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.

This is in response to your XXXXX regarding sections 170 and 173 of the Excise Tax Act (the ETA).

ISSUES

1. Does subparagraph 173(1)(d)(iii) of the ETA apply to leased passenger vehicles or aircraft?

2. Would subparagraph 173(1)(d)(i) of the ETA apply where an ITC for tax paid on a leased vehicle (that does not meet the definition of passenger vehicle) was denied by reason of subsection 170(2) of the ETA?

3. Why does subparagraph 173(1)(d)(ii) of the ETA refer to leased property if subparagraphs 173(1)(d)(i), (iii) and (iv) exclude leased property?

4. Does paragraph 170(1)(b) apply to property acquired by way of lease?

OUR COMMENTS

ISSUE 1:

We agree that subparagraph 173(1)(d)(iii) of the ETA applies only to passenger vehicles and aircraft owned by the registrant and does not apply to leased passenger vehicles or aircraft.

ISSUE 2:

Where subsection 170(2) of the ETA has been applied to deny an ITC on a leased vehicle that is not a passenger vehicle, subparagraph 173(1)(d)(i) would apply such that the registrant would not be required to remit tax on the taxable benefit.

ISSUE 3:

Subparagraph 173(1)(d)(i) of the ETA refers to section 170. Subsection 170(2), which was used to deny the ITC, refers to property or a service acquired, imported or brought into a participating province by the registrant. Subsection 170(2) can include leases and purchases of property.

Subparagraph 173(1)(d)(ii) of the ETA refers to the election available under subsection 173(2) of the ETA. The election, in turn, refers to (a) leased passenger vehicles and aircraft of a registrant other than a financial institution and (b) to leases or purchases of passenger vehicles and aircraft of a financial institution.

Subparagraph 173(1)(d)(iii) refers to passenger vehicles and aircraft that are capital property of a registrant who is an individual or partnership where the property is not used by the registrant exclusively in commercial activities of the registrant.

Subparagraph 173(1)(d)(iv) refers to passenger vehicles or aircraft of a registrant who is not an individual, partnership or financial institution where the property is not used by the registrant primarily in commercial activities of the registrant.

The situations contemplated in subparagraphs 173(1)(d)(i), (iii) and (iv) are all situations where no ITC is available to the registrant on the acquisition of the property. In the situation contemplated in subparagraph 173(1)(d)(ii), a partial ITC may be available on acquisition of the property. However, the election under subsection 173(2) of the ETA may be made so that the registrant is not required to remit tax on the taxable benefit. This would be beneficial where the GST to be remitted on the taxable benefit exceeds the amount of any available ITC on the leased property. The following example is based on Example III in IT63R5.

Employer-leased Automobile Taxable Benefits
2005 Taxation Year

Assumptions:

Please note, however, the election is not available in respect of leased property other than passenger vehicles and aircraft. The election cannot be made in respect of other types of property, such as a leased vehicle that does not meet the definition of passenger vehicle. This issue has been brought to the attention of the Legislative Policy Division.

ISSUE 4:

Paragraph 170(1)(b) of the ETA refers to the supply of property acquired, imported or brought in by the registrant. It does not refer to the means (e.g., purchase or lease) by which the acquisition, importation or bringing in is accomplished. Paragraph 170(1)(b) of the ETA applies, therefore, to property acquired by way of lease.

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

2005/06/20 — RITS 59136 — Section 256 New Housing 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 fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of your XXXXX mL Cranberry Juice ("the Product").

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

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is pure cranberry juice, which has not been diluted or sweetened.

2. Pure berry juices have a wide variety of uses as an ingredient in recipes for glazes, marinades, salad dressings, punches and alcoholic beverages.

3. The Product is not generally consumed directly without modification by the consumer. It is most commonly mixed with other sweeter juices before being consumed. However, some consumers may ingest a few tablespoons of the Product at one time.

4. The Company has provided a faxed copy of the Product's product label. The product label for the Product states that it is XXXXX. The other side of the label states, XXXXX.

5. The Company states that its competitors are now marketing and promoting cranberry juice as a constituent of other prepared foods, as adjuncts to food such as a salad dressing or meat glaze, and as a constituent of fruit juice blends. The Company is shifting its marketing approach in the same direction as its competitors.

6. The nutrition facts table on the product label lists the nutrition information per XXXXX mL of the Product. XXXXX.

Ruling Requested

You would like to know the tax status of the Product.

Ruling Given

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

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

Explanation

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

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

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

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

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

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

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

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

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

Paragraphs 36 and 37 of GST/HST Memoranda 4.3, Basic Groceries, provide the CRA's administrative position with respect to concentrates in interpreting paragraph 1(d):

Supplies of non-carbonated fruit juice or fruit-flavoured beverages, including concentrates that, when reconstituted (according to instructions on the package) contain less than 25% by volume of natural juice(s), are taxable at 7% or 15%.

To determine the tax status of frozen fruit juice beverage concentrates, the [CRA] will consider the percentage of fruit juice by volume in the frozen concentrate (not the percentage of fruit juice in the beverage when reconstituted). If the percentage of fruit juice in the concentrate is more than 25% by volume, the supply of the concentrate is zero-rated. If the percentage of fruit juice in the concentrate is less than 25% fruit juice by volume, the supply of the concentrate is taxable at 7% or 15%.

The Product is not a juice concentrate, and therefore, the administrative position for concentrates does not apply. The product label for the Product does not instruct the consumer to add the Product to water. It identifies the Product as 100% pure cranberry juice, not from concentrate.

The Company states that it is shifting its marketing approach to be more like that of its competitors, which are now marketing and promoting cranberry juice as an ingredient in food and beverages. XXXXX.

The Product is not promoted as a product that can be added to water to produce a beverage, although this is a possible use of the Product. Based on the label, the most common use of the Product would be as an ingredient to a beverage made with other juices.

Based on the labelling and marketing of the Product, it is not a single serving of a beverage even though it is below the administrative quantity threshold for paragraph 1(n). The Product is not sold as a beverage.

As neither paragraph 1(d) nor 1(n) apply, supplies of the Product in XXXXX mL bottles will be zero-rated for GST/HST purposes pursuant to section 1 of Part III of Schedule VI to the ETA.

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

2005/07/15 — RITS 59548 — GST on Supplies Made by Tour Operators

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 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to various affinity programs provided by the XXXXX Association (the Association). We apologize for the delay in our response.

You also provided the following documents:

•   A copy of the XXXXX Affinity XXXXX Program Agreement between the Association and Party A.

•   A copy of the Business Agreement between the Association and Party B.

•   A copy of the Agreement between the Association and Party C.

•   A copy of the Agreement between the Association, Party D and Party E.

•   A third party authorization that authorizes XXXXX to represent the Association.

Statement of Facts

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

•   The Association is a non-profit organization and a public sector body as defined under subsection 123(1) of the Excise Tax Act (the ETA).

•   The Association is not registered for the purposes of the GST/HST.

•   The Association is a separately incorporated entity from Party F and is the XXXXX of Party F.

•   The Association receives funds from selected organizations to fund its various activities. These organizations have agreed to provide the Association with special programs and discounts that are not typically offered to the public.

•   The highlights of the four agreements provided are as follows:

XXXXX Affinity XXXXX Program Agreement

* Party A and the Association have entered into an agreement where PARTY A and the Association desire to offer to Association Supporters XXXXX.

•   In the agreement between PARTY A and the Association, the Association obliges to

•   Clearly disclose PARTY A's name on all XXXXX (printed and other material bearing any of PARTY A's trade marks which are used to solicit applications or promote the Affinity XXXXX Program) as the owner and issuer of all XXXXX;

•   Cooperate with PARTY A in the joint development by them of promotional programs for the Affinity XXXXX Program directed to Association Supporters in Canada, and to XXXXX, during the term of this Agreement, all as mutually determined and agreed to in writing by the parties;

•   Assist PARTY A, as part of its responsibilities under the previous bullet, in delivering the Affinity XXXXX Program information to current Association Supporters in Canada, at PARTY A's expense,

•   Provide verification of current Association Supporters in Canada which shall consist of a minimum of XXXXX mailable Supporters' names upon request by PARTY A, at least once per calendar year at no cost or expense to PARTY A;

•   Not be involved with the acceptance or processing of the XXXXX applications; and

•   Not enter into any affinity, co-brand or cooperative XXXXX agreement or arrangement substantially similar to the Affinity XXXXX Program.

•   PARTY A obliges to

•   Administer the services made available by or through PARTY A to XXXXX, including issuance of XXXXX;

•   Make all arrangements for the production and issuance of XXXXX to XXXXX in the form and manner agreed upon in writing by the Association and PARTY A from time to time;

•   Cooperate with the Association in the joint development by them of promotional programs for the Affinity XXXXX Program directed at Association Supporters;

•   At the Association's request, execute such documentation and agreements and do all other things reasonably required for PARTY A to become a licensee of the Association's Trade Marks:

•   Contribute up to $XXXXX per annum for costs and expenses incurred in marketing and advertising the Affinity XXXXX Program during the term of the agreement; and

•   Pay the following amounts to the Association:

•   $XXXXX for each XXXXX issued to a new XXXXX under this agreement;

•   $XXXXX for each XXXXX on which XXXXX are renewed;

•   $XXXXX for each XXXXX issued to a new XXXXX as a result of the Association's direct marketing efforts; and

•   XXXXX% of all amounts XXXXX posted to each XXXXX during years 1 through 5 of the term of the agreement.

•   PARTY A will pay fees to the Association on a quarterly basis with a guaranteed payment of not less than $XXXXX per quarter.

•   The agreement with PARTY A will be in full force for an initial term of XXXXX, commencing on XXXXX, and will automatically renew for successive additional terms of XXXXX, subject to renegotiation.

•   PARTY A sold their XXXXX PARTY G. PARTY G assumed the terms and conditions of this agreement effective XXXXX.

Party B

•   Party B and the Association have entered into an agreement whereby Party B offers XXXXX directly to the Association members and Party F.

•   Under the agreement with Party B, the Association shall:

•   Maintain to its ability an accurate list of its XXXXX and Party F including the name, address and phone number of each XXXXX. On an annual basis, the Association shall provide this list to Party B, in electronic form, on a timely basis for the purpose of a mutually agreed upon marketing campaign(s) and shall not provide such a list or any selection of such a list to another XXXXX for the purpose of marketing XXXXX so long as the agreement is in effect;

•   Facilitate the marketing of the XXXXX to eligible XXXXX;

•   Endorse and recommend the XXXXX to its XXXXX; and

•   During the term of the agreement, the Association will not sponsor or endorse any other XXXXX.

•   Under this agreement the responsibilities of Party B are that it shall:

•   Provide XXXXX under the products listed in XXXXX the agreement to the Association members and Party F who apply and who satisfy the eligibility requirements for the XXXXX;

•   Be responsible for the costs and expenses of producing and distributing any of its printed advertising, solicitation letters, and other promotional materials;

•   Pay to the Association an annual marketing expense allowance in arrears, based on XXXXX generated from the XXXXX for the particular year;

•   Pay to the Association XXXXX% of the annual growth in XXXXX;

•   Pay to the Association, in consideration of the Association granting to Party B its endorsement and exclusive right to market the XXXXX, an amount as determined in XXXXX the agreement;

•   In accordance with XXXXX the agreement the Association shall participate in a profit-sharing arrangement for the XXXXX, maintained by Party B on a pooled basis with other similar XXXXX association plans underwritten by Party B. The profit sharing will be based on a complex formula included in XXXXX the agreement.

•   If the resulting profit-sharing formula is a positive amount for the calendar year, the profit-sharing amount will be payable to the Association. If the resulting profit-sharing formula is a negative amount for the calendar year, the profit sharing amount to the Association will be XXXXX.

•   The agreement is effective XXXXX, and is to remain in effect until XXXXX, and will automatically renew upon that expiry date for successive XXXXX periods.

Party C

•   Party C wishes to offer XXXXX to the Association members, staff, Party F and their spouses (collectively referred to as the Members).

•   In the agreement entered into with Party C, the Association agrees to

•   Encourage the participation of its Members in the XXXXX;

•   Provide to Party C, at their request, access to updated lists of the XXXXX of the Association, including their name, address and telephone numbers for solicitation and promotional purpose;

•   Authorize Party C to use the names, trademarks, crests and logos of the Association on all related XXXXX documentation;

•   Offer exclusively to Party C any XXXXX advertisement in the Association's official publications; and

•   Not sponsor any other XXXXX during the term of the agreement.

•   In the agreement Party C agrees to

•   Ensure that the XXXXX will be administered in accordance with the present agreement;

•   Accept all reasonable requests for XXXXX under the XXXXX;

•   Give the Association the information contained in XXXXX, that being statistical information on the number of:

•   XXXXX;

•   XXXXX;

•   XXXXX;

•   XXXXX; and

•   XXXXX.

•   Promote the XXXXX using various promotional methods;

•   Assume all costs associated with the XXXXX - from package design, promotional material, mailing, postage, insurance policies, etc.; and

•   Indemnify and save the Association harmless.

•   In consideration for the exclusive right given to Party C to promote the XXXXX and subject to access of updated lists of the XXXXX of the Association, Party C will provide the Association with the following financial consideration during the term of this agreement. This financial consideration is for visibility given to Party C at different events held throughout the year by the Association such as, annual conferences and board of directors meetings:

•   Pay the Association an annual sum of $XXXXX;

•   Increase the annual amount payable by $XXXXX for each XXXXX; and

•   Increase the annual amount payable by $XXXXX for each XXXXX.

•   The agreement took effect XXXXX and will continue for a period of XXXXX and is to be renegotiated for renewal at the end of the XXXXX period.

Party D XXXXX and Party E

•   The Association operates an affinity program (the Program) exclusively for the XXXXX, XXXXX (the Members) of the Association.

•   The Program refers to the XXXXX to the Members and the Association will be compensated on the sale of XXXXX to Members.

•   Party D XXXXX will act as an administrative interface for services and products offered through XXXXX. Party E, one such XXXXX, will carry out any obligations or responsibilities pertaining to the solicitation, sale or negotiation of XXXXX.

•   Under the agreement the Association agrees to

•   Acknowledge its exclusive support of the Program;

•   Promote the Program through a combination of advertising opportunities that are available to them including the web site, XXXXX events and other opportunities that arise;

•   Appoint Party E as its official and XXXXX;

•   Not enter into any similar affinity proposal with any other XXXXX during the term of this agreement;

•   Promote Party E to its Members through written endorsements of specific offers and promotions;

•   Encourage the participation of its Members in the Program;

•   Authorize Party D and Party E to use the names, trademarks, crests and logos of the Association on all related Program documentation; and

•   Provide Party D and Party E, on a regular basis, with updated lists of the XXXXX of the Association, including their name and XXXXX.

•   Under the agreement, Party E agrees to:

•   Administer the Program. As previously mentioned, the Program refers to XXXXX to the Members;

•   Compensate the Association on the XXXXX of each XXXXX to Members;

•   Along with Party D, collaborate with the Association to offer the Members the Program;

•   Pay the Association XXXXX per XXXXX for any Member;

•   Send out two direct mail pieces per year to all mailable Association XXXXX. All promotion opportunities will be developed and mutually agreed to by Party D, Party E and the Association throughout the term of the agreement; and

•   Provide products and/or services on behalf of Party D to the Association Members. It is noted that the Association is not party to the contract between the Member and Party D.

•   The agreement will be in effect for XXXXX, beginning XXXXX and will automatically renew for successive XXXXX, unless terminated.

Other Observations

•   Although in all agreements submitted there is a clause that provides, to various extents, access to the membership list of the Association, the Association confirmed that a list is never directly provided to the other parties to the agreements. When the other parties wish to do a direct mailing to members, the Association sends a list of member names and addresses to a mailing house, where information to be mailed is addressed and sent out. The other parties never see the mailing list due to privacy issues.

•   On the Association's web site XXXXX there is an area that promotes the various XXXXX benefits and has links to web pages that promote the previously mentioned affinity programs. Once on the web page of a specific affinity program, an Association member can apply for or receive further information on the special offers.

Ruling Requested

You would like to know if the supply made by the Association is deemed not to be a supply pursuant to section 135 of the ETA under the:

•   XXXXX Affinity XXXXX Program Agreement;

•   Business Agreement between the Association and Party B;

•   Agreement between the Association and Party C; and

•   Agreement between the Association and Party D and Party E.

Ruling Given

Based on the facts set out above, we rule that the supply of the service of publicizing PARTY A's (business effective under the same agreement), Party B's, Party C's, Party D and Party E's business made by the Association is deemed not to be a supply pursuant to section 135 of the ETA under the:

•   XXXXX Affinity XXXXX Program Agreement;

•   Business Agreement between the Association and Party B;

•   Agreement between the Association and Party C; and

•   Agreement between the Association and Party D and Party E.

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 135 of the ETA deems the supply of a service or a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property of a public sector body not to be a supply. The supply must be made to the sponsor of an activity of the public sector body for use by the sponsor exclusively in publicizing the sponsor's business. Where it may reasonably be regarded that the consideration for the supply is primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically or for a prescribed service, it will not be captured by the provision in section 135 of the ETA.

Based on the agreements submitted the Association is providing a supply of a service of publicizing the business of the persons that have entered into agreements with it. In order to meet the requirements of section 135, the supply must be made to a sponsor of the Association. As you mentioned in your letter, although not defined in the ETA for purposes of section 135, the CRA accepts the general meaning of the term "sponsor", which usually indicates either a person who supports or accepts responsibility for another, or more commonly in the commercial sense, one who agrees to provide financial support with respect to another's activities or events while, or by, acquiring advertising or certain promotional rights. A sponsor can also be defined as a person who provides financial or material support for an activity which is not intrinsic to the furtherance of commercial aims but from which the person might expect to gain commercial benefit. In these agreements, the businesses involved are a sponsor of an activity of the Association; that activity being the operation of the Association as an NPO.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4206.

Yours truly,

Carol A. Gaudet
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2005/07/08 — RITS 54470 — Requirement to Register

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 seeking further clarification of our previous ruling XXXXX concerning the application of the Goods and Services Tax (GST) in respect of the deemed supply made by way of sale arising from the self-supply described below. We apologize for the delay in providing you with our response.

Statement of Facts

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

1. XXXXX (the "Builder") was incorporated XXXXX, and was granted status as a registered charity for income tax purposes XXXXX.

2. One of the purposes of the Builder is to construct XXXXX housing for students who attend XXXXX.

3. XXXXX.

4. The Land-owner owns a parcel of land located at XXXXX, XXXXX (the "Land"), near the XXXXX, on which is situated a building that is used to provide student residences, kitchen and dining facilities, lounge areas and a meeting room (the "Subject Property").

5. The Land is zoned "multi-family" residential permitting condominiums to be built on the Land.

6. On XXXXX, the Builder leased the Subject Property from the Land-owner under the terms of a lease (the "Lease") which provides for a lease term equal to XXXXX years XXXXX (within the meaning of XXXXX the Lease), with no options to renew. The annual rent reserved under the Lease is $XXXXX, and the Builder is required to bear all operating and maintenance costs for the duration of the lease term.

7. The Builder is in the process of raising funds for the construction of a new building on the Land.

8. The Builder proposes to remove the existing building and to construct, at its expense, a new building on the Land (the "Proposed Property"). A part of the Proposed Property will be used as a student residence to provide XXXXX housing for students attending XXXXX.

9. XXXXX.

10. The construction of the Proposed Property will cost approximately $XXXXX, and include an unfinished basement XXXXX.

11. The student residence part of the Proposed Property will be comprised of approximately XXXXX dormitory style rooms, each room being approximately XXXXX square feet in size and having no bathroom. There will be a shared bathroom, shared kitchen and shared recreational area. The Builder intends to supply the rooms to students by way of lease. The monthly lease payments will be below the market value for rental accommodations.

12. XXXXX.

Transactions

Where the proposed student residence is a "multiple unit residential complex" (MURC) as that term is defined in subsection 123(1) of the Excise Tax Act (ETA) and the construction of the MURC is substantially complete, the Builder will be deemed to have made and received a taxable supply by way of sale of the MURC and to have paid as a recipient and collected as a supplier, GST in respect of that deemed supply calculated on the fair market value (FMV) of the MURC provided that the other conditions set out in subsection 191(3) of the ETA are also met. The Builder will incur a GST liability at the later of the time construction of the proposed MURC is substantially complete and possession of the first residential unit in the MURC is given as described in subsection 191(3). In order to calculate this GST liability, the FMV of the proposed MURC must be determined at the later of those times.

Ruling Requested

What is the object of the FMV appraisal for purposes of the self-supply rule in subsection 191(3) of the ETA?

Ruling Given

Based on the facts set out above, we rule that the object of the FMV appraisal for purposes of the GST self-supply rules is that part of the Proposed Property that will be a MURC once constructed. The FMV ^[xxii]Footnote 1 of the proposed MURC will be based upon the highest and best use that can be made of the MURC as constructed and consistent with the definitions of a "multiple unit residential complex" and a "residential complex" in subsection 123(1) of the ETA.

This ruling is subject to the general limitations and qualifications outlined in Chapter 1.4 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

For self-supply purposes, the Canada Revenue Agency (CRA) will consider the object to be valued to be the particular residential complex that is deemed to have been supplied. Factors likely to affect the FMV of the part of the Proposed Property that is a MURC include the structural, design and functional attributes of the complex and the applicable provisions of the definition of "residential complex" in subsection 123(1) of the ETA. For instance, since each dormitory style room is a "residential unit" as that term is defined in subsection 123(1) of the ETA and each room will not be a separate parcel or other division of real property (i.e., not a condominium unit), each unit or room can only be supplied by way of lease, licence, or similar arrangement and therefore cannot be owner-occupied. While the definition of residential complex permits residential rental uses other than student housing supplied on a not-for-profit basis, the structural, design and functional attributes of the MURC, including dormitory-style rooms and shared kitchen, bathroom and recreational areas, are likely to limit the MURC's marketability as rental accommodations supplied on a for-profit basis to other market segments.

When transactions of other residential complexes or units are considered for purposes of determining the FMV of the MURC, such residential complexes or units would need to be sufficiently comparable to the MURC. In this case, appropriate comparables may include other MURCs with dormitory-style rooms and shared kitchen, bathroom and recreational areas. However appropriate comparables would exclude "residential condominium units" as defined in subsection 123(1) of the ETA and may also exclude rental housing where each unit is designed with private kitchen, bathroom and living areas and intended for supply on a "for-profit" basis.

Whether parts of the building outside of the residential units and the land are included in a MURC is determined based on paragraph (a) of the definition of "residential complex" in subsection 123(1) of the ETA. For instance, the MURC will include common areas and appurtenances to the building and that portion of the land immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals. As for the land subjacent to the building, the portion of land included in the MURC will be equal to that portion of the building that is included in the MURC. Given that the part of the building that is leased as a XXXXX will be excluded from the part of the Proposed Property that is a MURC, a fair and reasonable method must be used to allocate the Land between the MURC and the XXXXX unless the land immediately contiguous to the building is exclusively for the use and enjoyment of the building as a place of residence for individuals. Even though the Subject Property, which includes the Land, is leased to the Builder, the object of the FMV appraisal is the part of the building and the Land that is the MURC as if both that part of the building and the Land were being sold to the Builder.

We note that in your letter, you stated that in your opinion:

i) the Land as zoned was worth about $XXXXX;

ii) that the FMV of the Proposed Property as a "for-profit" student residence would be less than the cost of constructing the building;

iii) that the FMV of the Proposed Property (taking into account its "highest and best use") would be based on the Land value less the costs of demolishing the proposed building; and

iv) that if a commercial landlord were to purchase the Proposed Property and operate the student residence on a "for-profit" basis in perpetuity, the commercial landlord would not be willing to pay $XXXXX for the Proposed Property as the room rentals could not generate sufficient net rental income to justify such a high purchase price.

In addition, you asked whether the FMV of the Proposed Property for purposes of the GST/HST self-supply rules in light of the opinions you expressed above should be based upon:

(a) XXXXX of the FMV of the Land less the costs of demolishing the proposed building (XXXXX being the portion of the proposed building that is a MURC and excluding the portion that is XXXXX);

(b) the FMV of the MURC (rooms, shared facilities and related land) if sold to a "for-profit" operator (ignoring the lease issue);

(c) the FMV of the MURC (rooms, shared facilities and related land) if sold to a "not-for-profit" operator (ignoring the lease issue);

(d) the cost of constructing the MURC (rooms, shared facilities and excluding the construction costs relating to the clubhouse); or

(e) some other basis.

As you are aware, we are not issuing a ruling with respect to the FMV of the MURC. For further information regarding the determination of FMV, reference should be made to P-165R - Fair Market Value for Purposes of Part IX of the Excise Tax Act, in particular, the methods available to make such a determination (e.g., the cost method and the discounted cash flow or income method) and the information relating to the object of the self-supply. However, as indicated in the ruling provided above, the object of the FMV appraisal in this case is that portion of the Proposed Property that is a MURC. In addition, the FMV will be based on the proposed MURC as constructed. As such, the FMV will not be determined based on the value of the Land less the costs of demolishing the proposed building since the object of the FMV is the MURC itself and not the Land as if it were vacant.

It is noted that reference was made to XXXXX of the FMV of the Land, XXXXX being the portion of the building that is a MURC. As indicated above, the MURC will include a portion of the Land based on a fair and reasonable allocation of the Land between the MURC and the XXXXX. Although XXXXX of the land subjacent to the building may be a reasonable allocation of the subjacent land to the MURC, it is unlikely that it would be fair and reasonable to apply this ratio to determine the amount of land that is contiguous to the building and reasonably necessary for the use and enjoyment of the building as a place of residence for individuals.

Although you indicated at the time of your submission that the Builder does not expect to receive "government funding" (within the meaning of subsection 191.1(1) of the ETA), reference should be made to section 191.1 if at or before the time of the deemed supply, the Builder has received or can reasonably expect to receive government funding in respect of the complex. This section provides for the minimum amount of GST that will be deemed to have been paid and collected by the Builder in respect of the deemed supply.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-8852.

Yours truly,

Daryl J.A. Hooley, CGA
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2005/07/25 — RITS 45512 — [Application of the GST on the Supply of Lease Financing]

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.

In response to your request XXXXX, we wish to provide the following comments.

Our comments pertain to two main subject areas XXXXX: (1) Determining entitlement to ITCs under paragraph (b) in section 169 of the Excise Tax Act (ETA) and (2) Using time available for rent as a basis for determining the extent to which university residences are used in commercial activities.

(1) Determining entitlement to ITCs under paragraph (b) in section 169

XXXXX in determining ITCs in respect of property or services acquired for the purpose of improving capital real property (hereafter referred to as "improvements") of a university or college. XXXXX the essential differences between paragraphs (b) and (c) in subsection 169(1).

In our view there are significant differences between the conditions set for claiming ITCs in paragraphs 169(1)(b) and (c). If this were not the case and these paragraphs employed essentially the same methodology to achieve the same ITC result, there would be no need for the ETA to set out separate ITC provisions for improvements to capital property and for all other inputs. We also note that paragraph 169(1)(c) begins with "in any other case" and as a result paragraph (c) is clearly intended to apply only in cases where paragraph 169(1)(b) does not apply.

Insofar as paragraph 169(1)(c) is concerned, we largely concur with your XXXXX. ITCs can be claimed under paragraph (c) to the extent that various inputs are acquired for use in commercial activities of the registrant. Typically this "extent of use" condition is met using a fair and reasonable method of matching direct inputs to commercial and non-commercial activities and allocating indirect inputs between such activities.

XXXXX paragraph 169(1)(b) sets out an "extent of use" condition that measures the extent to which a registrant is using capital property (CP) in the course of its commercial activities. Thus, unlike paragraph 169(1)(c), the "extent of use" in paragraph (b) is expressed only in terms of one input, that being the CP of a registrant. This expression of "extent of use" is then applied to all inputs acquired as improvements to that same CP. In doing so, paragraph (b) codifies a particular "indirect method" of determining ITCs for improvements to CP.

XXXXX.

The particular measure of "extent of use" used in paragraph 169(1)(b) is uniformly applied to determine ITCs for all improvements to a particular CP. Thus, for purposes of paragraph (b), it does not matter whether improvement to the CP can be attributed: entirely to a commercial activity; to the making of exempt supplies; or some combination thereof. Essentially, paragraph (b) treats all improvements acquired in respect of CP as though they relate to every part of the CP equally and requires that the "extent of use" percentage used for ITC purposes be based solely on how much the CP, as a single input, is used in commercial activities. In this way paragraph (b) represents a departure from the matching of inputs to outputs, espoused in paragraph 169(1)(c).

For instance, consider Buildings A and B located on the same parcel (i.e., with one legal description ^[xviii]footnote 2 where Building A is used exclusively for making taxable supplies and Building B is used exclusively for making exempt supplies. Under paragraph 169(1)(b), a window installed in Building A is given the same ITC treatment as a window installed in Building B.

Applying paragraph 169(1)(b) requires a "yardstick" (i.e., a standard unit of measure) that accurately measures the extent to which CP is used in commercial activities, expressed as a percentage, at the time of the CP's last acquisition (which would include any deemed acquisition resulting, for example, from a change-in-use).

The most obvious and commonly used "yardsticks" for expressing the extent of use of real property that is capital property (CRP) in commercial activities are: square footage/meters of floor space, square yards/meters of land and acres/hectares of land. The ITC allocation methods that use these measures are referred to in this memorandum as "space-based" methods. We acknowledge that these yardsticks may not always provide an accurate measure of the extent to which CRP is used in commercial (versus non-commercial) activities. Where this is the case, a "space-based" method may not be a fair and reasonable method of determining the extent of use of CRP in commercial activities, as required in subsection 141.01(5). However, as a general rule, a "space-based" method is often the starting point for determining the extent of use for CRP.

The CRA's published policy for determining if CRP is used primarily in a business for purposes of paragraph 9(2)(a) of Part I of Schedule V ^[xix]footnote 3, sets out a multi-factor approach to determining the extent of use of CRP. A "space-based" method is recognized as being applicable particularly where certain portions of the CRP are dedicated exclusively to either commercial or non-commercial activities. The policy also recognizes that in some cases other (non-space-based) factors may need to be introduced to arrive at a fair and reasonable method of measuring the extent of use of the CRP. For example, this would occur where all square meters of the CRP are not equal in terms of expressing the extent of use of the CRP in commercial activities or where there are time-based considerations. In this case, the CRA's policy is to permit the use of additional factors necessary to provide an accurate measurement of the extent of use of the CRP in commercial activities. Some of the additional factors mentioned include: time spent, value of unimproved land used, value of improvements previously made, (etc.). However, we wish to caution against the use of factors (yardsticks) that provide a measure of commercial activity but that are not proportionately related to the extent that the CRP is used in that commercial activity.

For example, consider where a single parcel of CRP owned by the university comprised of Building A, Building B and a parking lot. Building A is used 100% in a commercial activity, Building B is used 100% in making exempt supplies and the parking lot is used 100% in making taxable supplies of parking spaces. Building A and B are situated on 50% of the total land area in the parcel, both buildings are equal in size, with each having 10 floors of useable space and each building is approximately equal in terms of its value as an improvement to the CRP. Thus, in terms of size, value of improvements and time spent, the extent of the CRP used in Building A and B are equal. However, two significant differences exist between the activity carried on in Building A and Building B. The costs of labour and electricity inputs for the activity in Building A are twice as great as that required in Building B. The parking lot comprises the remaining 50% of the land area included in the parcel. What is the extent (expressed as a percentage) to which the university is using this CRP in commercial activities for purposes of paragraph 169(1)(b)?

Since there are distinct areas of the parcel used in commercial activities and non-commercial activities and there are no time-based considerations (i.e., the distinct areas of the parcel are dedicated exclusively to one use at all times), the space-based method cannot be considered unreasonable unless it can be shown that a unit of space is not a consistent measure of the extent to which the parcel is used in commercial activities.

While the land area where two 10-floor buildings are situated is equal to the land area included in the parking lot, these portions of the CRP are not equal in terms of the extent to which each portion has been improved. Where certain portions of a parcel dedicated to commercial use are not improved to the same extent as other portions dedicated to non-commercial use, the space-based method must measure not only the horizontal plane (i.e., land areas) but also the vertical plane (i.e., the floors above ground level). In this case, suppose the total space dedicated to commercial use (i.e., the land area necessary for Building A, the 10 floors in Building A and the land area in the parking lot) is 45% of the total space in the parcel. In this case, the only other factor to consider would be the relative values of the improvements within the areas dedicated to commercial and non-commercial use, respectively.

The fact that the labour and electricity inputs for Building A and B are not equal may be relevant for purposes of matching inputs to outputs in paragraph 169(1)(c), however this is irrelevant for purposes of paragraph 169(1)(b) unless there is a consistent relationship between these inputs and the CRP used in commercial activities. The task in paragraph (b) is to find proportionality between the use of the CRP, as the singular input, and the commercial activities taking place on that CRP. The fact that one activity is more input intensive than another, does not necessarily mean that the extent of CRP used in each activity also differs in a proportionate way.

For example, if the total inputs required to produce taxable widgets in Building A is 5 times greater than the total inputs required to produce exempt gadgets in Building B, this does not necessarily mean that 5 times more of the CRP is used to make widgets than to make gadgets.

Similarly, if the total output (or revenue) from producing widgets is 5 times greater than the total output (or revenue) from producing gadgets, this does not necessarily mean that 5 times more of the CRP is used to make widgets than to make gadgets. In paragraph 169(1)(b) all units used to measure commercial activity must find their expression in terms how much of the CRP is used as an input into the making of taxable supplies.

In determining whether a unit (e.g., a square meter) of floor space is equivalent to a unit of parking space as a measure of the extent of use of CRP, one approach is to compare their respective "values as improvements" to the CRP at the time the measurement is taken. Where each square meter of space is equal in terms of its "value as improvements", then the "space-based" method is likely to be accepted as a reasonable method for purposes of paragraph 169(1)(b). If this is not the case, because one space is improved to a significantly greater extent than the other, then the space-based method may be considered unreasonable on its own, justifying the introduction of their relative "value as improvements" as a factor to modify the space-based method.

(2) Using time available for rent as a basis for determining the extent to which university residences are used in commercial activities.

XXXXX

XXXXX

XXXXX

XXXXX

In our view XXXXX a restrictive or narrow interpretation of "use" or "for use" (or its derivatives) XXXXX is contrary to the intended meaning of the term in Part IX of the ETA and its Schedules and to the CRA's published policy. XXXXX.

XXXXX GST/HST Memorandum Series Chapter 19.5 Land and Associated Real Property - Appendix A - paragraph 1 states:

"Capital real property must be used, or held for use, for one or more purposes at all times. In other words, capital real property of an individual or personal trust cannot be regarded as having no use".

While this statement was written in the context of interpreting paragraph 9(2)(a) of Part I of Schedule V, in our view it applies equally to all capital real property of any person.

In addition subsection 196(1) states that:

196. (1) Intended and actual use - For the purposes of this Part, where a person at any time acquires, imports or appropriates property for use as capital property of the person to a particular extent in a particular way, the person shall be deemed to use the property immediately after that time to the particular extent in the particular way.

This provision expands the concept of "use" to encompass the "intended use" or "purpose" for which a CRP is acquired and held by a person.

XXXXX. In the Navaho Inn decision ^[xx]footnote 4, Judge Rip agreed with the Respondent's (our) submission that "it is unreasonable to ignore the significant amount of the appellant's business that is derived from the making of exempt supplies. Rooms are not designated as either long-term or short-term and thus it is impossible to determine the use of rooms in advance. Consequently, says the Minister, it is unreasonable to assume that all unoccupied rooms were for taxable supplies, as alleged by the appellant."

For the same reason, in our view it would be equally unreasonable to have concluded in Navaho Inn that all unoccupied rooms were held for a singular purpose, whether that be the making of exempt (long-term) supplies or for personal use.

In the university cases that we are familiar with, student residences are often dedicated (i.e., set aside, prepared and held exclusively for) short-term rental during the non-academic portion of the year (e.g., from May - August). However, in any particular case, whether rooms in a student residence are dedicated for supply as short-term accommodation is a question of fact that should be corroborated with the facts of the case. For instance, if the university says the student residence is dedicated for short-term rentals for 4 months each year and there is evidence of long-term rentals during those 4 months, then an approach similar to that accepted by the TCC in Navaho Inn should be used. Note however, blocks of rooms can be dedicated for short-term rental rather than the whole residence, thus permitting both long and short-term rentals during the same time period.

CRA's published policy on whether the third exclusionary provision in the post-amble of the definition of residential complex (RC) is met (i.e., the so-called "all or substantially all" test) is set out in Policy Statement P-053. For purposes of student residences (and other forms of accommodation) that are supplied or held for supply on a mixed-use basis, the rationale and methodology in P-053 (with certain modifications ^[xxi]footnote 5) should also be used to determine the "extent of use" in commercial activities for ITC entitlements and the change-in-use rules.

We trust these comments will be of assistance to you XXXXX. Should you wish to discuss these comments or any related matters please feel free to contact me at (613) 954-8852.

2005/08/31 — RITS 63332 — Temporary Importation of Amusement Rides

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 tax status of juice derived from XXXXX.

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

Statement of Facts

1. XXXXX juices XXXXX consist of 100% fruit juice from concentrate. The product comes in XXXXX different all natural flavours including pure XXXXX.

2. XXXXX is currently sold in Canada only in quantities of XXXXX ml. However in the near future, it will also be sold in the smaller size of XXXXX ml and the larger size of XXXXX ml.

3. XXXXX is sold in supermarkets and grocery stores and is generally found on refrigerated shelving near other juices.

4. The container in addition to listing the specific ingredients and storage instructions refers to the fact that the product is 100% juice from concentrate and represents a juice blend with natural flavours. No other descriptions are reflected on the container.

5. The manufacturer recommends drinking XXXXX ml a day, which is approximately XXXXX of the XXXXX ml bottle.

6. XXXXX is advertised XXXXX as an all-natural juice derived from XXXXX. XXXXX is also referred to an XXXXX, containing more naturally occurring XXXXX than other drinks such as blueberry, orange and cranberry juice.

7. XXXXX has recently been assigned a Natural Health Products number.

Ruling Requested

You would like to know the tax status of XXXXX juice sold in containers of XXXXX ml, XXXXX ml and XXXXX ml.

Ruling Given

Based on the facts set out above, we rule that the supply of XXXXX juice in containers of XXXXX ml and XXXXX ml is taxable at 7 % (or 15% as applicable) pursuant to section 165 of the Excise Tax Act (the Act) and, the supply of XXXXX juice in a container of XXXXX ml is zero-rated pursuant to section [1] of Part III of Schedule VI to Act.

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 1 of Part III of Schedule VI to the Act zero-rates supplies of food or beverages for human consumption ("basic groceries") and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Subparagraph 1(n)(iii) of Part III of Schedule VI to the Act excludes from zero-rating the supply of:

beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, except when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.

Under this provision, a serving of a beverage is considered to be a single serving when the serving is less than 600 ml (millilitres). In addition to volume, the Canada Revenue Agency considers the manner in which a beverage is packaged, marketed and promoted to determine if it is a single serving.

After reviewing all the relevant material (packaging, labelling and promotional material), we concur that XXXXX juice is a beverage. Although this product has a Natural Health Product (NHP) number, this factor alone would not change the status of this product from a beverage to a dietary supplement.

In addition, while we appreciate the fact that the manufacturer recommends a daily serving of XXXXX ml to achieve maximum health benefits (although the manufacturer does not discourage drinking the beverage in amounts exceeding XXXXX ml), it would not be unreasonable for a person to consume a XXXXX ml bottle of XXXXX juice in a single occasion. Finally, we cannot distinguish this beverage sufficiently from similar beverages sold in quantities of less than 600 ml.

Consequently, the CRA considers XXXXX juice in bottles that are less than 600 ml to be single serving of juice and therefore taxable pursuant to paragraph 1(n) of Part III of Schedule VI to the Act.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-5124.

Yours truly,

Gabrielle Nadeau
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/11/30 — RITS 64060 — Cancellation of Prepaid Funeral Arrangements

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 your letter XXXXX.

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

Statement of Facts

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

Rulings Requested

(a) XXXXX

(b) XXXXX

Rulings Given

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

XXXXX

XXXXX

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

Explanation

There is no exemption in the ETA that applies to the supplies made by XXXXX.

The small supplier threshold for persons who fall within the meaning of "public service body" as defined in subsection 123(1) is $50,000. This definition includes organizations that have been determined to be a municipality for purposes of paragraph (b) of the definition of "municipality" in subsection 123(1). As a determined municipality for purposes of the ETA, XXXXX is a registrant if its total worldwide revenues from taxable supplies in the last four consecutive calendar quarters and in any single calendar quarter are more than $50,000. If XXXXX is a registrant, the consideration for these supplies is subject to the GST/HST at the rate of 7%.

If XXXXX worldwide revenues from taxable supplies are $50,000 or less over the last four consecutive calendar quarters and in any single calendar quarter, it is a small supplier for purposes of the ETA and it does not have to register for GST/HST.

If, during any one calendar quarter, XXXXX total worldwide revenues from taxable supplies are more than $50,000, it will immediately stop being a small supplier and will be required to start collecting GST/HST on its taxable supplies made in Canada from the date of, and including, the supply that caused it to exceed the $50,000 threshold, even if XXXXX is not yet registered.

If XXXXX does not exceed the small supplier threshold amount in one calendar quarter, but does so over four consecutive calendar quarters, it will be considered to be a small supplier for those four calendar quarters and a month following those quarters. It would have to start collecting GST/HST on its taxable supplies made in Canada following that month.

Generally, provincial and territorial governments, which include departments or ministries, and certain of their Crown corporations, boards, commissions, and agencies, do not pay GST/HST on their taxable purchases if they provide certification. They are immune from the payment of tax by virtue of section 125 of the Constitution Act, 1867. We note that all provincial ministries are part of the XXXXX. XXXXX would not charge GST/HST on taxable supplies made to these persons if an authorized official provides evidence that they are a provincial or territorial department or entity. Such evidence could include a certification clause signed by an authorized official of a provincial or territorial government. This is a statement on provincial or territorial purchase documents that certifies that a provincial or territorial government is purchasing the goods or services with Crown funds. As the supplier, XXXXX must keep the purchase documents with the certification clause for audit purposes. Note that employees of a provincial government who make official business purchases in their own name have to pay GST/HST.

Similarly, supplies of services for real property on reserve made to First Nations are relieved of GST/HST where documentary evidence is provided. Please refer to the enclosed GST/HST Technical Information Bulletin, B-039R, GST Administrative Policy Application of the GST to Indians for detailed information regarding these supplies.

Although GST/HST may not be collected on supplies made to provincial and territorial governments and First Nations, XXXXX includes its revenue from these supplies in its calculation of total worldwide revenues from taxable supplies to determine whether it is a GST/HST registrant.

Other Information: Supplies Made to XXXXX

To ensure a complete response to your ruling request, we are providing the following additional information regarding the tax status of XXXXX supplies made to its member municipalities.

In our review of XXXXX activities and the provisions of the ETA that generally apply to municipalities, we identified paragraph 28(a) of Part VI of Schedule V as the exemption that would apply to the supplies made by XXXXX, which includes supplies made under the XXXXX. This provision exempts a supply between a municipal body and any of its para-municipal organizations.

A "municipal body" is defined in section 1 of Part VI of Schedule V as a municipality or provincially established designated body. "Para-municipal organization" is also defined in that section to include an organization (other than a government) of a municipal body that is owned or controlled by the municipal body. Where the municipal body is a municipality, the organization is established by the municipal body and the organization is determined under paragraph (b) of the definition "municipality" in subsection 123(1) be a municipality. The definition of "para-municipal organization" also sets out criteria for owned or controlled by a municipality as follows:

•   the municipal body owns all or substantially all of the organization's shares or assets, or it controls the disposition of the organization's assets such that the assets are vested in the municipal body in the event that organization is wound-up or liquidated, or

•   the organization is required to submit its periodic operating and, where applicable, capital budget to the municipal body for review and approval and a majority of the members of the organization's governing body are appointed by the municipal body.

On the basis of the facts set out above in this letter, we accept that XXXXX falls within the meaning of "para-municipal organization" of XXXXX, as that phrase is defined in the ETA. That is, XXXXX was established by a municipal body as demonstrated by XXXXX municipalities fall within the meaning of "municipal body" as defined in the ETA. With respect to the legislative criteria in the definition of "para-municipal organization" that XXXXX be owned or controlled by the municipal body that established it, we note the following:

•   XXXXX

•   XXXXX

XXXXX

Finally we note that XXXXX is determined under paragraph (b) of the definition "municipality" in subsection 123(1) to be a municipality.

XXXXX

As noted above, paragraph 28(a) of Part VI of Schedule V exempts a supply between a municipal body and any of its para-municipal organizations. Accordingly, the supplies made by XXXXX to the "municipal body"; XXXXX are exempt under paragraph 28(a) of Part VI of Schedule V. Please note that this ruling applies only to the extent that XXXXX continues to meet the legislative criteria with respect to the definition of "para-municipal organization". If there are any changes to the facts upon which this ruling was given, XXXXX this ruling may no longer apply.

XXXXX

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761. We also encourage you to contact XXXXX at our XXXXX GST/HST Rulings office at XXXXX if you require other information regarding XXXXX obligations and entitlements under the GST/HST.

Yours truly,

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

2005/10/25 — RITS 53126 — Sale of Vacant Land

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 XXXXX ("the Product").

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

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is a new XXXXX beverage launched in XXXXX.

2. The Product is a combination of XXXXX.

3. The Product contains XXXXX% natural fruit juice.

4. The Product is available in XXXXX flavours, XXXXX and is sold in a XXXXX container.

5. The Product is identified as an XXXXX.

6. The amount of vitamins and minerals added to the Product is based on the limits set out in the Food and Drug Regulations under the Food and Drugs Act for fortifying XXXXX beverages.

7. The packaging includes a Heart and Stroke Foundation Health Check(tm) endorsement, a nutrition panel, and details about the healthy benefits of the Product.

8. The nutrition panel indicates that the Product is XXXXX.

9. The healthy benefits of the Product noted on the package include that the Product is XXXXX.

10. The ingredients of the XXXXX flavour are: XXXXX.

11. The nutrition facts table indicates that a XXXXX mL serving of the Product in XXXXX flavour contains the following vitamins and minerals:

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

12. The ingredients and the nutrition table for the other flavours are similar to the XXXXX flavour.

Ruling Requested

You would like to know the tax status of the Product.

Ruling Given

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

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

Explanation

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

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

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

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

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

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

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

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

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

The Product is a beverage that contains more than 25% by volume of a natural fruit juice or combination of natural fruit juices that have been reconstituted into their original state.

As paragraph 1(d) will not apply, supplies of the Product will be zero-rated for GST/HST purposes pursuant to section 1 of Part III of Schedule VI to the ETA.

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

2005/10/07 — RITS 63065 — Subsection 136(2) of the Excise Tax Act (ETA) and Multiple Residential Complexes

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

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of a box of XXXXX cookies.

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

Statement of Facts

1. The corrugated box of XXXXX cookies consists of XXXXX portions of XXXXX cookies that are individually wrapped.

2. The box contains the following information: a list of ingredients, the number of individually wrapped portions and the universal product code (UPC).

3. Each pack (inside the box) contains XXXXX cookies. The information on this package also contains a list of ingredients, nutrition information and the net weight, but no UPC code.

4. This box of XXXXX cookies is generally sold to airline companies and institutions.

5. The cookies are generally given away on airlines or distributed without a specific charge in institutional settings. You are not aware that the individually wrapped packages of XXXXX cookies are being sold by any person.

Ruling Requested

Is the box containing XXXXX portions of XXXXX cookies wrapped individually considered to be pre-packaged for sale to consumers and therefore, zero-rated?

Ruling Given

Based on the facts set out above, we rule that the supply of a box of XXXXX portion packages of XXXXX cookies is zero-rated in accordance with section 1 of Part III of Schedule VI to the Act.

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

Pursuant to subparagraph 1(m)(i) of Part III of Schedule VI, cookies that are prepackaged for sale to consumers in quantities of less than six items, each of which is a single serving, are subject to tax at 7% or 15% if applicable. Therefore, a zero-rated prepackaged unit would be a box of six or more single servings packaged by the manufacturer in a container intended for purchase by the final consumer. A box that is considered to be prepackaged for sale to consumers normally contains the information required under the Consumer Packaging and Labelling Act. This information includes a list of ingredients and net weight. The universal product code (UPC) is another indication that the box is prepackaged for sale to consumers.

The box of XXXXX cookies is zero-rated because it is prepackaged for sale to consumers and includes six or more servings.

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

Yours truly,

Gabrielle Nadeau
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/11/29 — RITS 65402 — Application of GST/HST to Purse Winnings

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, in response to our letter XXXXX. Our letter was in response to your original ruling request XXXXX. The ruling request concerns the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below. We apologize for the delay in providing you with our response.

All legislative references are to the Excise Tax Act (hereafter "the ETA") unless otherwise noted.

Statement of Facts

Our understanding of the facts and transactions is as follows:

Background

1. XXXXX "the Corporation" is an incorporated for profit company that has constructed and operates a new long-term care facility in XXXXX. The long-term care facility (hereafter "the Facility") is licensed by XXXXX [(]"the Ministry"), XXXXX [(]"the Province") under XXXXX [(]"the Act"). The Corporation is licensed under the Act to operate the Facility as a "nursing home" ^[i]footnote 1.

2. The Corporation registered for the GST/HST in XXXXX and, shortly thereafter, acquired vacant land with the intention of building the Facility. The Corporation engaged contractors to construct the Facility.

3. The Corporation paid tax on the acquisition of the land that forms part of the Facility and self-assessed the GST on the Corporation's GST/HST return for the reporting period in which tax on the acquisition of the land became payable. The Corporation also paid GST on the various contractors' supplies mentioned in the previous paragraph and claimed input tax credits on that tax payable.

Legislative Context

4. The Act and Regulation XXXXX thereto (hereafter, "the Regulation") provide the legislative and regulatory requirements under which the licensee of a nursing home is required to operate. Pursuant to XXXXX the Act, no licensee is permitted to operate a nursing home unless the licensee is party to a service agreement (hereafter "the Service Agreement") ^[ii]footnote 2) with the Ministry and the Service Agreement complies with the Act and the Regulation.

5. XXXXX the Act states:

XXXXX.

Nursing Home Admittance Requirements and the Application Process

6. Pursuant to XXXXX the Regulation, an individual will be eligible for admission to a nursing home only if they meet all the conditions identified therein (^[iii]footnote 3)

7. An individual wishing to live at a nursing home must apply for authorization to do so. A XXXXX reviews the application and determines the individual's eligibility for admission. A nursing home licensed under the Act is not permitted to admit individuals who have not met the eligibility criteria or who have not successfully applied for admittance to a nursing home through a XXXXX.

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

9. Once an individual is approved for admission to a nursing home by a XXXXX, the individual's name will generally be placed on a waiting list that is maintained by the XXXXX. The XXXXX will advise the individual of the available nursing homes appropriate to their needs and the individual's application is forwarded to those homes at which the individual is prepared to live. The decision on whether to accept the individual for residency at a nursing home is made by the nursing home operator. Once the operator accepts the individual's application, the individual moves into the nursing home, or if the home is already fully occupied, the individual's name is added to the home's waiting list, which is maintained by the XXXXX.

10. Admissions occur by priority and chronological order. If the individual's condition deteriorates while waiting for his or her preferred nursing home or if he or she requires immediate admission, the individual may be required to accept a temporary bed in a home other than the one he or she has chosen. The XXXXX will advise the individual when an appropriate bed becomes available in one of the individual's chosen nursing homes, and when the bed offer is made, the individual has a limited time in which to accept the offer.

Ministry Requirements for Nursing Homes

11. A resident of a nursing home is entitled, under the Act, the Regulation and the provisions of the Service Agreement and the Long-Term Care Facility Program Manual ^[iv]footnote 4 (hereafter "the Program Manual", which is mentioned in XXXXX the Service Agreement), to receive certain property and services. The Program Manual XXXXX provides a list of basic services that a resident of a nursing home can expect to receive in respect of the payment the resident is required to make (the payment a resident is required to make is discussed below).

12. The Program Manual also contains the following provisions:

(a) XXXXX;

(b) XXXXX;

(c) XXXXX; and

(d) XXXXX.

13. Residents of a nursing home are generally in varying needs of assistance with the activities of daily living, e.g., bathing, dressing, and personal hygiene. XXXXX the Act requires the licensee of a nursing home to develop a personalized plan of care that meets each individual resident's requirements. That XXXXX also requires that the plan of care be revised as necessary when the individual's requirements change and that such requirements are assessed on an ongoing basis. Pursuant to XXXXX the Regulation, the personalized plan of care must, among other things, reflect the individual's preferences and goals and clearly describe the care to be given to the individual including the treatments, diet and medications to be given, the assistance with the activities of daily living to be provided and the safety and security precautions to be taken with respect to the individual.

14. The Regulation also addresses issues relating to the management and operation of nursing homes as well as officers and staff of nursing homes, records and accounts, posting of documents, nursing home licences and the treatment, care, conduct, discipline and discharge of residents. For example, nursing homes are required to appoint a physician as a medical director for the home to advise the administrator on medical care matters and where the licensee of the home is an individual, that physician cannot be the licensee. Every nursing home administrator must make arrangements for a physician to be on call to provide emergency services when a resident's physician is not available.

15. The operator of a nursing home must ensure that 24-hour nursing service is available in the home. A registered nurse must be designated as the director of nurses and be responsible for the organization, direction and evaluation of nursing care, directing the work of nursing staff, and organizing and directing in-service training programs for nursing staff.

16. Nursing stations must be on each floor of a nursing home.

17. Where required by a resident's physician, registered nursing staff must regularly observe and record the resident's vital signs and report the information to the physician.

18. Nursing staff must provide restorative care, bladder or bowel training, gait training, care of weak or paralysed limbs and maintenance of a range of joint movements to those residents requiring such care. For residents confined to a bed, nursing staff provide care that includes turning every two hours, positioning and measures to prevent skin disorders or care for skin disorders. Nurses instruct residents in the use of self-care devices, and ensure that proper and sufficient care of each resident's body is provided daily to safeguard the resident's health and maintain personal hygiene.

19. There must be sufficient registered nurses, registered practical nurses, and health care aides on duty in the nursing home at all times to provide the nursing care required by the residents, and only a physician, dentist, registered nurse or registered practical nurse may administer drugs to a resident. The labelling, storage, ordering, destruction and removal of drugs are strictly controlled. Residents are not permitted to keep drugs in their room unless authorized by a physician or extended class registered nurse who is in attendance for the resident, and every nursing home must maintain a "drug record book" to record specific information about the resident's drugs.

20. The list of procedures and services to be provided at a nursing home as part of the nursing and personal care services are extensive. For example, Program Manual XXXXX lists numerous procedures and services a nursing home operator is to provide.

Funding

21. XXXXX the Act is the basic funding authority that requires the Province to pay a licensee for the operation of a nursing home. That XXXXX provides that the Ministry shall make payments out of money appropriated by the legislature, to a licensee of a nursing home, to assist in defraying the maintenance and operating costs incurred or to be incurred by the licensee in providing accommodation, care, services, programs and goods to residents of the nursing home. The Ministry funds long-term care facilities under a resident needs based funding system. An annual funding entitlement for each facility (referred to in the Program Manual and hereafter, as "the operating subsidy" is determined through a resident classification process that is completed each year by the Ministry.

22. XXXXX the Regulation provides that the operating subsidy to a licensee in respect of a nursing home is to be determined in accordance with the subsidy calculation worksheet (which we understand to be the "Long-Term Care Facility Subsidy Calculation Worksheet"), semi-annual reports, year end reports, and auditor's reports, all as set out in the Regulation.

23. XXXXX the Service Agreement provides that the Ministry will provide the operating subsidy for the operation of a nursing home, specifically, for the Services provided by the licensee as stipulated in various funding "envelopes" (discussed below).

24. The Ministry may also pay an amount to a licensee to cover property taxes in respect of the nursing home. XXXXX the Act provides that the Ministry may make a grant to a licensee to assist in defraying costs as a result of an extraordinary event (such events are prescribed by regulation).

25. XXXXX the Act provides that a resident of a nursing home is responsible for those amounts demanded by a licensee for accommodation, which includes certain property and services, in accordance with XXXXX the Act. That XXXXX provides that the maximum amount payable by a resident for accommodation is as set out in the Regulation and is therefore established by the Ministry. However, no charges to residents are permitted for provincially funded nursing and personal care services, programming and support services, meals, and housekeeping and maintenance services. Further, there is no relationship between the care received and the amount paid by a resident for accommodations. We also note that XXXXX the Regulation allows a resident to apply to a nursing home licensee for a reduction in the fee payable for basic accommodations and that if they do so, the maximum amount that can be demanded by the licensee will be as determined under that XXXXX. XXXXX the Regulation also allows a resident to apply to the Ministry for a reduction in the fee payable in respect of basic accommodation. The Program Manual XXXXX provides that an income test will be used to determine ability to pay for those who cannot afford the basic accommodation rate. Further, the Ministry will fund the subsidy required by residents eligible for the rate reduction.

26. The Regulation indicates the maximum amount a nursing home licensee can charge a long-term resident in respect of the various types of accommodations. For a recent period, the amounts were as follows:

(a) Basic accommodation ^[v]footnote 5 - $XXXXX per month,

(b) Semi-private accommodation ^[vi]footnote 6 - $XXXXX per month, and

(c) Private accommodation ^[vii]footnote 7 - $XXXXX per month.

27. The Ministry provides the operating subsidy based on the per diem rate for four funding "envelopes". The Ministry's funding envelopes are as follows:

(a) the "Nursing and Personal Care" envelope;

The nursing and personal care envelope is per diem based and varies each year depending on the level of care of residents in a particular nursing home. We understand that the Ministry uses what it refers to as a "Case Mix Index" ("CMI") to allocate funding for nursing homes. The CMI is determined annually through a classification process that involves the review of care documentation for all XXXXX long-term care residents. The CMI is applied as a percentage to the provincial per diem for the nursing and personal care envelope. Any changes to the CMI are reflected at the beginning of April of the following year, and are combined with the provincial per diem rate increases to establish the operating subsidy for the fiscal year. The funding from the nursing and personal care envelope is used to pay the salaries and wages of the nursing and personal care staff and to purchase supplies and equipment for the services provided.

(b) the "Program and Support Services" envelope;

The programming and support services envelope is a fixed per diem rate and is used to pay the costs of recreational programs, therapies, and other resident support services, including salaries and wages of staff and related equipment and supplies.

(c) the "Raw Food" envelope; and

The raw food envelope is a fixed rate per diem and is used to pay the costs of raw food.

(d) the "Other Accommodation" envelope.

The Accommodation envelope is a fixed per diem and is used to pay costs for administrative, dietary and environmental services (laundry, housekeeping and maintenance), staff salaries and equipment and supplies.

Of the four components only the nursing and personal care per diem varies with the care requirements of the nursing home's residents. The remaining three components are set as flat rates and are determined each year by the Ministry.

28. The Ministry provides the operating subsidy throughout the year to the licensee. Our understanding is that at year-end, a reconciliation is done to produce the actual subsidy. If the licensee has spent less than the operating subsidy with respect to the services supplied with respect to the items in a particular envelope, the excess has to be returned to the Ministry (or can be deducted from the operating subsidy the Ministry provides for the subsequent fiscal year). If the estimated provincial subsidy paid for the year is less than the subsidy the licensee is entitled to, the Ministry shall provide the difference to the licensee.

Admission Contract

29. An individual who moves into the Facility (hereafter "the Resident") and the Corporation enter into an Admission Contract, a sample of which was included in your submission. The Admission Contract contains the following provisions:

(a) XXXXX.

(b) XXXXX.

(c) XXXXX.

(d) XXXXX.

(e) XXXXX.

(f) XXXXX.

Ruling Requested

You are requesting confirmation that the Corporation is eligible to claim a new residential rental property rebate (as set out in section 256.2 of the ETA) in respect of the Facility.

Ruling Given

Based on the facts set out above, we rule that the Corporation is not eligible to claim the new residential rental property rebate in respect of the Facility.

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 single/multiple supply issue

One of the conditions that must be met in order for a new residential rental property rebate to be available in this case, as set out in subparagraph 256.2(3)(a)(ii), is that the Corporation would have to be making an exempt supply of a residential unit in a residential complex by way of lease, licence or similar arrangement where those supplies are included in section 6 of Part I of Schedule V to the ETA. Further, those supplies would have to result in the Corporation being deemed to make and receive a taxable supply by way of sale of the complex under section 191.

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

It is your opinion that the Corporation is making a supply of accommodations to Residents of the Facility and that that supply is separate from the supply of nursing, meals and personal care services that are also provided to the Residents, though funded by the Ministry. We understand that your main reason for that conclusion is that Residents are responsible for paying certain amounts while the Province funds other costs related to the operation of the Facility.

For any given transaction, an evaluation of whether a person is making a single supply or multiple supplies must consider all relevant factors. Thus a transaction must be evaluated in its totality to determine whether it is, in fact, a single supply, or whether multiple supplies exist. A determination of a single supply or multiple supplies would consider the overall context of the transaction rather than relying solely on any individual aspect of that transaction. The issue of single supply versus multiple supplies must be made on a case-by-case basis, and cannot be resolved solely by reference to the number of recipients. The relative weight to be given to each aspect of a transaction must be evaluated within the overall context of the transaction to determine whether the transaction constitutes a single supply or multiple supplies.

In our view, the context in which accommodation, meals, care and other services are rendered to Residents of the Facility demonstrate that the Corporation is making a single supply that is beyond that covered by the exemption in section 6 of Part I of Schedule V to the ETA. Accommodation is a necessary aspect of the service that the Corporation renders to Residents. That is, a person must be a resident of the facility in order to receive the various other goods and the extensive services provided by the Corporation.

It is clear from the facts provided that the purpose of being admitted to and lodged in the Facility is to receive care and services. The accommodation, care and services are interconnected where each is an integral part of a composite whole. This is supported in part by the definition of "resident" in the Admission Contract as being XXXXX, which is indicative of the fact that the individual has been admitted to the Facility as evaluated by the XXXXX in accordance with admission criteria established by the Ministry.

Pursuant to the standards and criteria for resident care listed in the Program Manual, the Corporation is required to enter into an Admission Contract that describes the accommodation, care, services, programs and goods that will be provided to a Resident and the obligation of the Resident with respect to their responsibilities and payment for service. The Resident receives all of the care and services in return for the basic fee payable by the Resident as provided in the Admission Contract and the Program Manual.

Under various provisions of the Act, the Regulation, the Service Agreement, the Admission Contract and the Program Manual, the Corporation must provide the basic care, programs and services set out therein. These basic care services are legislated under the Act and as such, it is not possible for the Corporation, at least in a nursing home scenario, to provide only accommodations to the exclusion of the other programs and services. The accommodations included in the basic care services provided by the Corporation are an integral component of an overall supply of providing care, but are nonetheless only an element of that supply. Once an individual is admitted to the Facility, that individual is entitled to receive all of the basic care, programs and services set out above. As such, based on the foregoing, we consider the Corporation to be making a single supply. That single supply is not that of simply accommodations as set out in section 6 of Part I of Schedule V, as the accommodations are not the predominant element of the supply made by the Corporation.

Therefore, because the Corporation's supply to a Resident is not a supply contemplated by section 6 of Part I of Schedule V to the ETA, one of the conditions for claiming the new residential rental property rebate is not met and a rebate eligibility does not arise.

The operating subsidy

GST/HST Technical Information Bulletin TIB B-067, Goods and Services Tax Treatment of Grants and Subsidies, sets out policy guidelines to clarify when a payment of a grant or other transfer payment may be regarded as consideration for a supply. Generally, transfer payments made by a government are not regarded as consideration for a supply unless there is a direct link between the payment and a supply received by that government or a specified third party (as stipulated by the government).

It is our view that the operating subsidy provided by the Ministry to the Corporation under the Service Agreement is a grant and not consideration for a supply. Funding received by the Corporation from the Ministry to assist in the maintenance and operation of the Facility is provided pursuant to an on-going funding program under the XXXXX Program, set up for the public purpose of subsidizing community services and institutions that include long-term care facilities in XXXXX. The statutory authority for the funding is the Act. The Ministry provides operating subsidies based on a funding formula that takes into consideration the care requirements of residents once the operator has signed a Service Agreement in respect of a facility. The Service Agreement sets out the terms for use of the operating subsidy and reporting to the province on expenditures for accountability purposes ^[viii]footnote 8.

The Ministry does not receive any goods or services for its funding payments and the Corporation uses the funding it receives from the Ministry for its operating activities to benefit all of the Residents of the Facility rather than any particular Resident(s). There is no direct link between the operating subsidy paid to the Corporation by the Ministry, and a supply received by the Ministry or a specified third party.

Additional Information

Self-supply

Section 191 sets out '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 the purpose of its occupancy by an individual as a place of residence. The builder is treated as having sold and repurchased the complex and is generally required to remit the GST on the fair market value of the complex. One of the conditions that must be present in order for the self-supply rule under subsection 191(3) to apply is that the builder must give possession of a unit in the complex to a person under a lease, licence or similar arrangement for the purpose of occupancy of the unit by an individual as a place of residence. In this case, we do not consider this condition to be met. Therefore, the Corporation is not treated as having sold and repurchased the Facility and is not required to account for the GST on the fair market value of the Facility.

It is generally understood that a Resident is admitted to and lodged in the Facility for reasons other than solely occupancy of a room or a bed. In the case at hand, although the Facility provides accommodation, the primary purpose for which a Resident enters the Facility is to receive long-term care that involves nursing, personal and supervisory care, meals, and support services, as stated in the Program Manual. In addition, it is not the intent of the Ministry to create a landlord and tenant relationship under the Admission Contract.

Input Tax Credits Claimed on Construction of the Facility

You advised that the Corporation claimed full input tax credits for the GST it paid on the acquisition of the land that forms part of the Facility and the costs of constructing it. Pursuant to section 169, the ability of a person to claim input tax credits is limited to the extent that the person acquired property or services for consumption, use or supply in the course of commercial activities of the person. The definition of "commercial activity" in subsection 123(1) specifically excludes a business carried on by a person that involves the making of exempt supplies by the person. Therefore, to the extent that the tax paid or payable on construction services acquired in constructing the Facility are inputs into the making of exempt supplies, the Corporation will not be eligible for input tax credits in respect of the tax paid or payable on the land and the construction services.

Should you have any further questions or require clarification on the operating subsidy received by the Corporation from the Ministry, please contact Glenda MacInnes at (613) 952-8531. In respect of any other matter discussed above, please do not hesitate to contact me at (613) 954-4393.

Yours truly,

Hugh Dorward
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2005/12/21 — RITS 49336 — Tax Status of Memberships

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

Dear XXXXX:

This is in reply to your letter XXXXX, with attachments, and further to our telephone conversation XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of consultant services by XXXXX R.N., to the XXXXX pursuant to a contract engagement.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX entered into a contract for services with the XXXXX for the period XXXXX. Pursuant to this contract, XXXXX will serve as a consultant to the XXXXX on the research project entitled the XXXXX.

2. You advised that under the contract engagement, XXXXX activities include reviewing information pertaining to patient charts XXXXX. In addition, XXXXX provides related consultation as may be requested by the XXXXX.

3. The engagement contract specifies that as a consultant, XXXXX will engage in the following activities:

(a) XXXXX;

(b) XXXXX; and

(c) XXXXX.

4. The XXXXX component of the research study commenced XXXXX and is to be completed by XXXXX.

5. XXXXX is paid $XXXXX per day for participating in research training and $XXXXX. The contract also sets out amounts for reimbursement of expenses, such as travel, accommodation, and meals. XXXXX will invoice the XXXXX for fees and expenses monthly.

6. You advised that the contract engagement between XXXXX and the XXXXX is a contract for self-employed service.

Ruling Requested

The supply of XXXXX consultant services to the XXXXX pursuant to the engagement contract described above are exempt under paragraph 6(c) of Part II of Schedule V to the Excise Tax Act (the "ETA") as a supply of a nursing service rendered by a registered nurse that is made to a public sector body.

Ruling Given

Based on the facts set out above, we rule that the supply of XXXXX consultant services to the XXXXX pursuant to the engagement contract described above is a taxable supply at the rate of 7%.

That is, XXXXX consultant services are not exempt supplies under paragraph 6(c) of Part II of Schedule V to the ETA.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

As you noted, paragraph 6(c) exempts the following supply:

"A supply of a nursing service rendered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, where

...

(c) the supply is made to a public sector body."

Accordingly, to fall within the exemption, the supply must first be that of a "nursing service". Nursing services are understood to be the provision of care for, and the treatment of health conditions of, an individual by supportive, preventive, therapeutic, palliative and rehabilitative means in order to attain or maintain optimal function. We consider the scope of nursing to be the diagnosis and treatment of health problems, involving nursing interventions used in caring for the individual, who we understand may also be referred to as a patient or client. A nurse carries out skilled nursing care and nursing interventions of patients, such as wound care and medication administration.

It is important to note that "nursing service" and "registered nurse" are separate terms where neither term is defined by the other; rather the meaning of each term is evaluated independently. "Nursing service" is the activity described as the skilled practice of nursing involving procedures, treatments, drug administration, and other interventions, which are acts performed on patients by nurses as part of a care plan or on the order of a physician. A "registered nurse" is the person who meets certain prescribed standards of education, clinical competence and registration or other licensing requirements. Together these terms fulfill the requirements of section 6 of Part II of Schedule V to the ETA. A nursing service arises from the provision of treatment or care rendered to a patient by a registered nurse or other nurse professional included in the ETA. Therefore, a service provided within the context of a therapeutic nurse-patient relationship established by the registered nurse for providing nursing services is a nursing service for purposes of the ETA.

Registered nurses may be employed in a variety of activities. These activities may involve the provision of care to patients, but registered nurses may also perform administrative, supervisory, consultant, teaching, and researching activities. A determination of the nature of a particular supply is not based solely on a person's qualifications and knowledge. Accordingly, where a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, renders (nursing) services in the capacity of a care provider, i.e., care involving personal interaction with a patient in a professional therapeutic relationship these nursing services are exempt if they are supplied within one of the circumstances specified in section 6 of Part II of Schedule V to the ETA.

We understand that it is your view that XXXXX status as a registered nurse and her knowledge are sufficient to conclude that she is providing nursing services because these are factors necessary for the research project undertaken by the XXXXX. However, as explained above, XXXXX qualifications and knowledge are not sufficient to conclude that in acting as a consultant she is rendering "nursing services". In our view, XXXXX has been hired under a personal services contract to provide general consultant services; the XXXXX has not contracted with XXXXX for nursing services.

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

Yours truly,

Susan Eastman
Municipalities and Healthcare Services Unit
Public Service Bodies and Governments Division

2004/04/07 F — RITS 50865 — Valeur de l'importation temporaire d'un autobus loué