XXXXX contends that the true employer is the trust on the basis the trust directs and controls the "other assistants and officers", is able to terminate their employment and is liable for termination payments required to be paid. XXXXX is acting as agent of the trust when it pays salaries to the employees and as such XXXXX is not making a taxable supply to the trust. The trust is an entity separate and distinct from XXXXX and is able to contract on its own behalf.

Interpretation Given

It is the position of the Canada Revenue Agency that employment status for GST/HST purposes is the same as for income tax purposes, and whether an employer-employee relationship exists between any two parties is a question of fact and is determined by CPP/EI Rulings based on the facts of a particular situation. The Excise and GST/HST Rulings Directorate does not determine employer/employee relationships.

In regards to the application rulings discussed above, these rulings pertain to specific fact situations involving secondments to the federal government. We determined in certain cases that in secondments to the federal government, the employee was an employee of their home organization and also the host organization, the federal government. Therefore, the reimbursement paid by the federal government (the host organization) to the home organization was not subject to GST/HST. It is important to note that this position is in reference to specific secondments to the federal government, and as such is limited to those cases only and does not apply in any other situation.

We understand from the information provided that XXXXX is remitting source deductions, issuing T4's, and performing all payroll functions relating to the employees that are classified as "other assistants and officers". It would appear XXXXX is the employer of these employees for purposes of the ITA.

If the XXXXX is in fact the employer, it is not paying salaries to employees on behalf of the trust, and would be considered to be making a taxable supply of employee services to the trust. The payment the trust makes to XXXXX in respect of the employees would be the consideration payable for the supply and would be subject to GST/HST.

Should you wish a ruling on whether XXXXX or the trust is the employer in the situation at hand, you can request a ruling from CPP/EI Rulings, Revenue Collections Division of your local tax services office. If it is ruled that the trust is the employer then we agree with your view that XXXXX will be considered to be paying salaries on behalf of the trust and the reimbursement paid by the trust to XXXXX will not be consideration for a supply made by XXXXX to the trust, and will not be subject to GST/HST.

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) 952-9213.

Yours truly,

Susan Kissner
Industry Sector Specialist
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2006/09/28 — RITS 78322 — Determination of Whether a Separate Supply Occurs upon the Exercise of a Lease Renewal Clause

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:

The purpose of this letter is to advise you that the Canada Revenue Agency ("CRA") has issued Policy Statement P-248, The application of the GST/HST to the supply of an independent medical examination ("IME") and to other independent assessments. We are also replying to your letter XXXXX in which you requested clarification on what constitutes a "health care facility" for purposes of the Excise Tax Act (the "ETA") as well as clarification on the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to IMEs and other independent assessments supplied by various health professionals and when a supply does not involve an assessment rendered in a health care facility operated by the supplier.

This policy statement can be found under the GST/HST Policy Statements link at (http://www.cra-arc.gc.ca/menu/GTPP_200-e.html) on the CRA Web site. A copy of the policy statement is enclosed for your reference. The policy represents a change in the CRA's position on the application of the GST/HST to sections 5 and 7 of Part II of Schedule V to the ETA and it describes the circumstances under which IMEs and other independent assessments will be exempt from the GST/HST under these provisions as well as section 2 of that Part.

The effective date of the policy is June 8, 2001, which is the date the Tax Court of Canada issued its decision regarding Riverfront Medical Evaluations Ltd. v. Canada ("Riverfront"). The policy is based on careful consideration of the Tax Court of Canada and Federal Court of Appeal decisions in Riverfront, the exemptions in the ETA that apply to supplies made by medical practitioners and practitioners, as well as the information provided by stakeholders on the issue.

In situations where the CRA has issued specific interpretations that differ from this policy, the policy should be applied to the affected person(s) on the earlier of the day the CRA has made the public aware of this policy or informs the person(s) in writing of the application of the tax to their transaction(s). However, the CRA may apply the policy retroactively, where this would be beneficial to a person and the person asks that the policy be applied retroactively.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. You may refer to Reduction in the Rate of the GST/HST - Questions and Answers at (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) for more information on the transitional rules for the reduction of the GST/HST rate.

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

Interpretation Requested

We understand that you are requesting clarification on the following three issues related to the provision of IMEs and other independent assessments:

1. What constitutes a "health care facility" for purpose of the ETA;

2. The tax status of assessment services provided by regulated health professionals, such as nurses, massage therapists, kinesiologists, social workers and vocational examiners; and

3. The application of the GST/HST to an assessment supplied by a person who does not operate a health care facility or when the supply does not involve a service rendered in a health care facility operated by the supplier.

Interpretation Given

The GST/HST is a transaction tax and for each transaction, the supplier must determine whether the tax is applicable. The general rule under in section 165 of the ETA is that all supplies of goods and services made in Canada are subject to the GST/HST at the rate of 6% or 14%. There are exceptions for certain health care services that are identified as being exempt from the GST/HST. These exempt services are listed in Part II of Schedule V. The exempting provisions apply to specific suppliers as well as to specific services. In particular, section 2 of that Part exempts a supply made by the operator of a "health care facility" of an "institutional health care service" if the service is rendered to a patient or resident of the facility. The ETA defines "health care facility" and "institutional health care service". In addition, sections 5 and 7 of that Part exempt from GST/HST certain supplies made by a "medical practitioner" and a "practitioner", as those suppliers are defined in section 1 of that Part.

1. Health care facility

For supplies of IMEs and independent assessments, the relevant part of the definition of "health care facility" is paragraph 1(a) of Part II of Schedule V, which is describing a facility, or part thereof, operated for the purpose of providing hospital or medical care. This means a facility, or part thereof, operated for the purpose of providing care to patients by physicians acting in the course of the practice of medicine. The CRA considers medical care to mean services provided to patients by physicians, including examining or interviewing patients, and would consider the following factors to determine the purpose for which a facility is operated:

•   The operator contracts with physicians to provide medical care to patients of the facility;

•   Physicians provide medical care in the operator's facility; and

•   The facility has consultation and examination rooms and equipment and supplies to support the provision of medical care.

In a multi-disciplinary facility, only the part of that facility's operations where medical care is provided to patients falls within the definition of "health care facility". Services provided by other practitioners, such as dentists, physiotherapists, chiropodists, chiropractors, occupational therapists, and psychologists, are not included within the meaning of medical care. Thus, the part of a multi-disciplinary facility operated to provide care by other practitioners is not a health care facility for ETA purposes.

2. Services provided by regulated health professionals

With respect to your query regarding assessment services provided by a variety of regulated health professionals, such as nurses, massage therapists, kinesiologists, social workers and vocational examiners, as noted above the GST/HST always applies unless there is a specific exemption for the particular service. The application of the exemption in section 7 of Part II of Schedule V is limited to an optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech therapy ^[ix]footnote 1, occupational therapy or psychological service rendered to an individual when supplied by a "practitioner" of the service. By definition in the ETA, a "practitioner" means a person who practises the profession of optometry, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech therapy occupational therapy, or psychology and 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, then the person must have the qualifications equivalent to those necessary to be licensed or certified in another province.

Services provided by nurses, massage therapists, kinesiologists, social workers and vocational examiners are not listed in section 7 of Part II of Schedule V and therefore, this exempting provision cannot apply to these services. However, section 6 of that Part contains exemptions for nursing services rendered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse, and a registered psychiatric nurse. A supply of a nursing service is exempt where it is rendered to an individual in a health care facility or in the individual's place of residence; the service is a private-duty nursing service; or the supply is made to a "public sector body". The ETA defines "public sector body" and this definition includes organizations such as non-profit organizations, charities, municipalities, and hospital authorities.

The Notice of Ways and Means Motion introduced by the Department of Finance on October 3, 2003, included a proposal to exempt certain services rendered in the practice of the profession of social work. The proposed amendment to the ETA will apply to services supplied by a person who practises the profession of social work and the person is licensed or otherwise certified to practise the profession in the province in which the service is supplied. If no such licensing or certification is required in that province, then the proposed amendment stipulates that the person must have the qualifications equivalent to those necessary to be so licensed or certified in a province where such a requirement exists.

The proposed amendment, which has not yet received Royal Assent, will cover only certain social work services, which are described as services rendered to an individual within a professional-client relationship between the supplier and the individual, where those services are provided for the prevention, assessment or remediation of a physical, emotional, behavioural, or mental disorder or disability of the individual, or to assist the individual in coping with a disorder or disability, or to assist another person to whom the individual is related or to whom the individual provides care or supervision otherwise than in a professional capacity.

The issue involving independent assessments involved the application of section 7 of Part II of Schedule V; thus nursing services and social work services were not part of the revised policy. The CRA will consider on a case-by-case basis whether a supply falls within the scope of the exemption for nursing services or the proposed amendment to exempt social work services.

With respect to services provided by massage therapists, kinesiologists and vocational examiners, please note that these services are not specifically identified in the exempting provisions in the ETA that relate to health care services. Accordingly, these services are generally taxable, notwithstanding that they may be provided by a regulated health professional.

Accordingly, because of the limitations and conditions contained in the exempting provisions relating to health care services, your recommendation to simply refer to "services rendered by a regulated health professional" as exempt supplies would not accurately reflect the provisions of the ETA.

3. Services not provided in a health care facility operated by the supplier

We understand that this issue relates to a supply that consists of an assessment of an individual where the assessment is rendered at another person's facility. That is, in the scenario you described, the supply does not involve an assessment of an individual provided in a health care facility operated by the supplier; instead the supplier refers the individual to another person for an assessment.

As previously noted, section 2 of Part II of Schedule V exempts a supply of an "institutional health care service" rendered to a patient or resident of a "health care facility" where the operator of that facility supplies these services to them within its facility. The definition of "institutional health care service" describes services rendered by a person that are provided in a health care facility where the operator of the facility remunerates the person for these services. The definite article "the" in paragraph (h) of this definition links the location where the person's services are rendered to the operator's facility. Services rendered by a person remunerated by the operator of a health care facility fall within the definition only when the person's services are provided in the operator's facility.

On the basis of the definition of "institutional health care service", the exemption in section 2 of Part II of Schedule V does not apply to services rendered outside the supplier's health care facility nor does it apply to services that are not medical care, as such services do not fall within the meaning of "institutional health care service" since they were not provided in a "health care facility"; i.e., that part of the supplier's facility where medical care is not provided is not a "health care facility" as defined in paragraph 1(a) of Part II of Schedule V. Further, where the supplier does not operate a health care facility, this exempting provision will not apply to any assessments supplied by this supplier.

Accordingly, if the supply consists of an assessment rendered by a practitioner to an individual and the supplier is not a "practitioner" as defined in the ETA, the supply is taxable regardless of where it was rendered; i.e., the location of the assessment is not a factor. Similarly, if the supply consists of an assessment rendered to an individual by a physician and the supplier is a person other than that physician or the supplier does not operate a health care facility, the supply is taxable. However, as noted above, if the supply consists of an assessment rendered to an individual by a physician and the supplier operates a "health care facility", the location of the assessment is a factor for purposes section 2 of Part II of Schedule V because of the definition of "institutional health care service". This latter supply will be taxable if it did not consist of a service identified in this definition that was provided in the supplier's health care facility and rendered to a patient of the facility.

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 CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require additional information, 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

2006/10/02 — RITS 81650 — Impact of GST Rate Reduction on Holdbacks and Progress Payments