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 facsimile XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the construction of retirement residences by XXXXX. We apologize for the delay in providing our response.

In particular, you wish to obtain a general interpretation, based on the sample residency agreement provided, on whether a person, who constructs a retirement home to provide long-term residential accommodation and services to seniors, is eligible for the New Residential Rental Property (NRRP) rebate where the total monthly fee under the agreement is inclusive of the accommodations as well as meals and other services. Specifically, based on the sample residency agreement provided, whether there is a supply of a residential unit that is exempt under section 6 of Part I of Schedule V to the Excise Tax Act (ETA).

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

Statement of Facts

Our understanding of the facts as outlined in your facsimile XXXXX, in the supplementary documents provided XXXXX, and in various telephone conversations, is as follows:

1. XXXXX is in the business of building retirement residences for use by seniors as a place of residence. XXXXX is registered for GST/HST purposes.

2. XXXXX provides residential accommodation, meals and, if required, limited assistance with the activities of daily living as well as other services. The extent of services provided will vary depending upon the resident's needs. XXXXX objective is to provide a retirement residence for seniors in an independent living environment.

3. An apartment in a retirement residence typically consists of one or two bedrooms, a living space, kitchenette and a four-piece bathroom. Common features include a wireless emergency response system, telephone and cable TV outlets. Residents are required to furnish their own apartments.

Operating Requirements

4. The retirement residences are generally not licensed in the provinces in which XXXXX currently owns such facilities. In contrast to nursing homes, which are generally licensed by provincial health ministries ^[v]footnote 1, the retirement residences must generally comply with provincial landlord and tenant legislation.

5. XXXXX the retirement residences are subject to the XXXXX. XXXXX sets out the rights and duties of landlords and tenants of XXXXX.

6. The XXXXX requires that there be a written tenancy agreement relating to the tenancy of every tenant in a XXXXX. The tenancy agreement is to include provisions with respect to the tenant's right to privacy, notice requirement for rent increases, details of charges with respect to XXXXX and meals, written notice for terminating a tenancy and provisions dealing with eviction or transfer of XXXXX tenants in situations where a tenant no longer requires the level of care provided, or requires a higher level of care than the landlord can provide.

7. Before entering into a tenancy agreement with a new tenant in a XXXXX, the XXXXX requires that the landlord provide the new tenant a XXXXX information package containing prescribed information ^[vi]footnote 2.

Admission Procedures

8. Unlike admission to a nursing home XXXXX where a person is required to apply through the XXXXX and be approved for admission by the XXXXX in accordance with provincially established criteria, individuals wishing to reside in retirement residences may apply directly to the residence of their choice.

9. An assessment of a prospective resident is made where there is concern as to the resident's ability to cope with the activities of daily living. Such an assessment may be made by a nurse at the particular retirement residence or, where the prospective resident was referred by a social worker of a hospital, by the social worker concerned.

10. Generally, upon admission, a resident is not expected to require assistance with activities of daily living (e.g., bathing, dressing, transportation to the dining room or other activity). However, where an assessment reveals that a prospective resident requires additional care or assistance with activities of daily living, XXXXX will recommend the purchase of a separate care package, at an additional cost. Evidence of additional care requirements may result in the non-acceptance of the prospective resident to the retirement residence.

Services Provided

11. Basic services provided by XXXXX generally include 24-hour emergency response, housekeeping, laundering of linens and towels, social and recreational programming, administration of medication, daily meals and snacks, and varying amounts of transportation. The services usually provide for at least one meal per day to be taken in the communal dining room.

12. Assisted living services are available where required. These include assistance with bathing, administration of medications, incontinence care, physiotherapy, foot care, and hairdresser and barber services.

13. XXXXX may employ a registered nurse to supervise nurses' aids who assist residents with their medications and other personal care needs. Where required, XXXXX will provide for the safekeeping and/or assistance with the administration of medication.

14. Generally, the services available at a retirement residence are set out in an addendum to the agreement entered into by XXXXX and the resident. Where support services are required, the addendum to the agreement indicates the nature of the support services provided.

15. XXXXX may provide a limited number of additional care and supportive services such as personal nursing care and companion service, for which there is a separate charge.

16. In some retirement residences, residents purchase a monthly care plan that includes a defined care program. Monthly pricing will vary according to the services provided. In other instances, a resident may purchase XXXXX services on an hourly basis, which may be provided by a third-party health care agency or by the retirement residence staff for a separate charge.

Residency Agreement

17. A sample generic residency agreement (Agreement) used by XXXXX at retirement residences, XXXXX, has been provided. The Agreement stipulates that, whereas the XXXXX (i.e., retirement residence), provides living accommodation together with care, services, meals and other items to assist residents with their daily living needs, residency in the XXXXX is available only to those individuals who require XXXXX, meals and other items to assist them with their daily living needs.

18. XXXXX the Agreement provides that the Operator XXXXX agrees to lease a suite (private or semi-private) for the resident's personal occupancy as residential care accommodation. Generally, a resident enters into the Agreement with XXXXX for a minimum of one year.

19. Under XXXXX the Agreement, XXXXX reserves the right to terminate the residency in accordance with the XXXXX in the event the resident requires a level of care that XXXXX is not able to provide or that the resident is unable or unwilling to purchase.

20. XXXXX the Agreement sets out the "Total Basic Fee". The Total Basic Fee consists of "rent" and "non-rent charges", and is made up of the following three components, with corresponding charges separately identified:

•   Basic rent for the suite ("rent")

•   Basic XXXXX services and meals

•   Other charges

21. XXXXX the Agreement provides that the Total Basic Fee is consideration for the right to occupy the suite and for the residential services and facilities, XXXXX, meals and other items identified XXXXX. XXXXX sets out the following XXXXX services:

___ call-bell monitoring (personal emergency response services)

___ bed checks

___ medication administration/supervision

___ on-site director of care

___ assistance with bathing

___ minimum of one staff member on duty at all times

___ activation program

___ housekeeping

___ provision of bed linens and towels (including laundering)

___ personal laundry

A resident may select the services as applicable.

22. XXXXX the Agreement provides that the Total Basic Fee is payable by the resident whether or not the resident utilizes all of the items identified on XXXXX in any particular month.

23. XXXXX the Agreement provides that the resident may not sever and terminate any portion of the Agreement. A resident, upon giving the Operator proper notice as set out in the Agreement, may only terminate the Agreement as a whole.

24. XXXXX sets out optional items for which the resident agrees to pay an amount in addition to the total basic fee. These include a separate monthly fee for parking, and the cost of XXXXX services and meals in respect of any additional occupant of the suite.

Interpretation Requested

Whether a person who constructs a retirement residence to provide long-term residential accommodations and services to seniors is eligible for the NRRP rebate under section 256.2 where the total monthly fee under the Agreement includes accommodation as well as meals and other services. In particular, based on the Agreement provided, whether there is a supply of a residential unit that is exempt under section 6 of Part I of Schedule V.

Interpretation Provided

Under subparagraph 256.2(3)(a)(ii), a builder of a residential complex is required to make an exempt supply of a residential unit by way of lease, licence or similar arrangement, where the supply is included in section 6 or section 6.1 of Part I of Schedule V, that results in the builder having to self-supply under section 191.

Section 6 of Part I of Schedule V exempts the supply of a residential complex or unit by way of lease, licence or similar arrangement where it is supplied "for the purpose of its occupancy as a place of residence or lodging by an individual" for a period of continuous occupancy to the same individual for at least one month. A builder is required to self-supply under section 191 where the builder gives possession of a residential unit under a lease, licence or similar arrangement entered into for the purpose of occupancy of the unit by an individual as a place of residence, and the other conditions of that section are also met.

Whether a particular supply is exempt under section 6 of Part I of Schedule V will depend upon the facts of the particular case. It is possible that a supplier could be providing other goods and services in conjunction with or in addition to a residential unit or complex that would ordinarily be included in a section 6 supply. Where a supplier provides several goods and services, it will be necessary to determine whether the supplier is making a single supply or multiple supplies ^[vii]footnote 3. If it is determined that the supplier is making a single supply, it is necessary to characterize the supply to determine whether any exempting provisions apply. If the supplier is making multiple supplies, it must be determined whether any particular supply is incidental to any of the other supplies, and whether any supply is included in section 6 of Part I of Schedule V. If it is determined that there is no supply being made that is included in section 6, there will be no eligibility to the NRRP rebate.

Residency Agreement

While the Agreement provides for a Total Basic Fee to be paid monthly by the resident, the Total Basic Fee is made up of separate elements which are separately identified and for which separate charges are set out. These charges are further categorized in the agreement as "rent" (i.e., basic rent for the suite or accommodation) and "non-rent charges" (i.e., XXXXX services, meals and other charges).

In accordance with the XXXXX, residents are made aware of the various elements of the supply and the related charges. Before entering into a tenancy agreement with a new tenant in a XXXXX, the XXXXX requires that the landlord give the new tenant a XXXXX information package setting out the list of charges for the various types of accommodation provided and alternative packages of XXXXX services and meals available. Accordingly, the sample Agreement provided sets out in XXXXX the various services available to a resident. Consideration is separately identified such that a resident knows the amount paid for accommodations, XXXXX services and meals, and other charges.

While separately itemized elements are factors in determining whether separate supplies are being made, the requirement to separately itemize the various services and charges is a requirement of provincial legislation XXXXX. In addition, while a resident has a choice in selecting a basic XXXXX services and meals package to suit their individual needs, the Agreement specifically stipulates that residency in the retirement home is only available to individuals who require XXXXX services, meals and other services in addition to the accommodation. Under such circumstances, a resident would not have the choice of acquiring accommodation to the exclusion of the other services. Furthermore, the Agreement provides that a resident cannot sever or terminate a part of the Agreement, and that the Total Basic Fee is payable whether or not a resident uses the goods or services.

Based on the sample Agreement, if the operator of a retirement residence is making multiple supplies of accommodation, meals and other services, one of the supplies made by the operator would include the supply of a residential unit, which would be exempt under section 6 of Part I of Schedule V. Alternatively, if the operator is making a single supply consisting of accommodation, meals and other services, as described in the sample Agreement, it is our view that the predominant element of the supply would be that of a residential unit, which would be exempt under section 6 of Part I of Schedule V. As such, in either situation, the requirement under paragraph 256.2(3)(a) is satisfied.

Self-Supply

Section 191 sets out the "self-supply" rules where a builder constructs or substantially renovates a residential complex and supplies the complex by way of lease, licence or similar arrangement for purpose of its occupancy by an individual as a place of residence. The self-supply rules deem the builder to have made and received a taxable supply by way of sale of the complex at the later of the time construction or substantial renovation is substantially completed and the time possession of a residential unit is given to an individual under a lease, licence or similar arrangement. The builder is required to account for the GST/HST on the deemed sale based on the fair market value of the complex at that time. Given that the deemed sale under section 191 is a taxable supply, a builder who is a GST/HST registrant is generally entitled to claim ITCs on costs incurred with respect to the construction of the complex up to the time of self-supply.

Accordingly, where the remaining conditions under subsection 256.2(3) are met, XXXXX will be eligible to claim a NRRP rebate in respect of the supply of the residential units exempt under section 6 of Part I of Schedule V.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9212.

Yours truly,

Carmela Antonelli
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2006/11/16 — RITS 84342 — [Application of the GST/HST to Supplies of Other Arrangements of Prepared Food]

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 respond to your ruling request XXXXX and our subsequent telephone discussions regarding the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to supplies of independent medical examination ("IME") reports that are supplied by XXXXX to insurance companies.

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 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 Canada Revenue Agency Website at (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html).

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

Statement of Facts

You advised that XXXXX sells a service to insurance companies, which includes IME reports. On the basis of your letter and our discussions we understand that:

1. To supply the IME reports, XXXXX contracts with medical practitioners for the preparation of the reports. The medical practitioners supply the IME reports to XXXXX.

2. XXXXX does not operate a facility for the preparation of the IME reports. Rather, the medical practitioners conduct the IME and prepare the report at other locations.

3. According to the XXXXX website noted in your letter XXXXX, XXXXX contracts with medical professionals to provide insurance medical examinations on a mobile basis. That is, the examinations take place at the home or place of business of the insurance company's client. The medical professionals work as "independent contractors" and have the flexibility to determine their own hours and availability, and decide what volume of work they wish to complete.

4. XXXXX invoices the insurance company for the supply of the completed IME report. The consideration for this supply includes an arranging fee or set-up fee, and XXXXX bills its customer (i.e., the insurance company) this fee as well as an amount to cover the cost of the IME report, which was supplied to, and paid by, XXXXX.

Ruling Requested

You would like confirmation that XXXXX is required to collect the GST/HST on the consideration it charges insurance companies for the supply of IME reports.

Ruling Given

Based on the facts set out above, we rule that XXXXX is required to collect the GST/HST on the consideration it charges insurance companies for the supply of IME reports. The tax is calculated on the value of the consideration for this supply which is the total amount charged by XXXXX to the insurance companies. That is, the value of the consideration includes the recovery of XXXXX expenses incurred to make this supply and its arranging or set-up fee.

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 supplies of property and services are subject to the GST/HST at the rate of 6% or 14% (as previously noted prior to July 1, 2006, the rates were 7% and 15% respectively). Part II of Schedule V contains specific exemptions for certain health care services when they are provided by a supplier that is identified in that Part.

For example, sections 5 and 7 of Part II of Schedule V exempt from GST/HST certain supplies made by a "medical practitioner" or a "practitioner", as those suppliers are defined in section 1 of that Part. In particular, section 5 exempts a supply made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual.

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" for purposes of this Part.

These exempting provisions do not apply to services supplied by other persons, as these persons do not meet the legislative criteria of being a supplier as defined for purposes of these provisions. On the basis of the information provided, it is our view that neither section 2, 5 or 7 of Part II of Schedule V would apply to the supplies of IME reports made by XXXXX.

That is, we understand that XXXXX does not operate a health care facility. Therefore its supplies do not constitute exempt institutional health care services rendered to patients of a health care facility. In addition, XXXXX is not a "medical practitioner" or a "practitioner" as defined in the ETA. XXXXX does not hold a licence to practise the profession of medicine in its name, nor does it practise a profession listed in the definition of "practitioner".

Please note that in general, where a person such as XXXXX subcontracts with a medical practitioner in the course of making supplies, whether these supplies are health care services rendered to an individual, the person's supplies are not exempt under section 5 of Part II of Schedule V because the person is not a medical practitioner for ETA purposes. The fact that the subcontractor may be a medical practitioner does not confer any benefit to the person such that the person would also qualify as a medical practitioner. Each person is a separate legal entity and its status as a supplier is evaluated separately from other persons that it subcontracts with in the course of making its supplies.

Please note that the Canada Revenue Agency has just released Policy Statement P-248, The application of the GST/HST to the supply of an independent medical examination ("IME") and to other independent assessments. The 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 Canada Revenue Agency Web site. The policy represents a change in the Canada Revenue Agency's position concerning 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 under section 2 of that Part. However, as explained above, these exempting provisions do not apply to XXXXX; therefore, the policy will not impact the supplies made by XXXXX.

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

2006/10/25 — RITS 64854 — [Application of the Point-of-sale Rebate on Printed Books]

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 publications with CDs by XXXXX ("the Company").

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

Our understanding of the facts, based on your letters XXXXX and our telephone conversation XXXXX is as follows:

1. The Company is a XXXXX that sells books to commercial and retail customers.

2. You have noticed that some of the technical publications that the Company sells are now including supplemental information in the form of a CD. Examples include XXXXX.

3. You have provided information on three example publications sold with CDs.

4. The first publication is XXXXX("Product A"). XXXXX.

5. The following description of Product A and the included CD is XXXXX:

XXXXX.

6. The second publication is XXXXX ("Product B"). Product B is published by XXXXX.

7. The third publication is XXXXX ("Product C"). Product C is published by the XXXXX.

8. XXXXX

XXXXX

•   XXXXX.

Ruling Requested

You would like to know whether books that include supplemental CDs, such as Products A, B, and C, are subject to the full HST when sold in XXXXX participating provinces.

On October 6, 2006, the Department of Finance announced proposed amendments to the Deduction for Provincial Rebate (GST/HST) Regulations under the ETA to facilitate the expanded application of the point-of-sale rebate on printed books. These amendments have not yet been enacted. As stated in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, we are unable to issue a ruling with respect to proposed legislation. However, we are pleased to provide the following interpretation.

Interpretation Given

The governments of Nova Scotia, New Brunswick, and Newfoundland and Labrador ("the participating provinces") provide a point-of-sale rebate of the 8% provincial component of the HST to all purchasers of printed books and other qualifying property. Qualifying property includes printed books and updates of printed books, audio recordings all or substantially all of which is a spoken reading of a printed book, and bound or unbound printed versions of scripture of any religion. The term "printed book" does not include electronic versions of books or printed books packaged together with CD-ROMs.

As recently announced by the governments of the participating provinces, the rebate is being expanded to include a new category of qualifying property, called composite property. This change applies to sales made on or after September 1, 2006. More information on this change can be found in the enclosed GST/HST Technical Information Bulletin B-094, Amendments to the Point-of-Sale Rebate for Printed Books.

Composite property consists of a printed book and a read-only medium (and/or a right to access a website under certain conditions) that is wrapped, packaged or prepared for sale as a single product. A read-only medium is a tangible medium that is designed for the read-only storage of information and other material in digital format.

Composite property is eligible for the point-of-sale rebate under two situations:

•   A printed book and a read-only medium sold together as a single product qualifies for the rebate if all or substantially all of the value of the material on the read-only medium is reasonably attributable to

–   a reproduction of the printed book, and/or

–   material that makes specific reference to the printed book and its content, and that supplements and is integrated with that content.

•   A printed book and a read-only medium and/or the right to access a website sold together as a single product qualifies for the rebate when the product is specially designed for use by students enrolled in a qualifying course ^[iv]footnote 1 and the read-only medium and/or website contain material that is related to the subject matter of the printed book.

There is no indication that the publications sold by the Company would meet the condition of being specially designed for use by students enrolled in a qualifying course, and thus they cannot meet the second situation. If the publications meet the first situation, then they are composite property and eligible for the point-of-sale rebate.

Under the first situation, all or substantially all of the material on the read-only medium must be either (i) a reproduction of the printed book or (ii) material that supplements and is integrated with the printed book and its content. Material on the read-only medium that does not make specific reference to the printed book and its content would not meet the second of these conditions. As well, the printed book must be the primary component of the package, and the material on the read-only medium must be supplementary to it.

The CD included with Product A includes the same information as the printed publication. Product A would meet the definition of composite property since the printed publication and the CD are sold together as a single product and all or substantially all of the value of the material on the CD is attributable to the reproduction of the printed publication or to material that makes specific reference to the printed publication and its content, and that supplements and is integrated with that content.

The CD-ROM included with Product B is XXXXX of the information provided in the printed publication. As such, it contains information that makes specific reference to the printed publication and its content, and that supplements and is integrated with that content. Product B would meet the definition of composite property since the printed publication and the CD-ROM are sold together as a single product and all or substantially all of the value of the material on the CD-ROM is attributable to the reproduction of the printed publication or to material that makes specific reference to the printed publication and its content, and that supplements and is integrated with that content.

Product C would not meet the definition of composite property since the CD-ROM is not supplementary to the printed publication. The CD-ROM contains more information than the printed publication, and the publisher indicates that the publication is not complete without both the printed component and the CD-ROM component.

Therefore, Products A and B will be eligible for the point-of-sale rebate of the 8% provincial component of the HST when sold in a participating province on or after September 1, 2006. The Company only has to collect the 6% federal component of the HST on supplies of Products A and B. Product C does not meet the definition of composite property, and will not be eligible for the point-of-sale rebate. The Company will have to collect the full 14% HST on supplies of Product C made in a participating province.

The foregoing comments represent our general views with respect to the proposed amendments to the Excise Tax Act as they relate to the subject matter of your request. Any change to the wording of these proposed amendments or any future proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. 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.

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 613-957-8253.

Yours truly,

Jacqueline Russell, CGA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/11/17 — RITS 78773 — [Tax Status of Multiple Species Single Ingredient Feeds]

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 letters XXXXX in which you requested a ruling concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to packaging services performed by XXXXX.

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

As you know, 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 as follows:

1. XXXXX is made up of XXXXX referred to as XXXXX.

2. XXXXX provides administrative and operational support XXXXX for long distance moves.

3. In providing its administrative and operational support, XXXXX acts as an intermediary in arranging for a long distance move XXXXX on behalf of XXXXX.

4. XXXXX role is limited to "brokering" or arranging for a move, which is performed by XXXXX.

5. In this capacity XXXXX will prepare the costing for a move and will invoice the customer once the move is complete.

6. To effect the move, XXXXX arranges with XXXXX to provide various services necessary for a successful move, such as dismantling, packing and unpacking, bracing or stabilizing where necessary, loading and unloading, transporting, and storing tangible personal property (TPP).

7. XXXXX service providers.

8. For a long-distance move that takes place within Canada, XXXXX charges GST/HST to a customer and accounts for the tax in the proper manner.

Ruling Requested

You would like to know the tax treatment with respect to the packing services XXXXX.

In accordance with GST/HST Memorandum 1.4 of the GST/HST Memoranda Series, copy enclosed, an application ruling can only be issued with reference to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and where the taxpayer has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. We are pleased to issue you an interpretation, which will elaborate in detail on how the GST/HST applies to the questions raised in your letter.

Interpretation Given

A "carrier" is defined under subsection 123(1) of the ETA as a person who supplies a freight transportation service within the meaning assigned by subsection 1(1) of Part VII of Schedule VI to the ETA.

A "freight transportation service" is defined, in part, in subsection 1(1) of Part VII of Schedule VI to the ETA as "a particular service of transporting tangible personal property and, for greater certainty, includes

(a) ...

(b) any other property or service supplied to the recipient of the particular service by the person who supplies the particular service, where the property or service is part of or incidental to the particular service, whether there is a separate charge for the other property or service ..."

"Packing services", within the transportation industry, generally means a service of packing for safe shipping by utilizing one or more packing materials to secure goods in place. It also includes placing goods in an appropriate container and marking and labelling the container with customer shipping destination data, as well as other information that may be required.

The Canada Revenue Agency's (CRA) position is that when a carrier, in the course of providing a freight transportation service, also provides a packing service of its customer's TPP, the packing service will take on the same status as the basic freight transportation service, as forming part of, or being incidental to, it.

A supply of a packing service made in Canada by an independent contractor, who is not a carrier in respect of a particular transaction, and who is not making a supply of "transporting tangible personal property" is viewed as not being part of, or incidental to, a freight transportation service and is considered to be a separate taxable supply of a packing service. It is our view that paragraph 1(1)(b) of Part VII of Schedule VI to the ETA, which defines the definition of "freight transportation service", that only includes incidental property or services when supplied as part of a supply of transporting TPP, indicates that such property or services are not part of a freight transportation service when supplied on their own.

The broad interpretation of the meaning of the term "freight transportation service" as set out in the Bam Packaging Ltd. case does not reflect the CRA's position or its interpretation of that term, as defined in subsection 1(1) of Part VII of Schedule VI to the ETA. Furthermore, this case, which was decided under the informal procedures of the Tax Court of Canada, is not considered by the CRA to be precedent setting.

Accordingly, only the packing service provided XXXXX that is a carrier in the course of providing a freight transportation service would be part of or incidental to that particular freight transportation service.

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

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

Yours truly,

Daniel Chamaillard
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

2006/11/02 — RITS 82152 — Health Care Services Supplied by a Medical Practitioner

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

Dear XXXXX:

Thank you for your facsimile transmissions XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of an admission made by the City XXXXX. Specifically, you would like to know whether GST applies to supplies of an admission made for $1.00 by the City to members of the public to skate or swim XXXXX at the City's recreational facilities, as described in the two scenarios you put forward.

In your second facsimile, you indicated that the information contained therein was more specific to your ruling request than what was provided in your first. For this reason, we have relied on the information contained in your second facsimile transmission. Further, XXXXX you confirmed that for purposes of responding to your request for a GST/HST ruling, we could use the City's name and the information posted on its website. As a result, we have taken the liberty of using this information and substituted your reference to XXXXX with the terms specifically used by the City XXXXX, as indicated on its website.

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

Statement of Facts

1. The City is registered for GST/HST purposes.

2. The City is a "municipality", as defined in subsection 123(1) of the ETA.

3. A "public sector body", as defined in subsection 123(1) of the ETA includes a public service body such as a municipality. As a city falls within the definition of "municipality", the City is a public sector body.

4. The City provides public access to its various recreational facilities, such as the XXXXX Recreation Centre, the XXXXX Recreation Centre and the XXXXX Arena. The main features of both the XXXXX Recreation Centre and the XXXXX Recreation Centre are, among other things, a swimming pool and an ice arena/ice surface. The XXXXX Arena is a full-size ice arena.

XXXXX

5. The XXXXX Recreation Centre and the XXXXX Recreation Centre each house a swimming pool.

XXXXX Recreation Centre

6. XXXXX the City charges members of the public an admission fee of $1.00 to swim in the pool at the XXXXX Recreation Centre. XXXXX. XXXXX the City charges members of the public an admission fee of $2.00 for the XXXXX. The City also hosts other sessions such as the XXXXX. These sessions are offered on differing days of the week and at differing times of day and night. The XXXXX sessions held on XXXXX involve pool games and pool toys.

7. For XXXXX, the fees payable by members of the public to the City for an admission to swim in the pool at the XXXXX Recreation Centre are as follows:

Child under 3  XXXXX

Child (3-12)  XXXXX

Teen/Student  XXXXX

Adult (18-60)  XXXXX

Senior (over 60)  XXXXX

Family   XXXXX

XXXXX   XXXXX

Admission fees include the GST.

One-month, three-month and yearly passes are also available for a certain fee.

XXXXX Recreation Centre

8. XXXXX the City charges members of the public an admission fee of $1.00 to swim in the pool at the XXXXX Recreation Centre. XXXXX. The City also hosts other sessions referred to as the XXXXX. These sessions are offered on differing days of the week and at differing times of day and night.

9. For XXXXX, the fees payable by members of the public to the City for an admission to swim in the pool at the XXXXX Recreation Centre are as follows:

Child under 3  XXXXX

Child (3-12)  XXXXX

Teen/Student  XXXXX

Adult (18-60)  XXXXX

Senior (over 60)  XXXXX

Family   XXXXX

XXXXX   XXXXX

Admission fees include the GST.

One-month, three-month and yearly passes are also available for a certain fee.

XXXXX

10. The XXXXX Recreation Centre, the XXXXX Recreation Centre and the XXXXX Arena each house an ice arena/ice surface.

11. The City charges members of the public an admission fee of $1.00 to skate on the ice surface/arena at any one of these recreational facilities. XXXXX. These sessions are offered on differing days of the week and at differing times of day and night. At other times of the day and week, the City charges members of the public an admission fee for the XXXXX sessions. The XXXXX session held on XXXXX involves games and music.

12. For XXXXX, the fees payable by members of the public to the City for an admission to skate on the ice surface/arena at the XXXXX Recreation Centre, the XXXXX Recreation Centre and the XXXXX Arena are as follows:

Child under 3  XXXXX

Child (3-12)  XXXXX

Teen (13-17)  XXXXX

Student   XXXXX

Adult (18-60)  XXXXX

Senior (60+)  XXXXX

Family   XXXXX

XXXXX   XXXXX

Admission fees include the GST.

One-month, three-month and yearly passes are also available for a certain fee.

Ruling Requested

You would like to know whether the supplies of an admission by the City to its XXXXX and XXXXX sessions are exempt of the GST/HST where:

1. The XXXXX and XXXXX sessions are no different from any other public swim or skate sessions hosted by the City at other times.

2. The XXXXX and XXXXX sessions are different (i.e., play special games, different times) from the other public swim or skate sessions hosted by the City at other times.

Ruling Given

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

The fees payable by members of the public to the City for an admission to its XXXXX session at the XXXXX Recreation Centre and the XXXXX Recreation Centre, and an admission to its XXXXX session at the XXXXX Recreation Centre, the XXXXX Recreation Centre or the XXXXX Arena are consideration for a taxable supply as no exempting provision within the ETA applies.

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 9 of Part VI of Schedule V to the ETA exempts the following:

"A supply made by a public sector body of an admission in respect of a place of amusement where the maximum consideration for a supply by the body of such an admission does not exceed one dollar."

The definition of "admission" in subsection 123(1) of the ETA means:

"In respect of a place of amusement or a seminar, an activity or an event, means a right of entry or access to, or attendance at, the place of amusement or the seminar, activity or event."

The definition of "place of amusement" in subsection 123(1) of the ETA includes "any place ... the purpose of which is to provide any type of amusement or recreation".

The City - a public sector body -charges members of the public an admission fee of $1.00 for the XXXXX and XXXXX sessions that it hosts at its recreational facilities - the XXXXX Recreation Centre, the XXXXX Recreation Centre and the XXXXX Arena.

The purpose of the admissions supplied to members of the public by the City for the XXXXX and XXXXX sessions is to provide a "type of amusement or recreation" - to swim or skate. As the purpose of the admissions is to provide recreation, each of its recreational facilities - the XXXXX Recreation Centre, the XXXXX Recreation Centre and the XXXXX Arena - constitute a place of amusement.

Accordingly, when the City permits members of the public to enter the City's premises and use its recreation facilities (e.g., a swimming pool or ice surface/arena), it has made a supply of an admission to a place of amusement. The supply of an admission to a place of amusement is a taxable supply subject to tax at 6% unless an exempting provision within Schedule V to the ETA applies.

The City supplies to members of the public an admission to a place of amusement, in this case the XXXXX Recreation Centre, the XXXXX Recreation Centre and the XXXXX Arena (hereinafter referred to collectively as recreational facilities). The consideration charged for supplies of an admission to these recreational facilities to skate or swim varies depending upon the session offered, the time it is offered and to whom it is offered. Special games or music may be played during some of these sessions.

Differences such as the time when the XXXXX or XXXXX sessions are offered, the admission fee payable or the activities that may be carried out during those sessions does not change the nature of the supply. The supply is that of an admission to a place of amusement to swim or skate.

As the City charges members of the public an admission fee to swim in a pool at its recreational facilities that exceeds $1.00, and an admission fee to skate on the ice surface/arena at its recreational facilities that exceeds $1.00, section 9 of Part VI of Schedule V to the ETA does not apply to exempt the supply of an admission for its XXXXX or its XXXXX sessions.

Accordingly, GST/HST applies to supplies of an admission made to the public by City for its XXXXX and XXXXX sessions.

As the admission fee of $1.00 payable by members of the public to the City for its XXXXX and XXXXX sessions are a GST-included amount, the City is correctly charging the tax.

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

Yours truly,

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

2006/12/15 — RITS 83781 — Discounts

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.     

As an exercise prompted by a query from XXXXX of your office, we have reviewed our interpretation concerning the nature of band-empowered entities (BEEs). XXXXX issued an interpretation in the form of an internal memorandum XXXXX addressed to XXXXX your office. At the time of the issuing of the memorandum, we agreed with XXXXX interpretation XXXXX concerning XXXXX, that XXXXX did not meet the definition of a BEE, as it is owned or controlled by a BEE XXXXX and not by a band, a tribal council, or a group of bands other than a tribal council. Upon review, however, we feel that the following clarification should be made.

The following is a summary of the background information concerning XXXXX:

1. XXXXX is incorporated under the XXXXX (the Act). It is not registered for GST/HST purposes. It maintains a presence on reserve in that its head office is located on the XXXXX Reserve XXXXX.

2. XXXXX was established by the XXXXX through XXXXX to oversee the XXXXX conducted on reserves XXXXX. XXXXX does not engage in any commercial activity. XXXXX is registered for GST/HST purposes. It is owned or controlled by a group of Indian bands. Its head office is located on the XXXXX Reserve XXXXX.

3. XXXXX indicates XXXXX that there is only one class of membership having all rights of membership. XXXXX indicates that the minimum number of directors of XXXXX is XXXXX and the maximum is XXXXX. XXXXX indicates that the person to whom the remaining property is to be distributed in the course of liquidation and dissolution is the XXXXX on such terms and conditions as may from time to time be decided upon by the XXXXX which decisions shall be carried out by XXXXX.

4. XXXXX by-laws indicates that XXXXX board of directors shall consist of XXXXX directors. The quorum for the transaction of business at any meeting of the board of directors shall consist of XXXXX directors. XXXXX by-laws provides the method of election of directors. It indicates that the XXXXX of the XXXXX on behalf of the member shall from time to time, as it may decide, elect the directors of XXXXX by resolution passed at a meeting of the XXXXX called for that purpose.

5. XXXXX by-laws indicates that the sole membership to be issued shall be issued to the XXXXX. No other memberships shall be issued without the approval of XXXXX. XXXXX by-laws indicates that the annual meeting of members shall be held at such time in each year, and subject to XXXXX by-laws, at such place as the board of directors, the chairman of the board of directors, or the president may from time to time determine, for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing directors, appointing an auditor and for the transaction of such other business as may properly be brought before the meeting.

6. XXXXX by-laws indicates that the chairman of the board of directors shall, on behalf of the board of directors, report to the XXXXX on the affairs of the XXXXX and shall if so requested report on the same matters to XXXXX. XXXXX by-laws indicates that the chairman of the board of directors shall report to the board of directors any guidance or advice that XXXXX has offered to XXXXX.

7. XXXXX.

Based on this statement of facts, we make the clarification here that XXXXX is a BEE as defined in Technical Information Bulletin B-039R, GST Administrative Policy - Application of GST to Indians (B-039R).

Position

A BEE, as defined under B-039R, may be a corporation owned or controlled by a band, a tribal council or a group of bands other than a tribal council.

The XXXXX has been considered as a group of bands XXXXX for purposes of B-039R. As such, an entity owned or controlled by XXXXX will be eligible to be determined as a BEE where the other requirements under B-039R are met.

Based on the facts set out above, the CRA takes the position that XXXXX is owned by XXXXX, because the group of bands XXXXX that make up XXXXX owns all of the memberships of the entity, satisfying the ownership part of the definition for a BEE.

Dave Caron
Manager, Aboriginal Affairs Unit
PSBs & Governments Division,
Excise & GST/HST Rulings Directorate

2005/01/11 — RITS 54061 — Subsections 317(2) and (8) of the Excise Tax Act

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 your letter XXXXX in which you request information concerning the Goods and Services Tax/Harmonized Sales Tax ("GST/HST") treatment of leases and licences of sites in XXXXX ("the Park"). We apologize for the delay in responding.

The general scenario that follows is based on your letter (with attachments), our various conversations XXXXX and on information provided by XXXXX. You have indicated that the facts surrounding the site lease to XXXXX are generally true for the remainder of the subject leases but that it is not possible at this time to confirm as fact the circumstances peculiar to each of the affected lessees.

As GST/HST rulings are binding on the Canada Revenue Agency, we are not able to provide a ruling covering the GST status of site leases and licences to unidentified parties whose individual circumstances cannot be confirmed as fact. However, in order to provide you with the clearest possible response, we have provided an interpretation on the following general scenario along with an explanation of how we arrived at our interpretation. We trust that this will assist you in determining the GST treatment of the leases and licences at issue.

All references are to the Excise Tax Act ("ETA").

1. XXXXX owns and operates the Park and is registered for GST purposes. The Park is located in XXXXX.

2. The Park contains XXXXX seasonal campground sites (the "Campground Sites") and XXXXX sites that are occupied by units which are used by their owners as residences (the "Residential Sites"). The area of the Park containing the Residential Sites is contiguous to the area of the Park containing the seasonal sites.

The Campground Sites

3. The Campground Sites are occupied by licensees (the "Licensees") who have placed various recreational vehicles (the "RVs") on their respective sites.

4. The document included in your submission entitled XXXXX (the "Licence Agreement") indicates that the licences pertaining to the Campground Sites extend from May to October annually (the "camping season").

5. XXXXX the Licence Agreement indicates that a particular Campground Site XXXXX.

6. The RVs are variously described as pop-up tent trailers, fifth-wheel trailers and motor homes designed for recreational use. None of the RVs are designed for use on a year-round basis; specifically, they are not designed to withstand XXXXX environmental conditions during winter.

7. Some of the RVs bear skirting and/or porches. All RVs have their undercarriage intact, including tow tongues and wheels, and none are physically attached to their sites in any way. Moreover, the RVs have conformed to the provisions of paragraph 22 of the Licence Agreement, which states:

XXXXX.

8. The Campground Sites are equipped with full hydro, water, and sewer facilities; however, these facilities are not available for use from November through April of each year (the "off-season"). Further, the roads in this area of the Park are not maintained during the off-season.

9. The current licence fee for a summer season is $XXXXX. A Licensee who wishes to occupy a site for the forthcoming camping season must license a site by December 31st of each year. Where the licence is not renewed, the Licensee must remove their RV from its site by that date. Where the licence is extended, the Licensee may leave the RV on its site during the off-season for no additional charge.

10. The Licence Agreement prohibits the Licensees from occupying their RVs beyond the end of the camping season.

The Residential Sites

11. An individual may occupy a Residential Site pursuant to a lease agreement with the Park. Such lessees are hereafter referred to as "Residents".

12. The Residents have placed various park-model units (the "Homes") on their respective sites, some of which meet the Canadian Standards Association Z240 building standards. All of the Homes are equipped with complete plumbing, electrical and heating facilities. The Homes are designed and manufactured to withstand XXXXX environmental conditions such that they are comfortably habitable throughout the entire year.

13. The Homes bear skirting and porches and have had their undercarriage (including wheels and hauling tongues) removed. All Homes are at least 12 feet wide and would require a special tow vehicle and permit to relocate them.

14. The Homes consist of at least one living area, a full bathroom, master bedroom and full kitchen. All are equipped with complete plumbing, electrical and heating facilities.

15. The Residential Sites are equipped with full hydro, water and sewer facilities, all of which the Park makes available to the Homes throughout the year. The water system serving the Residential Sites is winterized and remains in service throughout the year. All Homes are connected to the aforementioned facilities.

16. All roads within the area containing the Residential Sites are maintained during the winter months. Under the lease agreements, the Park is responsible for plowing the Residents' driveways.

17. The Residents occupy the Homes as places of residence. All of the Homes have been on the same site for two years or longer. The Residents will inhabit them indefinitely.

18. Under the lease agreement, a Resident may occupy their Home for a maximum of 270 days per year. The Resident is given the discretion of choosing the days that are suitable to them.

19. XXXXX.

Interpretation Requested

You have asked us to clarify the GST treatment of the Campground Sites and the Residential Sites.

Interpretation Given

In the general scenario outlined above, it is our interpretation that the licences of Campground Sites would be subject to the GST at 7%, while the leases of Residential Sites would be exempt pursuant to subparagraph 7(a)(i) of Part I of Schedule V.

Explanation

Supplies, including leases and licences of real property, are subject to the GST/HST unless specifically exempt. In the present case, the tax status of the above-described leases and licences is contingent on the application of the exemptions contained in section 7 of Part I of Schedule V. Section 7 exempts, in part, the following:

"A supply

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

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

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

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

(i) a mobile home, or

(ii) a travel trailer, motor home or similar vehicle or trailer, situated or to be situated on the site ..."

Paragraph 7(b) thus exempts certain supplies of sites forming part of a "residential trailer park" (defined below) while the paragraph 7(a) exemption pertains to supplies of sites that do not form part of a "residential trailer park". The following analysis begins with a discussion of "residential trailer park" in the context paragraph 7(b) and is followed by a discussion of paragraph 7(a).

Paragraph 7(b) of Part I of Schedule V

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

"... the land that is included in a trailer park ^[xxxix]1 of the person or, where the person has two or more trailer parks that are immediately contiguous to each other, the land that is included in those contiguous trailer parks, and any buildings, fixtures and other appurtenances to the land that are reasonably necessary for

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

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

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

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

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

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

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

Under the circumstances, the land within the Park would qualify as a "trailer park" as required by the above definition. The requirements of paragraph (a) are therefore satisfied.

Paragraph (c) requires that substantially all of the sites in the Park be leased for a period of at least one month in the case of mobile homes and other residential units and twelve months in the case of travel trailers, motor homes or similar structures. In addition, paragraph (d) of the definition indicates that the Park would not qualify as a residential trailer park unless all or substantially all of the sites are suitable for use by occupants of a mobile home (whether or not a particular site is actually occupied by one) as a place of residence throughout the year.

Determining whether paragraph (c) is applicable would potentially require a discussion of two specific issues: (1) whether the RVs occupying the campground could be described as "mobile homes" or "residential units" for purposes of subparagraph (c)(i); and (2), where subparagraph (c)(i) is not applicable, whether the leases of the sites occupied by the RVs could be viewed as being for a period of 12 consecutive months.

Notwithstanding that the conditions of paragraph (c) could potentially apply, it would appear that the requirements of paragraph (d) would not apply in this case. Specifically, since the utilities to the Campground Sites are unavailable during the off-season, those sites could not be considered as being "... suitable for use by individuals as places of residence throughout the year ..."[.]

As paragraph (d) is not applicable, the Park could not be considered a "residential trailer park". As a result, the exemption in paragraph 7(b) of Part I of Schedule V would not be applicable. Nevertheless, paragraph 7(a) may still apply.

Paragraph 7(a) of Part I of Schedule V

Subparagraph 7(a)(i) exempts a supply of land (other than a site in a residential trailer park) made under a lease, licence or similar arrangement which provides for continuous possession or use of the land for a period of at least one month, to the owner, lessee or person in occupation or possession of a "residential unit" that is or is to be affixed to the land for the purpose of its use and enjoyment as a place of residence for individuals. Given these provisions, it would be necessary in the present case to determine whether a particular Home or RV is a "residential unit" and, if so, whether such unit is "affixed" to its site.

Definition of "residential unit" for purposes of paragraph 7(a)

Subsection 123(1) defines the term "residential unit" to include a "mobile home" or similar premises that is occupied by an individual as a place of residence or lodging. Accordingly, any mobile homes occupying sites in the Park will be considered a residential unit by definition.

Definition of "mobile home"

The term "mobile home" is defined in subsection 123(1) as follows:

"... a building, the manufacture and assembly of which is completed or substantially completed, that is equipped with complete plumbing, electrical and heating facilities and that is designed to be moved to a site for installation on a foundation and connection to service facilities and to be occupied as a place of residence, but does not include any travel trailer, motor home, camping trailer or other vehicle or trailer designed for recreational use ..."

In addition to the above, Policy Statement P-223, The Meaning of "manufacture and assembly of which is completed or substantially completed" in the Definition of "Mobile Home (enclosed) effectively includes in the definition of "mobile home" buildings composed of one or more components that otherwise meet the remaining requirements of the above definition. In summary, a particular unit may qualify as a "mobile home" for GST/HST purposes if it is:

(a) comprised of one or more components where

(i) each component consists of at least one room or living area, and

(ii) the manufacture and assembly of each component is completed or substantially completed prior to being moved to a site,

(b) equipped with complete plumbing, electrical and heating facilities,

(c) designed to be moved to a site for installation on a foundation and connection to service facilities,

(d) to be occupied as a place of residence, and

(e) not a travel trailer, motor home, camping trailer or other vehicle or trailer designed for recreational use.

Under Policy Statement P-223, multi-section mobile/modular homes are to consist of three-dimensional modules with three walls and a roof/ceiling in order to come within the definition of "mobile home". The policy also stipulates that these modules are to be in as finished condition as possible prior to leaving the manufacturer's premises, taking into consideration that they must be transported. Further, it states that units manufactured to either CSA A277 or Z240 building standards and other similar buildings will be considered as "mobile homes" for purposes of the ETA. The policy thus provides two alternative standards by which a particular unit could be considered as a "mobile home": the unit may fall within the auspices of points (a) through (e) above; alternatively, it may conform to the aforementioned CSA standards.

Some of the Homes, having been manufactured to CSA Z240 standards, will fall within the definition of "mobile home" pursuant to the above criteria. Whether the remaining units can be considered as mobile homes will depend on the presence or absence of the criteria delineated in points (a) through (e) above. In determining whether those factors are present, one must bear in mind the purpose of P-223, which is to provide criteria for distinguishing between those units that are residential in nature as opposed to those that are for recreational use. To this end, the policy excludes from the definition of "mobile home" those units that are travel trailers, motor homes, camping trailers or other vehicles or trailers designed for recreational use.

In the circumstances of the general scenario, it is our opinion that the Homes meet the criteria described in paragraphs (a) to (d). Given that the Homes have no undercarriage or hauling tongues and require a special permit and vehicle to relocate them, we would not consider the Homes to fall within a standard normally attributed to a travel trailer, motor home, camping trailer or other vehicle designed for recreational use; paragraph (e) will therefore also have been satisfied. Moreover, even though certain Homes may not meet CSA A277 or Z240 building standards, they appear to be similar to such units, as evidenced by the attributes outlined in points 12 to 17 of the general scenario. Accordingly, it is our opinion that the Homes would be "mobile homes" and therefore "residential units" for purposes of paragraph 7(a).

On the other hand, we would not consider the RVs to be "mobile homes" as their relative portability would indicate that they are akin to a travel trailer, motor home, camping trailer or other vehicle or trailer designed for recreational use. Moreover, given that the RVs are restricted to recreational and/or vocational use by the Licence Agreement, it would be difficult to take the view that a particular Licensee is occupying an RV as a place of residence (as is required by paragraph (d) above).

Where a particular RV does not qualify as a "mobile home", it may nevertheless qualify as a "residential unit" if it meets the conditions of enclosed Policy Statement P-104, Meaning Of 'Mobile Home', 'Residential Unit' And 'Residential Complex' In The Context Of Mini-Homes, Park Model Trailers, Travel Trailers And Motor Homes.

Policy Statement P-104 ("P-104")

P-104 addresses the issue of whether units such as the RVs could be considered "mobile homes" or "residential units" for purposes of the exemption in paragraph 7(a) above.

The policy states that units such as travel trailers and motor homes are not generally considered as "mobile homes" as they are not designed to be placed or installed on a foundation similar to that of a mobile home and are normally for recreational use. Where a particular unit does not qualify as a mobile home, it may nevertheless be considered as a "residential unit" under the policy if it is permanently affixed to land in the same manner as a house. Whether a particular home or trailer is "permanently affixed" to land in the same manner as a house is a question of fact to be determined with reference to the particular circumstances of a given situation. The policy lists certain factors that might be considered in making this determination, including:

•   the type of home or trailer in question;

•   the use of the home and the applicable land;

•   the actual degree of permanency with the land;

•   applicable provisions of any agreements relating to the permanency and means of affixation of the home or trailer to the land; and

•   the removal or ownership of the home or trailer at the end of the lease.

Similar to the guidelines outlined in P-223, the above criteria is designed to assist in distinguishing between units held for residential as opposed to recreational purposes by focusing on the concept of permanence. The criteria aids in measuring the degree of permanence of a particular unit with the underlying land by considering both physical and non-physical indicators as appropriate.

Although physical attachment to the land subjacent to a particular unit would in most cases be a strong indicator that a unit was intended to be permanent with it, this criterion would need to be considered in light of other relevant factors including those listed above. Using similar logic, a particular unit that is not physically attached to land should not necessarily be precluded from consideration as a "residential unit" if other relevant factors support its inclusion in the definition.

Given the general scenario, it would be our opinion that the RVs are not intended to be permanent with their respective sites and, by extension, are not "permanently affixed" to them. The fact that they are not physically attached to the land, although not conclusive in itself, nevertheless indicates that they are for recreational purposes and are not intended to be permanent with their sites. Also supporting a recreational purpose is XXXXX the Licence Agreement, which stipulates that any additions or improvements to an RV, where approved, XXXXX. Further, that the Licence Agreement restricts an RV from being used for residential purposes supports the view that they are not intended to be permanent with their sites. This particular feature of the Licence Agreement is consistent with the requirement that the Licensees vacate their RVs at the end of a camping season and, in combination with the fact that the RVs are not designed for year-round occupation, supports a recreational intention.

For these reasons, we would not view the RVs as being permanent with their sites and therefore would not consider them to be "permanently affixed" for purposes of P-104. Accordingly, the RVs could not be considered as "residential units" under the policy.

Meaning of "affixed" for purposes of subparagraph 7(a)(i)

Recall that subparagraph 7(a)(i) requires a particular "residential unit" to be "affixed" to the underlying land. A unit qualifying as a "residential unit" under P-104, having been determined to be "permanently affixed" under the policy, will also be considered to be affixed for purposes of subparagraph 7(a)(i).

For those units not subject to P-104 but which nevertheless qualify as a "residential unit" (e.g., the Homes), the concept of "permanence" as illustrated in P-104 is useful in determining whether a particular unit is affixed for purposes of subparagraph 7(a)(i). In assessing permanence, all the facts of a particular case should be considered, including the intention of the owner. In addition to the indicators of permanence listed in P-104, the following may be considered when determining whether a "residential unit" is affixed to its site:

•   the unit is connected to utilities;

•   the unit is placed on concrete pads and skirted;

•   the unit is left in place for an indefinite period of time;

•   the unit is available for use on a year round basis; and

•   the unit is used often enough to constitute a place of residence.

In the present scenario, it would appear that all of the above criteria would apply to the Homes. We would therefore view the Homes as being affixed to their respective sites for purposes of subparagraph 7(a)(i); the Residential Site leases would therefore be exempt from the GST. Given that the RVs do not qualify as "residential units" (either by definition or under P-104), they cannot be considered for exemption under subparagraph 7(a)(i).

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

Additional Information

Self-supply

Please note that subsection 190(3) requires a person who first supplies land by way of a lease that is exempt under subparagraph 7(a)(i) above to account for the GST/HST on the fair market value of the land so leased. Pursuant to subsection 190(3), if the Park were the first person to supply the Residential Sites, it would be deemed to have made and received a taxable supply by way of sale of the relevant land and to have paid tax in respect of that deemed supply. In that case, the Park would have been required to include the tax in the net tax calculation for the reporting period in which the Residential Sites were first leased. For more information, please consult paragraphs 64 to 67 of GST/HST Memoranda Series section 19.2.3, Residential Real Property - Deemed Supplies (enclosed).

New residential rental property rebate ("NRR")

Note also that a person who makes a supply of land that is exempt under subparagraph 7(a)(i) may be eligible for a NRR if, in entering the lease agreement, the person is deemed to have made and received a taxable supply by way of sale of the land and to have paid tax in respect of that deemed supply. Accordingly, if the leases of the Residential Sites, being exempt supplies pursuant to subparagraph 7(a)(i), results in the Park being deemed to have paid tax under subsection 190(3), it may be eligible for a NRR for each site if the eligibility conditions for the NRR are satisfied. Please refer to the enclosed excerpt from Technical Interpretation Bulletin B-087, GST/HST New Residential Rental Property Rebate for further details.

Tax paid in error

Where tax has been erroneously charged and collected in respect of the Residential Sites, you may refund that tax to the affected Lessees, subject to subsection 232(1). Subsection 232(1) indicates that you may, within two years after the day the amount was so charged or collected, refund or credit the tax. Where such action is taken, subsection 232(3) would require you to issue a credit note in the amount of the refund or credit. If the amount refunded or credited has been included in determining net tax for the reporting period in which it issued the credit note or for a previous reporting period, you may deduct that amount in determining your net tax for the reporting period in which the credit note is issued, on line 107 of your GST/HST return.

Input tax credits ("ITCs")

As you are aware, a recipient that is a GST/HST registrant is generally entitled, pursuant to subsection 169(1), to claim ITCs for tax paid or payable on property and services to the extent (expressed as a percentage) that the property or service is acquired or imported for consumption, use or supply in the course of the recipient's commercial activities. A "commercial activity" is defined in the ETA to include a business carried on by the person, except to the extent to which the business involves the making of exempt supplies by the person. Accordingly, no ITCs would be available in respect of tax paid on property or services acquired for consumption, use or supply in its exempt activities.

Note that ITCs remain available for any inputs that relate directly to the making of taxable supplies. If you wish to also claim partial ITCs in respect of the Park as a whole, you must calculate in a reasonable manner the percentage for which the inputs were used in commercial activity, pursuant to paragraph 169(1)(c). Note however, that if a particular input is used at least 90% of the time in making exempt supplies, the Company would not be able to claim any ITCs for the tax paid on the input, pursuant to subsection 141(4).

We trust that the above will be of assistance. Should you have any further questions or require clarification on any of the above matters, please do not hesitate to contact me at (613) 952-8816.

Yours Truly,

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

2005/01/19 — RITS 50163 — The Transfer of Units in Gross Royalty Trusts

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 letter is in response to a request by XXXXX the XXXXX Tax Services Office to provide an interpretation to you concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to point of sale instant rebate transactions.

Background Information

As we understand it:

•   XXXXX (the "retailer") enters into informal arrangements with a number of its suppliers. The arrangements provide that the suppliers will pay amounts to the retailer to promote specified products purchased from the suppliers by the retailer for resale. In return for the payments, the retailer offers point of sale instant rebates (i.e., a specified dollar amount discount) to purchasers of the specified products that are sold at the retailer's stores, during designated campaign periods (i.e., the payments to the retailer by the suppliers under the arrangements are for a temporary price reduction program).

•   The payments made by the suppliers to the retailer are equal to the total amount of the price reductions given during the designated campaign period and there is no written indication by the suppliers that the payments include an amount on account of GST/HST.

•   The retailer visibly displays the temporary price reductions as instant rebates that reduce the specified product's price, in its store pricing exhibits and advertisements.

•   There is no indication that the price reductions given to the retailer's customers include an amount of GST/HST or that the price reductions stem from any obligation or commitment on the part of the suppliers to provide rebates directly to the purchasers (i.e., manufacturer's rebates).

•   There is no indication that the price reductions are electronic coupons offered by the suppliers for which the retailer is reimbursed.

•   At the point of sale, the retailer has been collecting GST/HST based on the specified product's price after the application of the price reduction.

Interpretation Requested

Can the retailer deduct the amounts identified as instant rebates from its regular selling price before calculating and collecting GST/HST in respect of taxable supplies of the specified products?

Interpretation Given

Every recipient of a taxable supply, other than a zero-rated supply (taxable at 0%), made in Canada is required to pay GST at the rate of 7% on the value of the consideration for the supply. The person making the supply is required to collect the tax payable by the recipient, as agent of Her Majesty in right of Canada. Where a taxable (other than zero-rated) supply is made in a participating province, such as New Brunswick, recipients are required to pay an additional amount of tax, which results in a rate of 15% for the HST.

Generally, where an amount is paid by a supplier to a retailer to promote the supplier's product by temporarily reducing the retailer's selling price of that product for a designated campaign period, the amount is a promotional allowance for the purposes of section 232.1 of the Excise Tax Act (the "ETA"). As such, the amount of the promotional allowance is not consideration for a supply made by the retailer to the supplier. However, given that the amount of the promotional allowance is paid otherwise than as a discount or credit against the price of the product provided by the supplier, the promotional allowance is deemed, under paragraph 232.1(e) of the ETA, to be a rebate for purposes of section 181.1 of the ETA. Therefore, the supplier has the option of indicating in writing to the retailer that a portion of the promotional allowance includes an amount on account of GST/HST. Based on the facts above, the retailer is not required to account for GST/HST in respect of the promotional allowances, as the suppliers have not provided any written indication that the allowances include GST/HST.

With respect to the price reduction offered by the retailer at the point of sale, the amount of the reduction is deducted from the regular selling price of the product before calculating the GST/HST payable in respect of the sale of that product, even if the retailer identifies the price reduction to the purchaser as an "instant rebate". In other words, the GST/HST applies on the value of the consideration for the supply made by the retailer i.e., the reduced selling price.

A number of different types of transactions can occur at the point of sale with varying GST/HST consequences (e.g., coupons, including reimbursable electronic coupons, manufacturer's rebates, point of sale discounts, etc. ...). It is a question of fact as to the nature of the transaction(s) that occurs at the point of sale. For example, an amount identified as an "instant rebate" where the amount is subsequently paid to the retailer by the supplier could be an amount resulting from an electronic vendor funded coupon (i.e., a reimbursable coupon) or an instant manufacturer's rebate offered by the supplier to the purchaser and administered by the retailer on the supplier's behalf. In these cases, at the point of sale, the GST/HST would be calculated by the retailer on the regular selling price prior to taking the "instant rebate" into account.

Pursuant to subsection 286(1) of the ETA, both the retailer and the supplier must maintain books and records to enable the determination of each person's liabilities and obligations under the ETA, as well as, any refund or rebate entitlements. Given the tax implications, it is imperative that the parties maintain adequate documentation of the transactions involved and are consistent in their handling of the transactions to ensure that their obligations and entitlements are determined in accordance with the facts.

The foregoing comments represent our general views with respect to the treatment of instant rebates. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in Chapter 1.4 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of Chapter 1.4 of the GST/HST Memoranda Series and GST/HST Policy Statement P-243 Promotional Allowances.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-7945.

Yours truly,

Susan Mills
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2005/02/25 — RITS 56925 — Application of Section 181 of the Excise Tax Act to Electronic Coupons

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

Dear XXXXX:

Thank you for your XXXXX letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations. We apologize for the delay in our response.

You design book covers. You live and work in XXXXX, and are not registered for the GST/HST. Your clients are predominately located in the United States. You design the cover for a book, and send it electronically to the client. The client receives the rights to the cover design.

You have an arrangement with a printer in XXXXX ("the Printer") that you use as an incentive to attract clients. The clients can have their books, with the book cover designed by you, printed by the Printer. You usually submit the printing request, although the client may discuss specific issues directly with the Printer.

The document and cover design is provided to the Printer electronically. You also provide advice to your clients regarding the printing of their books, such as what type of paper to request and how to best set up the book for printing. You can upload the document and cover design to the Printer's server for the client, but refer clients to another person if the file format of the document has to be converted to the format used by the printer.

The Printer prints the books, and ships the books directly to the clients. At no time do you receive the books.

The Printer invoices you for the books, and gives you a discount because of the volume of business you generate. The invoices from the Printer do not contain shipping information. The delivery charges are usually paid by the U.S. client.

You pay the Printer for the books and charge your clients a higher price for the books than the Printer charges you. You keep the difference as your profit. You sometimes bill the client separately for the book cover design and the books.

Rulings Requested

Should the Printer charge you GST in respect of the books that are shipped to the U.S?

Should the Printer charge you GST in respect of the books that are shipped within Canada?

Interpretation Given

In accordance with section 1.4 of Chapter 1 of the GST/HST Memoranda Series, a ruling can only be issued with reference to a clearly defined fact situation of a particular person. Rulings are issued upon request and where the person has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services and property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. We are pleased to offer you the following interpretation.

Generally, a taxable supply made in Canada is subject to tax at 7%, or 15% if the supply is made in a participating province (Nova Scotia, New Brunswick, and Newfoundland and Labrador), pursuant to section 165 of the Excise Tax Act (ETA). A supply that is made outside Canada is not subject to tax. Whether a supply is made in or outside Canada is determined under the general place of supply rules outlined in section 142 of the ETA, and depends on the nature of the supply (i.e., whether it is of tangible personal property, real property, intangible personal property or services).

Based on the limited facts provided, it would appear that the Printer is making supplies of books (tangible personal property). You are the recipient of that supply (as defined in subsection 123(1) of the ETA, the "recipient" of a supply of property or a service is the person who is liable to pay the consideration for the supply), although the books are shipped directly to your clients, most of whom are non-residents. You in turn supply the books to your clients.

Paragraph 142(1)(a) of the ETA states that a supply by way of sale of tangible personal property shall be deemed to be made in Canada if the property is, or is to be, delivered or made available in Canada to the recipient of the supply. Paragraph 142(2)(a) states that a supply by way of sale of tangible personal property shall be deemed to be made outside Canada if the property is, or is to be, delivered or made available outside Canada to the recipient of the supply.

Memorandum 3.3, Place of Supply, provides more information on how the phrase "delivered or made available" is interpreted for purposes of paragraphs 142(1)(a) and 142(2)(a) of the ETA. The phrase "delivered or made available" has the same meaning as that assigned to the concept of "delivery" under the law of the sale of goods, as follows:

•   "Delivered" refers to those situations where delivery of the tangible personal property under the applicable law of the sale of goods is effected by actual delivery.

•   "Made available" refers to those situations where delivery of the tangible personal property under the applicable law of the sale of goods is effected by constructive delivery (i.e., actual physical possession of the tangible personal property is not transferred to the recipient of the supply yet is recognized as having been intended by the parties and as sufficient in law). For example, situations arise where a person sells tangible personal property to another person and agrees to hold the property as bailee for the buyer.

Generally, the place where the tangible personal property is delivered or made available can be determined by reference to the terms of the contract. However, in the absence of such terms, the place where the tangible personal property is delivered or made available may be determined by reference to the place where the tangible personal property is considered to have been delivered under the law of the sale of goods applicable in that case. For example, in the absence of evidence to the contrary, where the Printer is authorized or required to send the books to your client, delivery of the books to a carrier for the purpose of transmission to your client would constitute delivery to you whether the carrier is named by you or not. As such, where this takes place in Canada, the supply of the books by the Printer would be considered to be made in Canada and subject to tax at 7% unless zero-rated (taxed at 0%) as an export.

A taxable supply of tangible personal property made in Canada may be zero-rated as an export under section 1 or section 12 of Part V of Schedule VI to the ETA provided the conditions in either of the provisions are met.

Section 1 of Part V of Schedule VI to the ETA zero-rates a supply of tangible personal property (other than an excisable good) made by a person to a recipient who intends to export the property provided:

•   the recipient is not a consumer;

•   the recipient exports the property as soon after the property is delivered to the recipient as is reasonable, taking into account the circumstances surrounding the exportation and where applicable, the recipient's usual business practices;

•   the property is not acquired by the recipient for consumption, use or supply in Canada prior to export;

•   after the supply is made and before the recipient exports the property, the property is not further processed, transformed or altered in Canada by the recipient except to the extent reasonably necessary or incidental for its transportation; and

•   the supplier maintains satisfactory evidence of the exportation of the property by the recipient.

Under section 12 of Part V of Schedule VI to the ETA, a supply of tangible personal property may be zero-rated if the supplier

•   ships the property to a destination outside Canada that is specified in the contract for carriage of the property;

•   transfers possession of the property to a common carrier or consignee that has been retained by the supplier on behalf of the recipient or the recipient's employer to ship the property to a destination outside Canada; or

•   sends the property by mail or courier to an address outside Canada.

When a supply of tangible personal property is zero-rated as an export, the supplier must maintain satisfactory evidence that it has been exported. We have enclosed a copy of section 4.5.2, Exports - Tangible Personal Property of the GST/HST Memoranda Series that discusses these zero-rating provisions and the documentary requirements.

The determination of whether a supply of books by the Printer to you is zero-rated under section 1 or section 12 of Part V of Schedule VI to the ETA must be made based on the facts of each case.

Where it is determined that the supply by the Printer is made in Canada and not zero-rated, the supply of the books by the Printer is considered to be made in a participating province where the Printer ships the books to a destination in a participating province or transfers possession of the books to a common carrier that the Printer has retained on behalf of the recipient to ship the property to such a destination.

Generally, taxable supplies made in a participating province are subject to HST of 15% unless zero-rated. However, a point-of-sale rebate of the provincial component of the HST (8%) is available on supplies of a printed book or an update of a printed book, an audio recording all or substantially all of which is a spoken reading of a printed book, or a bound or unbound printed version of scripture of any religion. The point-of-sale rebate applies at every point in the distribution chain, including sales by retailers, publishers, wholesalers and distributors. Normally, the supplier pays or credits the rebate to the purchaser when the qualifying goods are bought, so that the tax is applied at a rate of 7%.

Please note that every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada must register for the GST/HST except where, among other things, the person is a small supplier.

Generally, a person qualifies as a small supplier during any calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies, including zero-rated supplies, made by the person (or an associate of the person at the beginning of the particular calendar quarter) that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000 or $50,000 where the person is a public service body.

There is an exception to this rule. Generally, a person ceases to be a small supplier at any time in a calendar quarter if the total value of the consideration that becomes due, or is paid without having become due, in that quarter for world-wide taxable supplies made by the person, or an associate of the person at the beginning of the calendar quarter, exceeds $30,000 or $50,000 where the person is a public service body. In this case, the person ceases to be a small supplier immediately before the consideration becomes due or is paid for the particular taxable supply that puts the person over the $30,000 (or $50,000) threshold.

Both of these calculations exclude consideration attributable to the sale of goodwill of a business, supplies of financial services, and supplies by way of sale of capital property in determining the $30,000 (or $50,000) threshold.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8253.

Yours truly,

Jacqueline Russell
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/02/17 — RITS 47887 — GST on the Supply of a Condominium Unit

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, (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to reimbursements of salaries and benefits. We apologize for the delay in responding to your request.

Statement of Facts

•   XXXXX (the Corporation) is a corporation XXXXX. The Corporation has entered into a Master Secondment Agreement, XXXXX with XXXXX, XXXXX and a third party, XXXXX, XXXXX), a corporation incorporated under the laws of XXXXX.

•   The Corporation is registered for GST/HST XXXXX. XXXXX and XXXXX are both registered for GST/HST. XXXXX is not registered for GST/HST.

•   The Corporation wishes to obtain the benefit of services to be provided by selected employees of XXXXX, XXXXX, XXXXX. Each seconded employee (Employee) enters into an Employee Secondment Agreement between the Corporation and such an Employee.

•   Each of the Employees will be performing services on a full-time basis for the Corporation for XXXXX to XXXXX months at a place in Canada as selected by the Corporation from time to time. In the case of Employees of XXXXX, the Employees are required to physically relocate to Canada in order to carry out their duties for the Corporation. The Employees have permanent workstations at the Corporation's place of business.

•   The Employees will observe the Corporation's procedures for governing its employees and will obey the Corporation's reasonable instructions in respect of the provision of the services during the term of their agreements. The Employees are given business cards to represent themselves as employees of the Corporation. Nothing in the Employees' Secondment Agreements limits the ability of the Corporation to authorize the Employees to execute contracts on behalf of the Corporation.

•   The Employee's Secondment Agreement may be terminated by the Corporation in the event of a material breach of this Agreement by the Employee, immediately; or otherwise, as determined by the Board of Directors of the Corporation.

•   The Employee will promptly disclose and assign to the Corporation the Employee's entire right, title and interest in any invention, industrial design, idea, discovery, intellectual property, including software or improvement thereon, made or conceived solely or jointly with others, which arises from any task assigned to the Employee or work performed by the Employee for or on behalf of the Corporation.

•   In no event will any employee of XXXXX, XXXXX or the Corporation be considered the agent or employee of any other party.

•   The Employee's compensation (i.e., salary and benefits) will be paid directly by XXXXX, XXXXX, XXXXX, as the case may be. The Corporation is not responsible for paying the salary for any Employee or, with respect to such an Employee, for withholding any amounts for any taxes, employment insurance or other amounts that are required to be deducted by statute, from payments made to employees of the Corporation in XXXXX or Canada.

•   During the term of the agreements, the Corporation will pay XXXXX, XXXXX, XXXXX or XXXXX, as the case may be, an amount to reimburse the employees' salaries and benefits within 30 days of the end of each month. The reimbursement is at cost and there is no profit motive.

•   XXXXX, XXXXX, XXXXX agree to pay or reimburse and indemnify the Corporation for any Canadian withholding taxes that may be exigible pursuant to the Income Tax Act. XXXXX, XXXXX, XXXXX agree that all payments made to any of them from the Corporation will be net of any applicable withholding tax.

Ruling Requested

You would like to know how the GST/HST applies to the reimbursement of salaries and benefits paid by the Corporation.

The Canada Revenue Agency's (CRA) policy is that the determination criteria of an employee/employer relationship are the same for income tax and GST/HST purposes. The responsibility for such determinations/rulings is given to one area of the CRA (i.e., the CPP/EI Rulings Unit) to facilitate consistency. Therefore, we cannot provide you with a ruling. However, we are pleased to provide you with the following interpretation.

Interpretation Given

Section 165 of the Excise Tax Act (ETA) requires that every recipient of a taxable supply (other than zero-rated) made in Canada shall pay GST at 7% or HST at 15% on the value of the consideration for that supply. Pursuant to subsection 123(1) of the ETA, a "supply" means, in part, the provision of property or a service in any manner and a "service" means anything other than property, money, and anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person.

Therefore, for GST/HST purposes, any work performed by an employee for his/her employer is not subject to tax. Thus, as a general rule, the employer will not have to pay GST/HST on the salary and benefits (i.e. the consideration for the work performed by the employee) paid to his/her employee.

As previously stated, the decision of whether or not a seconded individual is held in law to be an employee of the host organization (i.e., the Corporation) during the period of the individual's assignment to that organization is a question of fact that may be ruled on by our CPP/EI Rulings Unit, on a case-by-case basis.

If a seconded employee is held to be the employee of the host organization during the period of the individual's assignment to that organization, then the host organization will not have to pay GST/HST on the reimbursement it makes to the sponsoring organization XXXXX.

If, on the other hand, the seconded individual is held not to be the employee of the host organization during the period of the individual's assignment to that organization, then the reimbursement will be treated as consideration for a taxable supply of services made by the sponsoring organization to the host organization. Consequently, the host organization will have to pay GST/HST on the amount it pays to the sponsoring organization for the employees' services.

If the sponsoring organization is a non-resident person, and an employee of the non-resident person enters Canada to perform services in Canada for a significant period of time pursuant to an agreement (e.g., the Master Secondment Agreement for the period of time contemplated in that agreement), the CRA would likely consider that non-resident person to be carrying on business in Canada for GST/HST purposes. Where it is determined that the employee seconded from the non-resident person is held in law not to be an employee of the host organization during the period of the individual's assignment to that organization, the non-resident person would be required to register (except if it is a small supplier under subsection 148(1) of the ETA) by virtue of the fact that it is making a taxable supply of services in Canada in the course of carrying on a business in Canada. The non-resident person would therefore be required to collect and remit GST/HST at 7%/15% on the taxable supply of the services it performs in Canada.

Additional information concerning whether an individual is an employee of an organization or not, is provided in the enclosed pamphlet RC4110, Employee or Self-Employed? To request a ruling, you may complete the enclosed form CPT1, Request for a Ruling as to the Status of a Worker under the Canada Pension Plan and/or the Employment Insurance Act, and send it to:

XXXXX TSO
CPP/EI Rulings Unit
XXXXX
XXXXX

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the CRA with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

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

Yours truly,

Michèle Routhier, CMA
Technical Analyst
Services and Intangibles Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

2005/04/01 — RITS 55068 — Tax Status of Lease Agreements Entered Into Before March 10, 2004

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

Our Comments:

Under the QM, the 1% rate reduction is a required part of a registrant's actual net tax calculation (see formula in subsection 17(1) of the Streamlined Accounting (GST/HST) Regulations) for a specific reporting period and not an amount that may be deducted. Unlike an ITC, it is not an amount that the registrant may claim if he/she chooses in any reporting period (subject to the ITC time limits). Where the net tax indicated on a return for a reporting period does not account for the 1% rate reduction, the net tax shown on the return is incorrect and should be corrected. There are no provisions under the Excise Tax Act (ETA) that would allow the rate reduction or the reporting of tax collected to be carried over to another reporting period.

The Canada Revenue Agency (CRA) has established an administrative policy for adjusting returns. The policy is built on the underlying fact that the CRA has the discretion to raise assessments for net tax and that the CRA is not required to assess all returns. The administrative policy provides flexibility to ensure that the correct amount of tax for a reporting period is posted to the registrant's account.

In the case under consideration, a small business using the QM (which is intended to reduce the compliance burden by simplifying the net tax calculation) has not benefited from the 1% rate reduction that is given to all registrants using the QM. The registrant may be advised to provide the local tax services office with detailed information in writing and request that the specific reporting periods identified in the registrant's letter (over the last four years) be adjusted in accordance with the administrative policy.

The adjustments should be limited to four years to be consistent with the underlying fact that, generally, the CRA only has the discretion to raise net tax assessments for a period of four years in accordance with paragraph 298(1)(a) of the ETA. It is not the intent of the administrative policy to adjust returns to provide registrants with avenues to obtain benefits that would not be available under the legislation or contrary to the spirit or intent of the legislation.

Accepting the registrant's request to adjust its returns for the last four years is consistent with the assessment provisions. Subsection 296(8) of the ETA defines "overpayment of net tax" specifically for purposes of section 296 of the ETA. Based on the net tax calculation for the QM, the amount actually remitted by the registrant on account of net tax exceeds the net tax of certain reporting periods. Subsection 296(3) of the ETA provides that where there is an overpayment of net tax, the overpayment shall be applied to certain outstanding liabilities of the registrant and any remaining amount that was not so applied should be refunded. Subsection 296(4) of the ETA provides limitations for applying and refunding the overpayment. Given that the overpayment is not attributable to an ITC or deduction but is, in fact, a true overpayment of net tax as a result of an error in calculating the net tax for a specific reporting period, the limitations do not restrict the payment of the refund to the registrant. As such, if the CRA were to audit the registrant's reporting periods for the last four years, the amount of the overpayments would be refunded to the registrant.

Should you have any further questions regarding this matter, please do not hesitate to contact me at (613) 954-7931.

2005/04/15 — RITS 59054 — Entitlement by the XXXXX to an 83% Public Service Body Rebate

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 construction of a replacement house.

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

Statement of Facts

Based on your letter and your telephone conversation XXXXX with XXXXX of our XXXXX office, our understanding of the facts is as follows:

1. You and your husband XXXXX owned a single unit detached house in XXXXX. It was you and your husband's principal residence. The property also included a detached garage of approximately XXXXX square feet.

2. You operated a home-based business with a reasonable expectation of profit in a part of the main house (less than 50%) and in the entire garage. You are registered for GST/HST purposes. The home-based business consisted of XXXXX for sale to retailers.

3. GST was not payable on the acquisition of the residence (main house and garage). As such, you did not claim any input tax credit with respect to the acquisition of the residence. In addition, there were no improvements to the main house or the garage that related to the business and for which an input tax credit may have been available.

4. In XXXXX, the residence burned down to its foundation and could not be repaired.

5. All of the contents of the residence including the assets necessary to carry on the business were destroyed. You did not get all of the contents destroyed in the fire replaced, as you had no place to store them. Furthermore, the insurance company did not replace the assets that were used in carrying on the business.

6. As a consequence of the fire, you were unable to continue to earn a living in your field in XXXXX and you and your husband moved to XXXXX shortly after the fire.

7. Your insurance company told you that you and your husband could not sell the vacant land without rebuilding a house on the property. You both have settled on an amount in terms of damages with your insurance company to build a replacement house. However, your insurer informed you that they would not cover the GST payable on the construction costs of the replacement house.

8. XXXXX. After reconstruction, you expect to sell the house for an amount in excess of $450,000.

Ruling Requested

You would like to know whether you are entitled to a rebate or input tax credit for the GST incurred on the construction costs of the replacement house.

Ruling Given

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

1. You are not eligible for a GST new housing rebate in respect of the GST you paid on the construction costs incurred to rebuild the house and the garage.

2. You are not entitled to claim input tax credits for the GST payable on the construction costs incurred to rebuild the house and the garage.

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

1. The ETA generally allows a new housing rebate to an individual who builds or substantially renovates a residential complex for use as the primary place of residence of the individual or a relation of that individual. One of the reasons that you are not eligible for the rebate is that you do not meet the eligibility criteria because you intended to construct the house for sale and not for use as your primary place of residence or as a primary place of residence of an individual related to you. Moreover, the new housing rebate is not available where the fair market value of the residential complex is $450,000 or more.

2. For GST/HST purposes, the construction of the replacement house and the garage is not a commercial activity since you did not construct the house and the garage in the course of a business or an adventure or concern in the nature of trade. The construction of the house and the garage was undertaken at the direction of the insurer in accordance with the terms of the insurance policy. Therefore, you are not entitled to claim input tax credits for the tax incurred on the construction costs for the replacement house and the garage.

Additional information

For GST/HST purposes, you are not considered to be the builder of the replacement house since you did not construct the house and the garage in the course of a business or an adventure or concern in the nature of trade. Because you are not the builder and you are not entitled to claim input tax credits for the tax incurred on the construction costs, the sale of the replacement house and the garage will be exempt of tax.

As indicated above, you stated that the insurer would not cover the GST incurred with respect to the construction costs. The terms of the insurance policy should provide information with respect to the extent of the indemnification provided under the policy. As for the application of the GST, please find enclosed Chapter 17.16 of the GST/HST Memoranda Series entitled GST/HST Treatment of Insurance Claims. You may wish to refer to this publication, in particular paragraphs 13 to 19, for further information.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9587.

Yours truly,

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

2005/04/28 — RITS 59839 — Park Lot Lease and Development Fees