GST/HST Ruling

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 233442
Business Number: […]

Dear [Client]

Subject: GST/HST RULING
Input tax credit eligibility for […][X]

Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][X].

The HST applies in the participating provinces at the following rates:13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

Our understanding of the facts is based on the information provided in your letter of [mm/dd/yyyy], your subsequent emails and attachments including the separate entity financial statements, sample invoices and your representation regarding the application of section 186.

STATEMENT OF FACTS

In your letter […], you provided the following:

1. […][X] is incorporated pursuant to the laws of Ontario […].

2. [X] is a public company that is registered for GST/HST purposes.

3. […](Opco) is a wholly-owned subsidiary of [X], incorporated pursuant to the laws of Ontario.

4. Opco is the primary operating company of the [X] group of companies ([X] Group) […].

5. [X] also owns 50% of the shares of […][Unrelated Corporation 1], […].

6. The following entities are wholly-owned subsidiaries of Opco:

* […][Subco1] is incorporated pursuant to the laws of Ontario. […].

* […][Subco2] is incorporated pursuant to the laws of Ontario. […].

* […][Subco3] is incorporated pursuant to the laws of British Columbia (BC). […]

7. Opco holds a minority interest in […][Unrelated Corporation 2].

8. In 2020, Opco held a 50% interest in […][Unrelated Corporation 3], a corporation incorporated pursuant to the Canada Business Corporations Act. […]

9. In 2020, Opco held a […][minority] interest in […][Unrelated Corporation 4], […][a non-resident corporation]. Opco’s current interest in [Unrelated Corporation 4] is […][a minority interest].

10. You stated that […][X’s] interest in the corporations, including Opco, represents “all or substantially all” of the assets held by [X], and that the interest in Opco represents “all or substantially all” of the debts held by [X].

11. […]

12. […]

13. […]

14. […]

The following information was reported in [X’s] legal entity financial statements:

15. For the period ending December 31, 2019, [X] reported the following assets on its legal entity balance sheet: […]

16. For the period ending December 31, 2020, [X] reported the following assets on its legal entity balance sheet: […]

17. In your […][correspondence], you provided the intercompany balances for the period ending December 31, 2020. Based on this document, [X] reported an amount, under the balance sheet heading “Due from/investment in related parties”, of $[…], which consisted of the following:

* $[…] due from Opco;

* $[…] due from [Subco1]; and

* $[…] due from [Subco2].

18. In your [correspondence], you [also] provided details regarding the cash and deposits reported for all companies. For the period ending [mm/dd,yyyy] [X] reported an amount, under the balance sheet heading “Cash and deposits”, of $[…], which consisted of the following:

* $[…] in an account referred to as […]; and

* $[…] in an account referred to as […].

It is our understanding that both of these accounts are Canadian dollar deposit accounts with […][a Financial Institution].

19. [X] incurred expenses and paid the GST/HST for services acquired in Canada. Below are sample invoices, attached to your email, that were submitted for our consideration. The invoices provide a brief description of the supplies acquired by [X] and include the consideration and tax applicable for those supplies: […]

RULING REQUESTED

You would like to confirm that paragraphs 186(1)(a) and (c) apply to allow [X] to claim input tax credits (ITCs) for the GST/HST paid or payable by [X] on the supplies described on the sample invoices.

RULING GIVEN

Based on the facts set out above, we rule that paragraphs 186(1)(a) and (c) do not apply to allow [X] to claim ITCs for the GST/HST paid or payable by [Patent] on the supplies described on the sample invoices.

EXPLANATION

A corporation that holds shares of the capital stock and indebtedness of other corporations is generally making exempt supplies of financial services as a result of receiving dividends and interest income, and making dividend and interest payments in respect of financial instruments. In general, an ITC is not available for the GST/HST paid or payable on property or services acquired, imported or brought into a participating province for consumption, use or supply to the extent the property or services are consumed, used or supplied in the course of exempt activities.

However, where certain conditions are met, the provisions in section 186 may apply to deem certain property or services acquired, imported or brought into a participating province by a person to be for consumption or use in a commercial activity for purposes of determining an ITC of that person.

Please note that in respect of any property or service acquired, imported or brought into a participating province prior to July 28, 2018, subsection 186(1) applied to property or a service that could reasonably be regarded as having been so acquired, imported or brought into the province for consumption or use in relation to shares of the capital stock, or indebtedness, of another corporation. “In relation to shares of the capital stock, or indebtedness” was given broad judicial interpretation, thereby giving rise to ITCs on expenses that appeared to have an insubstantial nexus to the shares of the capital stock or indebtedness. However, as a result of the amendments to subsection 186(1), for any property or service acquired, imported or brought into a participating province after July 27, 2018, the property or service must be acquired, imported or brought in for a purpose or purposes set out in paragraphs 186(1)(a) to (c).

Paragraph 186(1)(a) generally applies if property or a service is acquired, imported or brought into a participating province directly for a purpose specified in that paragraph such as selling, purchasing, or holding shares of the capital stock or indebtedness of an operating corporation by the parent and, in such cases, the corporation may be entitled to claim ITCs for tax paid on the expenses. Paragraph 186(1)(a) does not apply if a person acquires property or a service for use for a purpose not specified in that paragraph even if the person is a corporation that exists only to hold shares in an operating corporation. If a corporation exists only to hold shares in an operating corporation and incurs expenses for that purpose, then paragraph 186(1)(c) may apply and the corporation may be entitled to claim ITCs for tax paid on the expenses.

Paragraph 186(1)(a)

In your representation you expressed the opinion that the services acquired by [X] (identified in the sample invoices) were acquired for the purpose of holding shares of Opco since [X] exists only to hold shares in Opco and does not carry on any other activity. As such, you contend that [X] would satisfy the requirement of paragraph 186(1)(a) and would be entitled to claim ITCs for the GST/HST paid on those expenses.

As explained above, paragraph 186(1)(a) no longer refers to any property or service acquired, imported or brought into a participating province for consumption or use in relation to shares or indebtedness of another corporation. As a result, if any property or a service is acquired by a parent corporation after May 17, 2019, directly for the purpose of holding units or indebtedness of an operating corporation (as defined in subsection 186(0.2)) of the parent, such as custodial costs for such units or indebtedness, paragraph 186(1)(a) may apply.

The sample invoices were for the following services acquired by [X]: […]

It is our opinion that the above supplies acquired by [X] as identified in the sample invoices were not acquired for the purposes described in paragraph 186(1)(a). That is, it appears the services were acquired for use in the course of activities of [X] but were not specifically for the purpose of holding units or indebtedness of an operating corporation.

Paragraph 186(1)(c)

Paragraph 186(1)(c) deems, under certain conditions, certain property or services acquired, imported or brought into a participating province by a parent corporation to be for use in the course of the parent’s commercial activities for ITC purposes, thus enabling the parent to claim an ITC for tax paid or payable on the property and services.

For any property or service acquired, imported or brought into a participating province after May 17, 2019, one of the conditions in paragraph 186(1)(c) is that, at the time the property or service is acquired, imported or brought into a participating province (the particular time), all or substantially all of the property of the parent is property that was:

* manufactured, produced, acquired or imported by the parent for consumption, use or supply exclusively in the course of its commercial activities;

* property that is a unit or indebtedness of the operating corporations of the parent; or

* a combination of such property.

In your representation you expressed the opinion that the definition of “property”, considered in the context of the ETA, and specifically in the context of the operation of section 186, should not be interpreted to include a right or interest in money. It is your opinion that this is inferred from the explicit exclusion of money from the definition and that this exclusion also applies to a right or interest in money.

“Property” is defined in subsection 123(1) as any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money.

“Money” is defined in subsection 123(1) to include any currency, cheque, promissory note, letter of credit, draft, traveller’s cheque, bill of exchange, postal note, money order, postal remittance and other similar instrument, whether Canadian or foreign, but does not include currency the fair market value of which exceeds its stated value as legal tender in the country of issuance or currency that is supplied or held for its numismatic value.

Currency or certain instruments that may be deposited into a bank account may qualify as “money” for GST/HST purposes. However, once deposited into a bank account, these amounts represent the depositor’s right to be paid money, which is a debt security; “debt security” is defined in part under subsection 123(1) as a right to be paid money and includes a deposit of money.

The debt security held by the depositor in respect of the account is not currency or any instrument included in the definition of “money”, and as a result, amounts held in a bank account are excluded from the definition of “money”. Accordingly, amounts held in a bank account are property and not money for GST/HST purposes.

Based on the information provided, it appears that during the relevant times, more than 10% of [X’s] property was bank deposits. It does not appear that these bank deposits are property that was manufactured, produced, acquired or imported by [X] for consumption or use in the course of its commercial activities. As a result, it appears that [X] does not meet the requirement in paragraph 186(1)(c) that all or substantially all of its property was manufactured, produced, acquired or imported for consumption, use or supply exclusively in the course of its commercial activities, property that is units or indebtedness of its operating corporations or a combination of such property. Therefore, [X] is not eligible to claim ITCs for the GST/HST paid or payable on the services described in the sample invoices.

Additionally, Opco may not satisfy the requirement that 90% or more of its property was last manufactured, produced, acquired or imported for consumption, use or supply by Opco exclusively in the course of its commercial activities. For example, it appears that more than 10% of the property of Opco is shares or indebtedness of other corporations. Accordingly, Opco would only meet the conditions under subsection 186(1) if these corporations are operating corporations of Opco and subsection 186(3) applies to deem the shares of the capital stock of shares or indebtedness held by Opco to be property that it acquired for use exclusively in the course of its commercial activities. A particular corporation is an operating corporation of another corporation at a particular time if it is related to the other corporation and all or substantially all of the property of the particular corporation is property that it last manufactured, produced, acquired or imported exclusively in the course of its commercial activities. One of these corporations is a joint venture that is not related to Opco and another, [Subco2], does not appear to meet the requirement that 90% or more of its property was last manufactured, produced, acquired or imported by it for consumption, use or supply by it exclusively in the course of its commercial activities. As a result, subsection 186(3) would not apply to deem these shares and indebtedness to be property that was acquired by Opco for use exclusively in the course of its commercial activities.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-543-0731. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Corinne Campbell-Rosser
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 231316

Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
The application of the “qualifying health care supply” purpose test and the tax status of occupational health services and travel health consultation services

Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to occupational health and travel health consultation services.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the following:

1. […] (the Corporation) carries on a healthcare service business […][in Canada].

2. It is registered for GST/HST under account number […].

3. Among other services, the Corporation offers occupational health services, travel health consultation services and vaccinations to their clients [at a clinic located in Canada].

4. The occupational health services are performed by healthcare professionals such as medical physicians, lab technicians, imaging technicians, nurses, kinesiologists, etc., licensed or certified to practice their profession in the jurisdiction in which they provide the healthcare services.

5. The travel health consultations are performed by either a medical physician or a registered nurse who specializes in travel medicine.

6. Medical physicians engaged by the Corporation are independent contractors while all other health professionals are employees of the Corporation.

7. The occupational health services

• Occupational services are performed for the purpose of determining whether an individual meets health requirements for employment.
• The services include, but are not limited to, pre-employment medical evaluations and periodic medical evaluations.
• Each evaluation is designed to meet the Corporations’ clients needs and may include the following services:
• Medical history and examination conducted by a medical physician
• Lab work conducted by a nurse or laboratory technician
• Stress/Resting ECG or a fitness assessment conducted by a nurse or kinesiologist
• Vision testing performed by a nurse
• Audiometric testing performed by a nurse
• Alcohol and drug testing conducted by a nurse
• Pulmonary function tests and/or chest x-ray conducted by a nurse or an imaging technician

The evaluations are industry-specific and depend on the job the candidate is being considered for or the job the candidate is currently holding.

Each evaluation is invoiced for a single consideration.

Pre-employment and periodic evaluations are not covered nor are they reimbursed by a provincial health care plan.

8. The travel health consultations

• Travel health consultations are performed for the purpose of maintaining health and preventing disease for individuals travelling outside of Canada.
• They include among other services:
• an assessment of vaccinations and/or prescriptions that should be obtained before travelling to certain countries;
• travel medical advice based on itineraries, personal risk and underlying health issues;
• personal advice on injury and infection prevention;
• recommended vaccinations and prescriptions for malaria prevention and self-treatment of traveler’s diarrhea;
• the provision of any recommended vaccine.

The travel health consultation service and the administration of the vaccine are invoiced for a single consideration.

9. Vaccines

• Vaccines are administered at the facilities of the Corporation by a medical physician or a registered nurse;
• They are invoiced for a separate consideration as the price of the vaccine on the invoice represents the amount charged for the drug only.
• Revenues from vaccines are recorded in a separate general ledger account.

10. We understand that the services offered by the Corporation are health care services (not cosmetic services or for cosmetic purposes) and are services that can fall under various exemptions of Part II of Schedule V, such as the exemptions of sections 2, 5, 6 or 7 depending on the nature of the supply.

RULING REQUESTED

You would like to know the tax status of the following services that the Corporation offers at its various facilities:

• pre-employment medical evaluations;
• periodic medical evaluations;
• travel health consultations, and
• vaccines.

RULING GIVEN

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

• The supply of pre-employment and periodic evaluations as part of the occupational health services offered by the Corporation are subject to GST/HST at the applicable rate.
• The supply of travel health consultations are qualifying health care supplies and are exempt from GST/HST, pursuant to section 5 of Part II of Schedule V where a medical practitioner renders the service, or pursuant to section 6 of Part II of Schedule V where a registered nurse renders the service.
• The supply of vaccines is zero-rated pursuant to section 2 of Part I of Schedule VI.

EXPLANATION

Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Zero-rated supplies are included in Schedule VI. Exempt supplies are not subject to the GST/HST and are included in Schedule V.

Part II of Schedule V sets out the health care services that are exempt from GST/HST. For a health care service to be exempt, the service must meet the requirements in one of the exemptions included in this Part and not be excluded from the exemption by sections 1.1 and 1.2 of Part II of Schedule V.

Section 1.1 of Part II of Schedule V provides that, “for the purposes of this Part, other than section 9, a cosmetic service supply and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in this Part.”

A “cosmetic service supply” is defined in section 1 of Part II of Schedule V to mean, “a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes.”

Section 1.2 of Part II of Schedule V provides that, “for the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a qualifying health care supply is deemed not to be included in this Part.”

Therefore, the application of the exemptions under Part II of Schedule V is limited by sections 1.1 and 1.2 of that Part. Sections 1.1 and 1.2 deem supplies that are made for cosmetic purposes and supplies that are not qualifying health care supplies to not be included in Part II of Schedule V.

A “qualifying health care supply” is defined in section 1 of Part II of Schedule V to mean a supply of property or a service that is made for the purpose of:

a. maintaining health;

b. preventing disease;

c. treating, relieving or remediating an injury, illness, disorder or disability;

d. assisting (other than financially) an individual in coping with an injury, illness, disorder or disability; or

e. providing palliative health care.

For an exemption under Part II of Schedule V to apply, the supply has to be made for at least one of the enumerated qualifying health care supply purposes and not for cosmetic purposes.

In the case at hand, the supplies of concern being made by the Corporation are: the occupational health services comprised of pre-employment and periodic medical evaluations, and the travel health consultation services in conjunction with vaccinations.

The application of section 1.2 makes it mandatory to determine the purpose of each of those supplies to determine their tax status.

The purpose of a supply is the reason why the supply is being made. The fact that an individual may ultimately receive health care benefits as a result of the supply does not necessarily make this the purpose of the supply. It is important to note that a link between a supply and the receipt of health care benefits is not always indicative that the purpose of the supply is to provide health care services (and as a result, the purpose of the supply is not necessarily one that meets the purposes set out in the definition of the term “qualifying health care supply”).

Occupational Health Services

The Corporation offers two kinds of occupational health services: pre-employment evaluations and periodic evaluations. In the case of both types of evaluations, the fact that the medical assessments resulting from such evaluations may uncover any health issues of the individual does not change the purpose of the supply. It is therefore primordial to determine the purpose of such evaluations.

Pre-employment evaluations

Pre-employment evaluations are completed as a prerequisite to employment. Therefore, the purpose of the supply of pre-employment evaluations is to assist the employer in making a decision on whether or not an individual meets the criteria to be accepted for a certain kind of job.

Periodic evaluations

Periodic evaluations are completed as a prerequisite to employment retention. Therefore, the purpose of the supply of periodic evaluations is to assist an employer in determining if an individual meets the necessary health requirements to retain or renew employment.

Consequently, the supply of pre-employment or periodic evaluations is not that of a qualifying health care supply as the purpose of each of those supplies is not included in paragraphs (a) to (e) of the definition of "qualifying health care supply" in section 1 of Part II of Schedule V.

Travel health consultations

The travel health consultations determine the types of vaccines needed by the individual and offer medical advice depending on the individual’s place of travel. Their purpose is that of maintaining the health and preventing of disease of an individual while abroad. The Corporation invoices the supply of travel health consultations and the administration of vaccines as one separate consideration from the supply of the vaccines themselves outlining clearly that these are treated as two distinct supplies even if offered or rendered in conjunction to each other. For the Corporation, the administration of the vaccine is simply a component of the overall supply of the travel health consultation unlike the supply of the vaccine itself. The consultation may or may not result in a vaccine being administered depending on the risk assessment of the individual both physically, contingent on personal health issues, and geographically, contingent on the place of travel. For example, a person may attend at the clinic and it may be decided that they do not require any vaccines; nonetheless the supply of the consultation has already been made without the administration or supply of a vaccine. As a result, the supply of the consultations is separate from the supply of the vaccines and the fact that the Corporation also provides these vaccines and administers them has no prevalence on the purpose of the consultation itself. This reasoning is consistent with that of the Tax Court of Canada (TCC) decision in Jema International Travel Clinic Inc. v. The Queen, 2011 TCC 462 (Jema).

It should be noted that the decision in Jema was reached before the addition of section 1.2 to Part II of Schedule V. As a result of the legislative amendment in section 1.2, services performed by health care professionals became either taxable or exempt depending on their purpose.

In this case, the consultation with a client involves a determination of which vaccines are required and what vaccines the individual may or may not elect to have before travelling to a specific country. The number and type of vaccines supplied would vary from client to client.

The purpose of the travel health consultations is to provide advice to persons travelling outside of Canada with respect to the health precautions to be taken and the vaccinations that should be obtained before arriving in certain countries in order to maintain their health and prevent from disease. As such, the supply of travel health consultations is a qualifying health care supply as the purpose of this supply is included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V, as long as it is the client’s choice to seek such a consultation for travel motives without being obliged to do so in order to meet any pre-imposed travel conditions.

Since the travel health consultations are performed by either a medical physician or a registered nurse who specializes in travel medicine and are qualifying health care supplies, the supply of such consultations is exempt pursuant to section 5 or section 6 of Part II of Schedule V.

Vaccines

As previously stated, the Corporation’s travel health consultations may or may not result in a vaccine being administered. In the instances where a vaccine is administered, the Corporation invoices the supply of the vaccine (the drug) for a separate consideration.

Section 2 of Part I of Schedule VI provides zero-rated status to certain drugs that are regulated under federal legislation unless the drugs are labelled or supplied for agricultural or veterinary use only. These drugs or substances are zero-rated throughout the production and distribution chain (that is, regardless of who sells them).

Drugs included in Schedule C or D to the Food and Drugs Act are essentially those, other than radionuclides, represented for use in the radiopharmaceuticals. Schedule D drugs are biologic. These drugs include: allergenic substances used for the treatment or diagnosis of allergic or immunological diseases, immunizing agents such as vaccines, blood, blood derivatives and certain hormones, and enzymes extracted from animal tissues or cultures of micro-organisms.

For purposes of applying section 2 of Part I of Schedule VI, for a vaccine to be zero-rated it should fall under the Food and Drug Act or any other Act or Regulation identified in this section. Vaccines administered by the Corporation fall under the Acts or Regulations identified in this section, therefore the Corporation’s supply of vaccines is zero-rated. Additional information may be found in GST/HST Memorandum 4.1, Drugs and Biologicals.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-4626. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Amal Khorchid
Health Care Sectors Unit
Public Services Bodies and Government Division
Excise and GST/HST Rulings Directorate

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 175140

Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of the GST/HST to supplies of services made by a determined municipality

Thank you for your telephone enquiry of [mm/dd/yyyy], and your subsequent correspondence providing additional information, concerning the application of the goods and services tax /harmonized sales tax (GST/HST) to supplies made by the […]Conservation Authority (Authority) to […][the City]. […]. We apologize for the delay in our response.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the facts as follows:

[…][The Authority]

1. The Authority was established by Order in Council by the Minister of Natural Resources (Minister) under the Ontario Conservation Authorities Act (CA Act). The Authority is a registered charity. It was determined to be a municipality for GST/HST purposes under paragraph (b) of the definition of “municipality” in subsection 123(1) […]. It is registered for GST/HST purposes and operates under Business Number […].

2. According to section 20 of the CA Act, the objects of a conservation authority are to provide programs and services designed to further the conservation, restoration, development and management of natural resources, other than gas, oil, coal and minerals, in the area over which it has jurisdiction.

3. Section 21 of the CA Act lists the powers granted to conservation authorities for the purpose of accomplishing their objects. These powers generally enable conservation authorities to perform all such acts as are necessary to further their objects. In particular, paragraph 21(1)(a) allows conservation authorities to study watersheds and determine services whereby the natural resources of the watershed could be managed, paragraph 21(1)(j) allows conservation authorities the power to control the flow of surface waters in order to prevent floods or pollution or to reduce the adverse effects thereof, and paragraph 21(1)(n) allows conservation authorities to collaborate and enter into agreements with municipal councils.

4. The authority to provide services to further its objects is provided in paragraph 21.1(1)(3) of the CA Act. Under section 23, the Minister may require a conservation authority to carry out flood control operations.

[The City]

5. The City is a municipality for GST/HST purposes. It is one of the member municipalities of the Authority.

6. The City owns land adjacent to watercourses that are located in the jurisdiction of the Authority. These watercourses are urban creeks that are prone to overflowing and can lead to flooding. The watercourses need to be monitored by the Authority to determine how and when flooding occurs and how it can be mitigated. The data obtained from the Authority from monitoring these watercourses is useful to the City, as it may build infrastructure on this land in the future.

[…][The Agreement]

7. The City does not have the staff expertise (i.e., hydrologists) to perform monitoring activities, such as generating accurate data regarding water levels, the rate of flow and other hydrometric data. As a result, the Authority and the City entered into [the Agreement] on [mm/dd/yyyy].

8. According to […], the purpose of the Agreement is to define […][the roles and responsibilities of the parties under the Agreement]

9. […] of the Agreement provides that the term of the Agreement shall be for an initial term of […]. The parties may renew the Agreement […], subject to […] approval for the continued provision of the Services by the City and the Authority.

10. […] of the Agreement outlines the scope of the Service. It provides that the Authority shall commit to the annual operation and maintenance of […] flow gauge stations […]

11. The Authority owns the monitoring equipment which is used for data management and calibration. This equipment comprises physical instruments inside the […] flow gauge stations. […].

12. […] of the Agreement states that the Authority is responsible to provide [personnel] that have the relevant educational background and experience in the appropriate field(s). As outlined in […], the Authority shall ensure that the [personnel] receive appropriate training on all aspects of the Service to be provided to the City.

[Personnel] is not defined in the Agreement. However, you confirmed that the term means the provision of the Authority’s staff to deliver the monitoring service required under this Agreement.

13. The City’s responsibilities are outlined in […] of the Agreement and include:

• providing payments to the Authority,
• allowing the Authority’s staff continuous access to City property on which the flow stations are located, and
• providing assistance when requested by the Authority with watercourse maintenance and debris removal at […] flow stations.

14. […] of the Agreement states that water level and provisional flow information will be provided to the City in near real time via the Authority’s web portal. Data generated through this Agreement will be the joint intellectual property of the City and the Authority and can be reported, distributed or released by either party.

15. According to […] of the Agreement, starting in [yyyy], the annual cost of providing the Service is $ […] and may be subject to annual increases subject to inflationary costs. The Authority invoices the City in […][month X] of each year of the term of the Agreement.

RULING REQUESTED

You would like to know whether the supply of the Service provided by the Authority to the City is subject to GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that the supply of the Service made by the Authority to the City is a taxable supply and the consideration for the supply is subject to GST/HST.

EXPLANATION

Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Exempt supplies are not subject to the GST/HST and are included in Schedule V.

Certain supplies made by a municipality are exempt under Part VI of Schedule V. However, there are no exempting provisions in Part VI of Schedule V (or any other Part of Schedule V) that would exempt the supply of the Service by the Authority, nor are there any other provisions that would relieve tax on this supply. Accordingly, the Authority’s supply of the Service in Ontario is subject to the GST/HST.

Uncollected GST/HST – Retroactive invoicing of the GST/HST

Where a supplier makes a taxable supply (other than a zero-rated supply) in Canada, the supplier is required to report and remit the tax in its GST/HST return for the reporting period in which the tax was payable by the recipient (generally, the period in which an invoice for the consideration payable on the supply was issued by the supplier). The requirement to report and remit the tax in the proper reporting period does not change regardless of whether the supplier actually collected the tax in that period.

Where a recipient is liable to pay the GST/HST in respect of a taxable supply made by a GST/HST registrant and the supplier is required to collect the GST/HST, the recipient's liability is not discharged by the fact that the supplier fails to charge and collect the tax.

The disclosure requirements set out in the ETA require, in part, that a registrant making a taxable supply (other than a zero-rated supply) must clearly indicate to the recipient in the invoice, receipt or agreement in writing, the consideration paid or payable in respect of the supply and the applicable amount of tax, or that the amount of tax payable by the recipient for the supply is included in the consideration payable for the supply. In addition, upon request by the recipient of a taxable supply, the supplier is required to provide in writing such particulars of the supply as may be required by the recipient to substantiate its claim for an input tax credit or rebate in respect of the supply. For details on what information the supplier must provide under these circumstances, please refer to GST/HST Memorandum 8.4, Documentary Requirements for Claiming Input Tax Credits.

A supplier may issue an amended invoice or an additional invoice to account for the uncollected tax and to meet the disclosure requirements in the ETA. Where there are no contractual or common law restrictions to prevent the issuance of amended or additional invoices, the Canada Revenue Agency (CRA) will accept that the disclosure of an amount of tax payable may be met after the fact.

For information on the obligations of a GST/HST registrant, please refer to GST/HST Guide RC4022, General Information for GST/HST Registrants under the heading “Collecting the GST/HST”, and GST/HST Memorandum 3.1, Liability for Tax.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 416-659-5550. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Cheryl Nazareth
Senior Rulings Officer
Municipal Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 175153
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of the GST/HST to supplies of services made by a determined municipality

Thank you for your telephone enquiry of [mm/dd/yyyy], and your subsequent correspondence providing additional information, concerning the application of the goods and services tax /harmonized sales tax (GST/HST) to supplies made by the […] Conservation Authority (Authority) to the […] (Municipality). […]. We apologize for the delay in our response.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the facts as follows:

[…] [The Authority]

1. The Authority was established by Order in Council by the Minister of Natural Resources under the Ontario Conservation Authorities Act (CA Act). The Authority is a registered charity. It was determined to be a municipality for GST/HST purposes under paragraph (b) of the definition of “municipality” in subsection 123(1) […]. It is registered for GST/HST purposes and operates under Business Number […] .

2. According to section 20 of the CA Act, the objects of a conservation authority are to provide programs and services designed to further the conservation, restoration, development and management of natural resources, other than gas, oil, coal and minerals, in the area over which it has jurisdiction.

3. Section 21 of the CA Act lists the powers granted to conservation authorities for the purpose of accomplishing their objects. These powers generally enable conservation authorities to perform all such acts as are necessary to further their objects.

4. Section 21.1(3) of the CA Act states that an authority may enter into a memorandum of understanding with a municipality situated in whole or in part within its area of jurisdiction in respect of programs and services that the authority will provide on behalf of the municipality.

5. The Authority has responsibilities under the Ontario Clean Water Act, 2006 (CW Act). The purpose of the CW Act is to protect existing and future sources of drinking water by enforcing a source protection plan as defined in subsection 2(1) of the CW Act.

Subsection 4(1) states that the area over which a conservation authority has jurisdiction under the CA Act is established as a drinking water source protection area for the purposes of the CW Act. Subsection 4(2) stipulates that the conservation authority shall exercise and perform the powers and duties of a drinking water source protection authority under the CW Act for the source protection area established by subsection (1).

6. Paragraph 47(1)(a) of the CW Act provides that except where otherwise provided, the council of a single-tier municipality is responsible for the enforcement of Part IV of the CW Act, Regulation of Drinking Water Threats, in the municipality. Under subsection 48(1), the council of a municipality may enter into an agreement with a conservation authority for the enforcement of Part IV in the municipality with respect to activities identified in the agreement, and for charging the municipality the whole or part of the cost. Subsection 48(2) requires the conservation authority to appoint a risk management official and necessary risk management inspectors where an agreement under subsection (1) is in effect.

7. The Authority also has responsibilities under additional legislation in Ontario such as the Planning Act, Environmental Assessment Act (EA Act), and the Building Code Act (BC Act). The Planning Act sets out the ground rules for land use planning in Ontario. The EA Act provides environmental and planning expertise to landowners, developers, and its member municipalities. Under the BC Act, a conservation authority prescribed in the building code (Footnote 1) is responsible for the enforcement of the provisions of this Act.

The Municipality

8. The Municipality is a municipality for GST/HST purposes.

The Agreement

9. The Municipality entered into […][the Agreement] with the Authority effective [mm/dd/yyyy] pursuant to the CW Act.

10. The Agreement is entered into by the Municipality for the purpose of appointing the Authority as the agent of the Municipality to carry out enforcement and jurisdictional rights under Part IV of the CW Act, as part of implementation of the […] Source Protection Plan. The Municipality is located within the […] Region, as set out in Ontario Regulation […] .

11. […] of the Agreement states that under section 4 of the CW Act the Authority serves as the Source Protection Authority for the […] Source Protection Area. Ontario Regulation […] , under the CW Act, designates certain municipalities as “participating municipalities” for the Authority when it acts as the Source Protection Authority under the CW Act. The Municipality is one of the participating municipalities located within that Source Protection Area.

12. Under […] of the Agreement, the Municipality appoints the Authority as the agent of the Municipality to carry out enforcement under Part IV of the CW Act within the Municipality, subject to the terms of the Agreement. Under […], the Authority accepts the appointment and agrees to act as agent of the Municipality for the duties and enforcement responsibilities of Part IV of the CW Act for the lands located within the Municipality.

13. “Source Protection Authority” is defined in […] of the Agreement to mean a Conservation Authority or other person or body that, under subsection 4(2) or section 5 of the CW Act, is required to exercise and perform the powers and duties of a drinking water Source Protection Authority under the CW Act. “Source Protection Plan” is defined in the same section to mean a drinking water source protection plan prepared under the CW Act.

14. Under […] of the Agreement, the Authority is responsible for all the powers and duties of an enforcement body under Part IV of the CW Act. The duties and powers included, but are not limited to, appointing Risk Management Officials and Risk Management Inspectors necessary for the enforcement of Part IV of the CW Act; providing mapping to the Municipality and establishing protocols in consultation with the Municipality to ensure Part IV requirements are incorporated into the review of applications under the Planning Act and Building Code Act, as well as reviewing those applications; negotiating, reviewing and accepting risk assessments under the CW Act; conducting inspections; maintaining records, preparing documentation and reporting annually on activities as required under the CW Act.

15. […] of the Agreement states that the Municipality shall adhere to agreed upon protocols to ensure Part IV of the CW Act requirements are incorporated into the review of building permit applications, applications under provisions of the Planning Act, and to generally cooperate with and assist the Authority with the protection of safe drinking water.

16. Under […] of the Agreement, the Municipality is required to provide information, and data required by the Authority to carry out their powers and duties under Part IV of the CW Act. The Authority is also required to provide records related to their powers and duties under Part IV of the CW Act to the Municipality, upon request. In the event of termination of the Agreement, records will be transferred to the Municipality.

17. […] of the Agreement states that the “Municipality is responsible for the costs of the enforcement of Part IV of the CW Act. A Memorandum of Understanding (MOU) has been established between the Municipality and the Authority identifying costs and timelines for phasing of the services under […] of the Agreement, and attached to the Agreement […].

18. Under […] of the Agreement, the Municipality collects and retains all user fees payable by any person for work performed by the Authority under the Agreement. The fees will be for the purpose of cost recovery and, in accordance with sub-section 55(2) of the CW Act, the fees will not exceed the anticipated reasonable costs of the enforcement of Part IV of the CW Act.

19. Under […], the Authority will seek prior approval of the Municipality prior to any expenditure for an extraordinary cost. The Municipality will reimburse the Authority for such reasonable costs, which are directly related to the Authority executing its duties and powers under this Agreement.

20. Under […] of the Agreement, the Authority appoints the necessary Risk Management Officials and Risk Management Inspectors pursuant to subsection 48(2) of the CW Act. These officials and inspectors are required to be qualified as prescribed by the Clean Water Act Regulation .

21. […] sets out that the Agreement shall continue in force for a period of […], commencing on [mm/dd/yyyy], and […].

22. […]. The MOU provides details in regards to timing of services to be provided and the funds required by the Authority from the Municipality to complete these services. The services are phased over a […] period and will be based on a cost recovery basis. […][X] identifies the budget for completing responsibilities for each year of the Agreement. The fees include the establishing and maintaining of the risk management office, negotiating or establishing risk management plans, reviewing applications under the Planning Act and building code, reviewing and accepting risk assessment, preparing documentation and making provisions to attend Environmental review tribunal, conducting inspections and annual reporting.

23. Progress reports are submitted to the Municipality […]. The report will be accompanied by an invoice for the expenditures during the reporting period. The total of all invoices submitted by the Authority cannot exceed amounts identified in [X] without prior written authorization from the Municipality.

RULING REQUESTED

You would like to know whether the supply of the enforcement services made by the Authority to the Municipality is subject to the GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that the supply of enforcement services made by the Authority to the Municipality under the terms of the Agreement is a taxable supply and the consideration for the supply is subject to GST/HST.

EXPLANATION

Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Exempt supplies are not subject to the GST/HST and are included in Schedule V.

Certain supplies made by a municipality are exempt under Part VI of Schedule V. However, there are no exempting provisions in Part VI of Schedule V (or any other Part of Schedule V) that would exempt the supply of enforcement services by the Authority, nor are there any other provisions that would relieve tax on this supply. Accordingly, the Authority’s supply of enforcement services in Ontario is subject to the GST/HST.

Uncollected GST/HST – Retroactive invoicing of the GST/HST

Where a supplier makes a taxable supply (other than a zero-rated supply) in Canada, the supplier is required to report and remit the tax in its GST/HST return for the reporting period in which the tax was payable by the recipient (generally, the period in which an invoice for the consideration payable on the supply was issued by the supplier). The requirement to report and remit the tax in the proper reporting period does not change regardless of whether supplier actually collected the tax in that period.

Where a recipient is liable to pay the GST/HST in respect of a taxable supply made by a GST/HST registrant and the supplier is required to collect the GST/HST, the recipient's liability is not discharged by the fact that the supplier has failed to charge the tax.

The disclosure requirements set out in the ETA require, in part, that a registrant making a taxable supply (other than a zero-rated supply) must clearly indicate to the recipient in the invoice, receipt or agreement in writing, the consideration paid or payable in respect of the supply and the applicable amount of tax, or that the amount of tax payable by the recipient for the supply is included in the consideration payable for the supply. In addition, upon request by the recipient of a taxable supply, the supplier is required to provide in writing such particulars of the supply as may be required by the recipient to substantiate its claim for an input tax credit or rebate in respect of the supply. For details on what information the supplier must provide under these circumstances, please refer to GST/HST Memorandum 8.4, Documentary Requirements for Claiming Input Tax Credits.

A supplier may issue an amended invoice or an additional invoice to account for the uncollected tax and to meet the disclosure requirements in the ETA. Where there are no contractual or common law restrictions to prevent the issuance of amended or additional invoices, the Canada Revenue Agency (CRA) will accept that the disclosure of an amount of tax payable may be met after the fact.

For information on the obligations of a GST/HST registrant, please refer to GST/HST Guide RC4022, General Information for GST/HST Registrants under the heading “Collecting the GST/HST”, and GST/HST Memorandum 3.1, Liability for Tax.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 416-659-5550. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Cheryl Nazareth
Senior Rulings Officer
Municipal Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 Building code refers to regulations made under section 34 governing standards for the construction and demolition of buildings.

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 185882
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Tax status of [a snack combination of] […][a spreadable product] and […][a baked product]

Thank you for your letter dated [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […](the Product). We apologize for the delay in responding.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the following:

1. […](the Company) is a distributor of the Product.

2. The Product is comprised of […][Component 1, a spreadable product] and [Component 2, a baked product] packaged together by the manufacturer in [a single container with] separate […][compartments]. The separate [compartments] are packaged and sealed together using a manufacturer’s label. You cannot separate each [compartment] without removing the manufacturer’s label.

3. [Component 1] is packaged in a [compartment] with a heat-sealed plastic topper. This ensures that [Component 1] and [Component 2] do not make contact, which preserves the integrity of each product.

4. [Component 2] [is] packaged within a cup like [compartment], which sits atop the sealed […][Component 1] [compartment].

5. The Product requires refrigeration and therefore is not displayed or sold in the chips or snack section of the grocery store.

RULING REQUESTED

You would like to know if supplies of the Product are zero-rated under Section 1 of Part III of Schedule VI.

RULING GIVEN

Based on the facts set out above, we rule that the Product is zero-rated under Section 1 of Part III of Schedule VI.

EXPLANATION

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (or at the rate of 13% in Ontario; 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island) unless the supply is zero-rated (subject to the GST/HST at the rate of 0%). A zero-rated supply is a supply that is included in Schedule VI.

Section 1 of Part III of Schedule VI zero-rates supplies of food or 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 included in paragraphs (a) to (r) of that section.

As the Product does not fall under any of the exclusionary paragraphs (a) through (r), the supplies of the Product are zero-rated.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 289-356-7396. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Peter Pushkarna
Rulings Officer
Basic Groceries & Recapture Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 187096

Attention: […]

Dear [Client]:

Subject: GST/HST RULING
Supply of in-store product demonstrations

Thank you for your letter of [mm/dd/yyyy] concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of in-store product demonstrations.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We have reviewed your letter of [mm/dd/yyyy] along with the additional documentation provided with your letter, including:

* a sample contract for the purchase of in-store product demonstration services from […](“DemoCo”) dated [mm/dd/yyyy], and

* a sample invoice from DemoCo dated [mm/dd/yyyy].

Based on this review, our understanding of the facts is as follows:

1. DemoCo, a Canadian resident corporation registered for the GST/HST, is in the business of providing in-store product demonstrations (“demos”).

2. A non-resident corporation that is not registered for the GST/HST (“USCo”) purchases demos from DemoCo in order to help promote and boost sales of its products in Canada.

3. RetailCo […] [sells] a wide range of goods, […].

4. USCo is a manufacturer of […] and regularly sells to RetailCo a variety of […] (“product”), which are in turn sold by RetailCo to customers in […][Canada].

5. DemoCo is hired by USCo to perform a certain number of demos of the product in various RetailCo store locations […]. DemoCo is not acting as an agent of USCo or RetailCo.

6. Details […] of the demos are finalized by USCo and DemoCo in consultation with RetailCo.

7. Once RetailCo, DemoCo and USCo agree […], a schedule is drawn up and a work order is issued for DemoCo to perform the demos according to the specifications.

8. DemoCo performs the requested demos […] in conformity with the schedule/contract for product demonstration services.

9. DemoCo sends an invoice to USCo for the supply of product demonstration services and charges GST/HST on the supply. The invoice separately itemizes the fee charged for the product demonstration services and the cost of the disposable […][materials] and product samples [purchased by DemoCo to be] used and consumed in the course of performing the demos.

10. A demo typically entails […] one or more of its product demonstrators […]. The demonstrators are trained in sales and are expected to acquire a working knowledge of the products being demonstrated.

11. Demonstrators are […] strategically placed within the RetailCo store. […][Quantities] of the product may be on display, arrayed in proximity to the demonstration […][area], in order to make them easily accessible for shoppers to purchase.

12. Demonstrators will routinely engage with passing shoppers who are in the store coincidentally as part of their normal shopping routines in order to encourage them to buy the product.

13. […], demonstrators assigned to give the demo at a particular RetailCo store location will purchase from that store […][the disposable materials and product samples to be used and consumed in the course of performing the demo].

14. […][Details about the tasks and responsibilities of the demonstrators before a demo; during the setup of the demo area; and while the demonstrators are performing the demo and engaging with shoppers in conformity with the contract].

15. The demonstrators interact with shoppers by providing basic information about the product, such as pricing and […], and by answering simple questions wherever possible. The main focus of these activities is to enable shoppers to experience the product and immediately purchase it as a result. The purpose of the demos is to immediately increase overall sales of the product.

16. After completion of the demos, DemoCo […][fulfils the balance of their responsibilities under the Agreement, such as the preparation of reports] which may include an analysis of the increased sales of the product resulting from the demos.

RULING REQUESTED

You would like to know whether:

1. DemoCo is providing a zero-rated supply of a service to USCo in accordance with sections 5 or 8 of Part V of Schedule VI to the ETA.

2. DemoCo is providing a single supply of demos that includes the disposable […][materials] and product samples required to complete the demos.

3. The provincial place of supply rule at section 13 of the New Harmonized Value-Added Tax System Regulations, Part I (“Regulations”) would apply to the supply of demos made by DemoCo to USCo.

RULING GIVEN

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

1. The supply of demos by DemoCo to USCo is a taxable supply pursuant to subsection 165(1) and is subject to GST at the rate of 5% or HST at the applicable rate if the supply is made in a participating province. The supply does not constitute a zero-rated supply of services under either of sections 5 or 8 of Part V of Schedule VI.

2. DemoCo is making a single supply of in-store product demonstration services which includes the disposable [materials] and product samples used in the course of making the supply.

EXPLANATION

Whether zero-rated supply

Generally, unless the supply is exempt or zero-rated, a supply of a service that is made in Canada is subject to the GST pursuant to subsection 165(1) or subject to the HST pursuant to subsection 165(2) if the supply is made in a participating province.

Pursuant to paragraph 142(1)(g), a supply of a service is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. DemoCo performs its product demonstration services for USCo exclusively in RetailCo stores located in Canada, therefore DemoCo’s supply of product demonstration services is deemed to be made in Canada.

Under certain conditions, supplies made in Canada to non-resident persons may be zero-rated under Part V of Schedule VI. In particular, section 8 of Part V of Schedule VI zero-rates a supply of a service of advertising made to a non-resident person who is not registered for purposes of the GST/HST at the time the service is performed.

The term “advertising” is not defined in the ETA; however, as described in GST/HST Memorandum 4-5-3, “Exports – Services and Intellectual Property,” the Canada Revenue Agency (CRA) generally considers an advertising service to be

(a) a service of creating a message oriented towards soliciting business, attracting donations, or calling public attention in the form of an information notice, a political announcement or other similar communication by any means including oral, written, or graphic statements and representations disseminated by any means, including,

(i) in a newspaper or other publication,

(ii) on radio or television,

(iii) in a notice, handbill, sign, catalogue, or letter, and

(iv) on a billboard or on real property;

and
(b) a service directly related to the communication of such a message (e.g., air time on a broadcasting service, space in a publication) where,

(i) the communication service is supplied as part of the supply of a message as defined in paragraph (a) above, or

(ii) the person providing the communication service can demonstrate that, at the time the supply is made, the service is in relation to the supply of a message as defined in paragraph (a) above.

Usually, it is the same person that both creates the message and communicates the message all within the same supply. But there are occasions where the person broadcasting or communicating a message, within the meaning of paragraph (b) above, will not be the same person creating the message within the meaning of paragraph (a). In that case, generally, the person supplying the broadcast or communication service will be in possession of the message or will have received sufficient information as to the content of the message prior to the supply of the communication service to know that the message is in the nature of advertising. In that case, the supply of the communication service, even though it is being supplied separately from the supply of the message, will nevertheless be considered as a supply of an advertising service.

Subparagraph (b)(i) of the above description applies where a person creates an advertising message within the meaning of paragraph (a) and also communicates that advertising message as part of the same supply. Based on our understanding of the facts, DemoCo is not providing a service of creating a set specific advertising message, within the meaning of paragraph (a) of the description. Since DemoCo is not providing a service of creating an advertising message, then subparagraph (b)(i) cannot apply.

Subparagraph (b)(ii) of the description of an advertising service applies where a person offers the use of a communications medium (i.e. billboard, space in newspaper, air time on tv, etc.) in order to broadcast a prepared advertising message received from another person who has created the message (“advertiser”). Thus, a supply of a communication service, in this context, relates to the act of putting a particular medium of communication at the disposal of an advertiser in order to facilitate the broadcast of the advertiser’s message.

In this case, DemoCo does not receive from an advertiser a specific set and controlled advertising message about the product, nor does it put a medium of communication at the disposal of an advertiser to enable the advertiser to broadcast or disseminate such a message.

Demonstrators set up a product demonstration [area] inside the store, prepare and distribute […][product] samples according to USCo’s specifications and personally interact with passing shoppers in an unscripted fashion. They strike up conversations whose content may vary depending on the specific needs of the shopper, putting more emphasis on points that seem to be of most interest to the shopper. Demonstrators adapt their conversation to each situation, according to the shopper’s reaction, in order to persuade shoppers to purchase the product on the spot. DemoCo’s purpose is not to provide a communications channel for the broadcast of an advertiser’s prepared message, but rather to demonstrate the product for the purpose of facilitating a sale. Consequently, DemoCo is not providing a communication service within the meaning of subparagraph (b)(ii) of CRA’s description of an advertising service.

The product demonstration services provided by DemoCo do not qualify as an advertising service for GST/HST purposes, and therefore the supply by DemoCo to USCo would not be considered a zero-rated supply of an advertising service made to a non-resident person under section 8 of Part V of Schedule VI.

Under section 5 of Part V of Schedule VI, a supply made to a non-resident person of a service of acting as an agent or representative of that person or of arranging for, procuring or soliciting orders for supplies by or to the person is zero-rated to the extent that the service is in respect of a supply that is

(a) a zero-rated export to the non-resident under Part V of Schedule VI to the Act, or

(b) a supply made outside Canada by or to the non-resident person.

The product demonstration services are not provided in connection with a separate zero-rated export supply made to the non-resident, therefore paragraph (a) does not apply. Paragraph (b) does not apply because the product demonstration services are not provided in respect of a supply made outside Canada by or to USCo. Accordingly, section 5 does not apply to zero-rate DemoCo’s supply of product demonstration services.

The supply of product demonstration services is taxable at the applicable rate depending on the province in which the supply is made.

Single or Multiple Supply

According to GST/HST Policy Statement P-077R2, Single and Multiple Supplies, whether a transaction consisting of several elements is a single supply or multiple supplies is a determination of fact. In general, multiple supplies occur when one or more of the elements of a transaction can sensibly or realistically be broken out from the other elements. Conversely, two or more elements of a transaction are generally considered to form part of a single supply when the elements are integral components, inextricably bound up with each other, and so intertwined and interdependent that they must be supplied together. An element may generally be regarded as any property or service that could reasonably be supplied on its own.

In identifying and analyzing the various elements of a supply, a distinction must be made between elements that are supplied to the recipient and those that are simply inputs used or consumed in making a supply. Elements that are simply inputs used or consumed in making a supply do not constitute a separate supply to the recipient but form part of a single supply.

In addition, the way in which the price for a transaction is set out on an invoice does not in itself determine whether there are one or more supplies. A single price does not automatically mean that there is one supply. Equally, an invoice that separately identifies prices for certain elements does not necessarily mean that there are two or more supplies.

Based on the facts, DemoCo is not making a separate supply to USCo of the demo disposable […][materials] or product samples that are used or consumed in performing the demos. These elements are merely input components to the overall supply of demos. USCo does not have (nor would it want) the option of purchasing those individual elements separately from the demos as it would have no use for the […][disposable materials] and product samples on their own, without the demos. These individual elements cannot sensibly or realistically be broken out from the overall supply of product demonstration services. All of these elements form part of a single supply of product demonstration services, each element being an integral component of that single supply, inextricably bound up with each other, and so intertwined and interdependent that they must all be considered as being offered together as one supply.

INTERPRETATION GIVEN

Provincial place of supply

A ruling provides the Canada Revenue Agency's (CRA) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented in writing. The CRA reserves the right not to issue a ruling where it considers that one would not be appropriate. In this case, we are unable to issue a written ruling on the provincial place of supply, as the information provided is insufficient to provide a determination. Therefore, we are issuing the following interpretation, which is a general explanation of the applicable provisions and how the legislation would apply.

A taxable (other than zero-rated) supply made in Canada is subject to GST at 5% when it is made in a non-participating province and is subject to HST at the applicable rate when it is made in a participating province. The participating provinces are Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador.

The provincial place of supply rules are contained in section 144.1, Schedule IX, and where applicable, the Regulations. Under section 144.1, a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Also, a supply made in Canada that is not made in any participating province is deemed to be made in a non-participating province.

Section 3 of Part IX of Schedule IX provides that, notwithstanding any other part of Schedule IX, a supply of property or a service is made in a province if the supply is prescribed to be made in the province under the Regulations.

Under the Regulations, different provincial place of supply rules exist with respect to general services, services in relation to real or tangible personal property and other specific types of services. Generally, we must first consider whether any specific place of supply rule applies in a particular situation. When the more specific place of supply rules for services do not apply, then it is the general place of supply rule for services in section 13 of the Regulations that applies.

The supply made by DemoCo to USCo may be characterized as a supply of a service of demonstrating products in-person directly to passing shoppers on-site at RetailCo store locations in Canada. To the extent that all or substantially all of the service is performed in the presence of the individual to whom the service is rendered (i.e. the in-store shopper), we must first try to apply the specific place of supply rule at section 17 of the Regulations in order to determine in which province DemoCo’s supply of demonstration services is made.

Section 17 of the Regulations generally provides that a supply of a service (other than an advisory, consulting or professional service) all or substantially all of which is performed in the presence of the individual to whom it is rendered is made

(a) in a participating province if the Canadian element of the service is performed primarily in participating provinces and

(i) an equal or greater proportion of the service is not performed in another participating province, or

(ii) if subparagraph (i) does not apply, the tax rate for the participating province is the highest among the participating provinces for which no greater proportion of the service is performed in another participating province; and

(b) in a non-participating province if the Canadian element of the service is not performed primarily in participating provinces.

Where it is not possible to apply section 17 of the Regulations, then the general place of supply rule for services at section 13 would apply in order to determine the place of supply of those services. Where the supplier is able to obtain an address in Canada of the recipient, subsection 13(1) of the Regulations generally provides that, subject to sections 14 to 17 of the Regulations, a supply of a service is made in a province if, in the ordinary course of business of the supplier, the supplier obtains an address in the province that is

(a) if the supplier obtains only one address that is a home or a business address in Canada of the recipient, the home or business address in Canada obtained by the supplier;

(b) if the supplier obtains more than one address described in paragraph (a), the address described in that paragraph that is most closely connected with the supply; or

(c) in any other case, the address in Canada of the recipient that is most closely connected with the supply.

Where multiple business addresses of the recipient are obtained by the supplier in the ordinary course of its business, the business address of the recipient from which the supplier is hired pursuant to the agreement for the supply (the "contracting address") will generally be the address that is most closely connected with the supply.

Where the supplier is not able to obtain an address in Canada of the recipient, subsection 13(2) of the Regulations provides that, subject to subsection (1) and sections 14 to 17, a supply of a service is made

(a) in a participating province if the Canadian element of the service is performed primarily in participating provinces and

(i) an equal or greater proportion of the Canadian element of the service is not performed in another participating province, or

(ii) if subparagraph (i) does not apply, the tax rate for the participating province is the highest among the participating provinces for which no greater proportion of the service is performed in another participating province; and

(b) in a non- participating province if the Canadian element of the service is not performed primarily in participating provinces.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-9892. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Anna Messore
Border Issues Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 188950
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Tax status of potted lettuce

Thank you for your letter dated [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […] potted lettuce (the Product). We apologize for the delay in responding.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the following:

1. The Product is marketed as […] and is supplied as a potted plant.

2. The Product is supplied directly to grocers and the Product placement is within the produce section.

3. The Product is intended to be consumed over the life of the plant on an “as desired” basis, thus ensuring readily available fresh produce.

RULING REQUESTED

You would like to know whether the supply of the Product is a zero-rated basic grocery under section 1 of Part III of Schedule VI.

RULING GIVEN

Based on the facts set out above, we rule that the supply of the Product is not zero-rated under section 1 of Part III of Schedule VI.

EXPLANATION

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (or at the rate of 13% in Ontario; 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.

Section 1 of Part III of Schedule VI zero-rates supplies of food or 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 included in paragraphs (a) to (r) of that section.

Some edible/partially edible products, such as potted vegetable plants (parts of which are edible), dietary supplements, vitamins and minerals, are not basic groceries under Section 1 of Part III of Schedule VI. The Product, at the time it is supplied, is a potted vegetable plant and as such would not be considered a basic grocery. It is from the living Product that food is later harvested.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 289-356-7396. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Peter Pushkarna
Rulings Officer
Basic Groceries & Recapture Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 196473a

Dear [Client]:

Subject: GST/HST RULING
Supply of dental care services

This letter is further to the GST/HST ruling provided to you in the letter of April 9, 2019 […]. That ruling letter concerned the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of dental care services. As a result of a review of that letter, we wish to clarify some of the information provided in that letter. We apologize for any inconvenience these changes may cause. For your convenience, we are reissuing the letter in its entirety. This amendment replaces and supersedes the original letter and is effective the date of this amended letter.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the following from your fax of [mm/dd/yyyy] and telephone conversations of [mm/dd/yyyy]:

1. […] (the Dentist) is a dentist practicing in […][Province A].

2. […][The Regulatory Body for the profession of Dentistry in Province A] has the Dentist listed as a General Practitioner (Footnote 1) at […][Clinic X] in […][Province A].

3. According to our records, the Dentist is the sole shareholder of […](the Company). The Company is registered for GST/HST purposes […]. Our records also indicate that [Clinic X] is an account name used to reference the same Company.

4. The Company itself is not listed with […][the provincial Regulatory Body] as a practitioner.

5. There is no written contract or agreement between the Dentist and the Company as the Dentist is the sole shareholder.

6. The Dentist states that he is the only dentist practicing at the clinic as an independent contractor and that there are no other independent contractors operating at the clinic.

7. The Dentist is not listed on the payroll of the Company. Instead, he receives dividends from the Company at least once or twice a year in relations to his ownership of shares in the Company.

8. The Company employs a number of other part-time employees such as dental hygienists and dental assistants. The Dentist himself undertakes the employment process and hires the employees at the dental clinic. The Dentist is not paid any income for his staffing services.

9. The Dentist does the day-to-day bookkeeping of the Company, and pays an external accountant for end-of-year financial statements and tax returns.

10. The Dentist dictates his schedule at his own discretion and is not obligated to supply services by the instruction of the dental clinic.

11. The Company owns the facility and equipment from which the Dentist operates.

12. The Company bills the individual patients for the dental care services that the Dentist has rendered to them.

13. Billings to the provincial health plan for eligible patients are billed with the Dentist’s name as the provider of the dental service but with the Company’s name on the invoice.

14. No percentage is withheld in exchange for using the Company’s facility and equipment since the Dentist owns the dental clinic.

15. The dental care services provided by the Dentist and the Company include diagnostic, consultative, treatment and other health care services.

16. The Dentist states that he does not render any cosmetic dental services to individual patients.

RULING REQUESTED

You would like to know whether or not the payout you receive from your dental corporation for the services you render would constitute consideration for a taxable supply and would therefore be subject to GST/HST.

RULING GIVEN

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

1. The supply of the dental care services made by the Dentist to the Company is an exempt supply pursuant to section 5 of Part II of Schedule V and is not subject to the GST/HST;

2. The dividends received by the Dentist as a shareholder of the Company are an exempt supply of a “financial service” and are therefore not subject to the GST/HST.

EXPLANATION

Medical practitioner and Dental service

Section 5 of Part II of Schedule V provides that a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual is an exempt supply, as long as it is not performed for cosmetic purposes.

Cosmetic service supplies and any supply of property and services related to cosmetic service supplies are excluded from the exempting provisions of Part II of Schedule V by section 1.1 of that Part. A cosmetic service supply, as defined in section 1, means a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes. Since the Dentist offers no cosmetic dental procedures, his supply of dental services would not be that of cosmetic service supplies.

Section 1 of Part II of Schedule V defines the term “medical practitioner” to mean a person who is entitled under the laws of a province to practise the profession of medicine or dentistry. Since the Dentist is authorised to practise in [Province A] and is registered with the [the Regulatory Body for the profession of Dentistry in Province A], the Dentist is a “medical practitioner” according to Section 1 of Part II of Schedule V. Therefore, as a “medical practitioner” providing health care services, i.e. dental services, the Dentist’s services are generally exempt under section 5 of Part II of Schedule V.

Furthermore, section 5 also provides that a health care service rendered by a medical practitioner to an individual is an exempt supply regardless of the identity of the supplier of the service. Hence, in this case, regardless of whether the dental services are supplied through the Dentist’s clinic or directly by the Dentist, the exemption under section 5 would still apply. For example, if the medical practitioner is an employee of the supplier, including situations where the supplier is a corporation, the health care service rendered by the medical practitioner that is invoiced to the recipient by that supplier would be exempt.

In addition to meeting the exempting provision above, section 1.2 of Part II of Schedule V provides that for the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a “qualifying health care supply” is deemed not to be included in Part II of that Schedule. Therefore, to be included under the exempting provision in section 5, the service provided must also meet the definition of a “qualifying health care supply”.

A “qualifying health care supply” is defined in section 1 of Part II of Schedule V to mean,

“a supply of property or a service that is made for the purpose of

(a) maintaining health,

(b) preventing disease,

(c) treating, relieving or remediating an injury, illness, disorder or disability,

(d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or

(e) providing palliative health care.”

In this case, the supply of a dental service being rendered by a medical practitioner to an individual would fall within the definition of “qualifying health care supply” as the purpose of the service is to identify and treat dental related issues.

Based on the above, the supply of dental care services rendered by the Dentist would meet the conditions of section 5 of Part II of Schedule V to the ETA and is, therefore, an exempt supply for purposes of the ETA. As such, the consideration charged to a patient for this service is not subject to the GST/HST notwithstanding the type of remuneration the Dentist may gain in relation to rendering such exempt services.

Dividend Payout

As mentioned in the facts stated above, the Dentist receives dividend payouts once or twice a year as the only form of consideration for the work he performs for the Company. As the dividends are paid in relation to the ownership of shares, they are not treated as consideration for the supplies of services by the Dentist.

An “equity security” is defined in subsection 123(1), to mean a share of the capital stock of a corporation or any interest in or right to such a share. An equity security is a “financial instrument” as defined in subsection 123(1). The payment or receipt of money as dividends in respect of a financial instrument is a “financial service” in accordance with that definition in subsection 123(1). Supplies of financial services are exempt under section 1 of Part VII of Schedule V unless otherwise zero-rated under Part IX of Schedule VI. Since none of the zero-rated provisions under Part IX of Schedule VI apply in these circumstances, the Dentist’s receipts of dividend payouts in respect of his ownership of shares in the company throughout the year are exempt supplies of financial services.

ADDITIONAL INFORMATION

Subsection 126(2) provides that persons are related to each other for GST/HST purposes if they are related to each other by reasons of subsections 251(2) to (6) of the Income Tax Act. Since the Dentist controls the Company because he is the sole shareholder, they are related persons in accordance with subsection 126(2). Subsection 126(1) provides that for GST/HST purposes, related persons are deemed not to deal with each other at arm’s length. As such, the Dentist and the Company may be partaking in non-arm’s length transactions. Therefore, the supply of property or service by the Company to the Dentist may be governed by the provisions of section 155 of the ETA.

Subsection 155(1) provides, in part, that where a supply is made between persons not dealing at arm’s length for no consideration or for consideration less than the fair market value at the time the supply is made, and the recipient is not a registrant acquiring the property or service for use exclusively in commercial activities of the recipient, the value of consideration is deemed to be the fair market value of the property or service at the time the supply is made.

We note that there might be services that are rendered by the Company to the Dentist. In order to determine if section 155 could apply to these transactions, if any, a ruling should be requested along with further details about such transactions. For more information on making a ruling request, refer to GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-4626. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Amal Khorchid
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 General Practitioner: […].

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

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 82247

August 29, 2011

Dear [Client]:

Subject:

GST/HST RULING
GST/HST treatment of trailer park seasonal site rental

This is in reply to your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the rental of a site at [...] (the Park) and the pro-rated portion of the municipal taxes that [...] (the Corporation) charges you with respect to the site rental. We apologize for the delay in responding.

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

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

Based on the information provided in your letter and attached documentation, including telephone discussions with [...] of the [...] TSO and our recent telephone conversation on June 1, 2011, we understand as follows:

1. The Park is located at [...] in [...] [Community 1], in the municipality of [...], [...] [Participating Province X]. The Park is a seasonal trailer park. It has a total of [...] sites. For GST/HST purposes, the Park is not a residential trailer park as that term is defined in subsection 123(1).

2. The Park is open seasonally for a period of six to nine months. The majority of the sites are available for approximately six months seasonal occupancy from May 1st through to Thanksgiving. The water to these sites is turned off for the winter. The section of the Park that generally allows for longer stays has a winterized water system.

3. Electrical, water, and sewer or septic facilities are available to all sites. Except for a small number of sites that have utilities available year-round, the water is generally turned off at the end of October.

4. You first began renting a site at the Park in [yyyy]. You purchased your current trailer, a [...], in [mm/yyyy]. The trailer measures [...]' x [...]' and is situated on site #[...] in the Park. It is equipped with complete plumbing and electrical facilities and has propane heating.

5. The trailer was towed to the Park by the manufacturer. You indicate that the tongue has been removed, but the wheels remain in place. The trailer is placed on cement blocks, but is not anchored to the ground. There is also a [...]' deck which is not fastened to the trailer.

6. You have provided a photo of the trailer. The photo shows the trailer on its wheels, sitting on a bare site. There is no skirting around the trailer and there is no landscaping around the trailer or of the site. The photo of the trailer does not reflect any significant attachment of the trailer to the site.

7. You have access to the trailer from May 1st to Thanksgiving, during the period the Park is in operation. During this period, you indicate you use the trailer occasionally on some weekends and for stays of three to four days during your holiday period. You indicate that the hydro and water to the trailer are turned off at the end of the season.

8. Your place of residence is in [...] [City 1], Participating Province X].

9. You indicate you pay a seasonal site fee. In addition, you pay a pro-rated portion of the property tax assessment in respect of your particular site.

Ruling Requested

You would like to know whether the site rental and the amount charged to you by the Corporation in respect of your share of the municipal property taxes for your site is subject to the GST/HST.

Ruling Given

Based on the facts set out above, we rule that the site rental is a taxable supply subject to the GST/HST. The additional amount charged to you by the Corporation in respect of your share of the municipal property taxes for your unit is additional consideration for that supply and is also subject to tax.

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

In general, the supply of real property is a taxable supply and is subject to GST/HST unless specifically exempted under the ETA.

Subparagraph 7(a)(i) of Part I of Schedule V to the ETA provides that a supply of land (other than a site in a residential trailer park) made by way of lease, licence or similar arrangement that provides for continuous possession or use of the land for at least one month is exempt if the supply is made to an owner, lessee or person in occupation or possession of a residential unit that is or is to be affixed to the land for the purpose of its use and enjoyment as a place of residence for individuals.

The determination of whether the supply of land is an exempt supply under subparagraph 7(a)(i) of Part I of Schedule V to the ETA depends on whether the following three conditions are met:

1. the recreational unit must be a residential unit for GST/HST purposes;
2. the unit must be affixed to the land in the context of subparagraph 7(a)(i) of Part I of Schedule V to the ETA; and
3. the unit must be affixed to the land for the purpose of its use and enjoyment as a place of residence.

Where the above conditions are met, the supply of land is exempt under subparagraph 7(a)(i) of Part I of Schedule V to the ETA provided the supply of the land is for a period of one month or more.

Subsection 123(1) defines the term "residential unit" to include a house, semi-detached house, mobile home or "any other similar premises". Whether a particular unit has the same permanent residential characteristics as a house such that it is considered to be a "residential unit", is affixed to the land, and is used as a place of residence for individuals is determined on a case-by-case basis taking into consideration the facts and circumstances of the particular case.

Recreational units, such as park model trailers, travel trailers or similar units, are generally not designed to be affixed to the land in a permanent manner. In determining whether a particular recreational unit is affixed to the land for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA, consideration is given to the method and degree of physical attachment of the unit to the land, as well as the purpose for which the unit has been attached to the land.

Based on the facts referred to above, the trailer is not considered to be affixed to the land for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA. For purposes of subparagraph 7(a)(i), the degree of affixation of the unit to the land must be sufficient to support long-term use of the unit as a place of residence. A recreational unit is considered to be affixed to the land if it is installed in a permanent manner that is conducive to long-term residential use. For example, the recreational unit must be bolted to sonotubes or a cement pad and not merely resting on the land or on any other surface, and must be connected, in a permanent way, to service facilities such as a municipal water and sewer system, well, septic system or electrical power distribution system.

In this particular case, the trailer is sitting on cement blocks with its wheels attached. The photo of the trailer shows little sign of permanency. It is not affixed to the land in a permanent manner. While the tongue has been removed, the wheels remain in place. The trailer does not possess the necessary characteristics of permanency to be considered to be affixed for purposes of subparagraph 7(a)(i) of Part I of Schedule V to the ETA. In addition, the facts do not indicate that the trailer is used as a place of residence, but rather as lodging for recreational purposes.

Since the requirements for exemption under subparagraph 7(a)(i) are not met and no other exempting provision applies, the site rental and, as noted below, the additional amount charged to you in respect of your pro-rated portion of the municipal property taxes for your site, is a taxable supply subject to GST/HST.

Additional Rent - property taxes

Property taxes paid by a property owner to the municipality are generally not subject to GST/HST. The property owner generally includes an amount that represents a recovery of such taxes from the lessee either as part of the basic rent or as an additional rent. Where a separate amount is paid by a lessee on account of property taxes assessed against the property owner, this amount is part of the consideration for the rental of the property, even if the lessee pays the amount directly to the municipality. As such, the amount will take on the same tax status as the rent. In this case, since the rental of the land on which the unit is situated is a taxable supply subject to GST/HST, the additional amounts charged to you by the Corporation for your share of the municipal taxes assessed in respect of your unit are also subject to GST/HST.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9212. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

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

UNCLASSIFIED

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

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 83372

August 29, 2011

Dear [Client]:

Subject:

GST/HST RULING
GST/HST treatment of trailer park site rental

This is in reply to your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the rental of a site at [...] (the Park) and the pro-rated portion of the municipal taxes that [...] (the Corporation) charges to you with respect to the site rental. We apologize for the delay in responding.

HST applies at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

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

The following facts are based on the information provided in your letter and in our telephone discussion of August 4, 2011.

Statement of Facts

1. The Park is located at [...] in [Community 1], in the municipality of [...], [...] [Participating Province X]. It has a total of [...] sites. For GST/HST purposes, the Park is not a residential trailer park as that term is defined in subsection 123(1).

2. The Park is open seasonally for a period of six to nine months. The majority of the sites are for six months seasonal occupancy from May 1st through to Thanksgiving. The water to these sites is turned off for the winter. The section of the Park that generally allows for longer stays has a winterized water system.

3. Electrical, water and sewer or septic facilities, and phone service are available to all sites. In addition, cable TV is available or individuals may put up their own satellite dish. Some occupants asked for mail delivery at the Park and the [Community 1] Post office installed post office boxes at the entrance to the Park.

4. You have provided a copy of your Ontario driver's licence which shows your address as the Park address; that is, [...], [Community 1], [Participating Province X] [...]. Your residence at the Park is your permanent and only residence in Canada.

5. In [yyyy] you began leasing site # [...] in that section of the Park that permits longer term stays under an annual lease arrangement. At that time, you began to reside at the Park under what you referred to as an "11-month stay arrangement" which restricted occupancy of the Park during the month of February.

6. You indicate that in approximately [yyyy] the Corporation advised you that occupancy of the Park would be restricted to a maximum of nine months, from April to December. You state that you occupy your unit at the Park as your only and primary place of residence in Canada except for the winter months when the Park is not in operation and during which time you go south for the winter.

7. You purchased your unit, [....] park model trailer, in [yyyy]. The trailer measures [...]' x [...]'. A Florida room also measuring [...]' x [...]' has been added to the original trailer thereby doubling your total living area. The unit consists of one bedroom, living room, bathroom and kitchen facilities, as well as an office/sitting area and utility room. The unit is connected year-round in a permanent manner to service facilities, including hydro, heating and an underground, winterized water and septic system. You also have a telephone listing and satellite services at the site.

8. The unit is affixed to the site on a concrete pad in a permanent manner that is conducive to long-term residential use. The tongue, originally used for transporting the unit to the site, has been removed. There is skirting around the entire structure and the site is fully landscaped. The unit has been affixed to the site and has been your place of residence since you purchased it in [yyyy]. It is your intent that the unit remain affixed to site and continue to be your place of residence for the foreseeable future.

9. You indicate that you currently pay an annual rent amount of about $[...] for the site as well as an additional amount in respect of your share of the municipal taxes assessed in respect of your unit.

Ruling Requested

You are requesting a ruling as to whether the rental of the site on which your unit is situated and the amount charged to you by the Corporation for municipal taxes assessed in respect of your unit are subject to the GST/HST.

Ruling Given

Based on the facts set out above, we rule that the total amount charged for the rental of the land, including the additional amount charged to you by the Corporation for your share of the municipal taxes assessed in respect of your unit located on Lot [#] [...] in the Park, is consideration for a supply of the land that is exempt of the GST/HST under subparagraph 7(a)(i) of Part I of Schedule V to the ETA.

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

Explanation

Subparagraph 7(a)(i) of Part I of Schedule V to the ETA provides that a supply of land (other than a site in a residential trailer park) made by way of lease, licence or similar arrangement that provides for continuous possession or use of the land for at least one month is exempt if the supply is made to an owner, lessee or person in occupation or possession of a residential unit that is or is to be affixed to the land for the purpose of its use and enjoyment as a place of residence for individuals.

Subsection 123(1) defines the term "residential unit" to include a house, semi-detached house, mobile home or "any other similar premises". Whether a particular unit has the same permanent residential characteristics as a house such that it is considered to be a "residential unit", is affixed to the land, and is used as a place of residence for individuals is determined on a case-by-case basis taking into consideration the facts and circumstances of the particular case.

Based on the facts referred to above, the unit is considered to be a residential unit. Modifications have been made to the unit such that the unit has the same permanent residential characteristics as a house, is installed in a permanent manner that is conducive to long-term residential use and is connected in a permanent way to hydro, water and septic facilities. As such, the unit is considered to be a residential unit that is affixed to the land.

Except for the winter months during which time you go south for the winter, you reside full-time in the unit at the Park. The fact that you are absent from the Park during the winter months does not preclude the unit from being considered your place of residence. In this case, the facts indicate that the unit has been your primary and only place of residence in Canada since approximately [yyyy]. Where a residential unit is an individual's primary place of residence, the particular unit meets the requirement that the unit be for use and enjoyment as a place of residence for individuals. As such, all of the requirements of subparagraph 7(a)(i) of Part I of Schedule V to the ETA are met.

Additional Rent - property taxes

Property taxes paid by a property owner to the municipality are generally not subject to GST/HST. The property owner generally includes an amount that represents a recovery of such taxes from the lessee either as part of the basic rent or as an additional rent. Where a separate amount is paid by a lessee on account of property taxes assessed against the property owner, this amount is part of the consideration for the rental of the property, even if the lessee pays the amount directly to the municipality. As such, the amount will take on the same tax status as the rent. In this case, since the rental of the land on which the residential unit is situated is exempt of GST/HST, the additional amount charged to you by the Corporation for your share of the municipal taxes assessed in respect of your unit is not subject to GST/HST.

Tax paid in error

Under the ETA, where a person has paid an amount as or on account of tax that was not payable, the person may request a refund or credit of the amount from the supplier. A supplier may refund or credit the tax within two years after the day the amount was charged or collected. Further information on the time limitations and conditions for claiming refunds and credits is available in GST/HST Memoranda Series Chapter 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act available on the CRA Web site.

Where a refund or credit is not issued by the supplier, the person may make an application under subsection 261(1) for a rebate of the tax paid in error by completing and submitting application form GST 189 General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST). It should be noted that a rebate application made under section 261 cannot include amounts that were paid in error more than two years before the application is filed. Given the circumstances in this case, September 7, 2006 (the date we received your ruling request) will serve as the date for purposes of the two-year time limitation under section 261.

Please complete the attached rebate application and send a copy of this ruling, along with the completed rebate application and all of the original invoices issued to you by the Corporation in respect of your rental of Lot [#] [...], that are dated from [mm/dd/yyy] to date, in which GST/HST was charged and that you paid, to the following address:

Summerside Tax Centre
Attention: [...]
Rebates Division
275 Pope Side Road
Summerside, PE C1N 5Z7
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9212. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

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

UNCLASSIFIED

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

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 138563

Business Number: [...]

October 24, 2011

Dear [Client]:

Subject:

GST/HST RULING
[...] [Sale of] Gift Cards

Thank you for your letter of August 31, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to [...] gift cards (the "gift cards").

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

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

Statement of Facts

From your incoming letter, our telephone conversation on October 20, 2011 and the provided examples of the gift cards, we understand the following:

1. [...] (RetailerCo) is a retailer and is registered for GST/HST purposes with Business Number [...].

2. Customers are able to purchase the gift cards at RetailerCo store locations across Canada.

3. The gift cards range from a variety of romance, pampering, family fun and adventure life experiences across Canada such as: golf, spas, water parks, hotels, resorts, restaurants, rides, race car experiences and in-home chefs.

4. The gift cards are priced accordingly and the amount charged by RetailerCo is the price as stated on the gift card package.

5. [...] examples of the front and back of the gift card packages and attached gift cards were enclosed for our review. They are for a variety of experiences such as overnight packages at hotels and country inns, dinning packages, spa treatments, and admission to sport and amusement parks at locations across Canada. The details of three representative samples are provided below.

6. The first includes one night's accommodation for two at an inn, a bottle of wine and a breakfast for two. The gift card holder must contact the inn to book the reservation, identify the gift card package, quote the number on the gift card and present the $[...] gift card as the method of payment.

7. The next sample can be redeemed at a number of spa resorts across Canada. The package includes services which focus on health, wellness and professionalism. The selected establishment must be called to book an appointment and the $[...] amount on the gift card will be used towards the cost of the reservation.

8. The third sample can be redeemed towards a reservation at a variety of white water rafting locations across Canada. The selected establishment must be called to book a reservation and the $[...] gift card must be presented at time of use.

9. The terms and conditions are on the back of the gift card package and contain (in part) the following provisions: Gift card is a one-time use card. The card is transferrable but not replaceable if lost or stolen and should be treated as cash. Card is subject to expiration date, if any, given on card. Card can be redeemed only at participating establishments. Total value of the card must be redeemed at a single establishment. Any unused balance will be converted to credit at participating establishment.

10. The gift card may be purchased as a gift, i.e., it is transferrable.

11. The steps required to redeem the gift card are, in general, the same but have some differences. For example:

• a customer must call a lodge to book the reservation; identify that he/she is booking a gift card package; quote the number on the back of the gift card; and present the package and the attached gift card to the lodge;

• a customer must select a particular golf course; call the golf course to book his/her tee time; and quote the number on the back of the gift card to complete the reservation; and present the package and attached gift card to the golf course.

12. The gift cards are sold to RetailerCo by a third party distributor, who invoices RetailerCo for the gift cards purchased.

13. The gift cards have no intrinsic value.

Ruling Requested

You would like a ruling on the applicability of the GST/HST to the sale of the gift cards as described above.

Ruling Given

GST/HST should not be charged to customers on the sale of the gift cards as they are considered to be gift certificates for the purposes of section 182.1.

Explanation

The GST/HST treatment of any of the above gift cards depends on the terms of the particular agreement between the parties and whether the gift card is a coupon or a gift certificate.

The definition of coupon includes a voucher, receipt, ticket or other device that does not include a gift certificate or a barter unit.

The term "gift certificate" is not defined in the ETA. Generally, the Canada Revenue Agency considers the following criteria in determining whether a particular device is a gift certificate. A gift certificate is a device (e.g. voucher, receipt, ticket):

• that usually has a monetary value or is for a supply of property or service,
• that can be redeemed on the purchase of property or a service from a particular supplier; i.e. the supplier agrees to accept the device as consideration, or a part thereof, towards the purchase of property or a service,
• for which consideration was given, and
• that has no intrinsic value.

Section 181.2 provides that, for GST/HST purposes, the issuance or sale of a gift certificate (including a gift card that meets the criteria of a gift certificate) for consideration is deemed not to be a supply and, when given as consideration for a supply of property or a service, the gift certificate is deemed to be money. The fact that a gift certificate may be transferred or resold does not change the characterization of the device as a gift certificate for purpose of 181.2. Therefore, no GST/HST should be charged to customers on the sale of the gift cards that are considered to be gift certificates.

At the time of redemption, a gift certificate is treated as money that is given as full or partial payment towards the purchase of the goods or services. Therefore, a GST/HST registrant merchant of a particular establishment who accepts a gift certificate as a method of payment is required to account for the GST/HST payable by the customer on the value of the consideration charged in respect of the taxable supply (other than zero-rated) of their goods or services.

Although, section 181.2 deems the sale of a gift certificate not to be a supply for GST/HST purposes, a person who makes that supply is still considered to be engaged in a commercial activity. Therefore, the person, if registered for GST/HST, may be eligible to claim as input tax credits (ITCs) the GST/HST paid on the person's expenses related to this commercial activity provided all of the requirements under section 169 for claiming ITCs are met.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (902) 426-6940. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,
Nancy Jardine
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

UNCLASSIFIED

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

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 37706-r

May 17, 2011

Dear [Client]:

Subject:

GST/HST RULING
[...] [GST/HST treatment of site leases]

We refer to our letter of July 15, 2003, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to leases of sites in [...] (the Park).

This is to notify you that the GST/HST Ruling of July 15, 2003, case number 37706, (the Ruling), is revoked on the basis that the statements provided did not fully and accurately describe all the necessary facts and transactions for which you requested a ruling.

We would also take this opportunity to provide you with the Canada Revenue Agency's interpretative position with respect to the definition of "residential trailer park", as that term is defined in subsection 123(1) of the Excise Tax Act (ETA), and certain exemptions in section 7 of Part I of Schedule V to the ETA.

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

All legislative references are to the ETA unless otherwise specified.

Interpretation Given

The phrase "residential trailer park" is defined as:

"the land that is included in a trailer park of the person or, where the person has two or more trailer parks that are immediately contiguous to each other, the land that is included in those contiguous trailer parks, and any buildings, fixtures and other appurtenances to the land that are reasonably necessary for
(a) the use and enjoyment of sites in the trailer parks by individuals residing in or occupying mobile homes, or travel trailers, motor homes or similar vehicles or trailers, situated or to be situated on those sites, or
(b) the purpose of engaging in the business of supplying those sites by way of lease, licence or similar arrangement,
but does not include such land and appurtenances or any part of them unless the land encompasses at least two sites and all or substantially all of the sites in the trailer parks
(c) are supplied, or are intended to be supplied, under a lease, licence or similar arrangement under which continuous possession or use of a site is provided for a period of at least
(i) one month, in the case of a mobile home or other residential unit, and
(ii) twelve months, in the case of a travel trailer, motor home or similar vehicle or trailer that is not a residential unit, and
(d) if the sites were occupied by mobile homes, would be suitable for use by individuals as places of residence throughout the year".

Whether sites are suitable for use by individuals as a place of residence throughout the year is a question of fact. However, in order for sites to meet that criterion, the sites would generally have to be accessible and serviced throughout the year. Sites may generally be considered accessible if they can be normally accessed by vehicle throughout the year. Sites may generally be considered to be serviced if they provide power, heat, and water and sewer services throughout the year.

With respect to the Park's [...] sites described in the Ruling, our understanding is as follows:

• The roads within the Park are not ploughed during the winter. If an individual wants to access their site during the winter, they can only do so on foot as vehicle access is not possible. Individuals wanting to access their site must leave their vehicle at the entrance to the Park and walk to their site.

• Water to the sites is shut off before winter freeze up.

• There is no sewage infrastructure in the Park. Each recreational vehicle has a septic tank that holds sewage and waste water that must be emptied periodically. While you offer the service of emptying septic tanks in recreational vehicles in the Park, the service is not available in the winter months. Further, as access to sites is restricted in the winter months, an individual cannot remove a recreational vehicle from a site during that time to empty the tank.

• Heat is available in the recreational vehicles as they come equipped with their own propane tanks. However, as access to the Park is not available in the winter months (other than by foot and then often at some distance from the Park entrance), refilling the tanks is not practical in the winter months.

• Recreational vehicles that are parked on a site in the Park are not permanently affixed to the site.We further understand that [...] [the Company] is not a "public service body" as that term is defined in subsection 123(1). (iFootnote 1)

If our above understanding is correct, the sites in the park cannot be considered to be accessible and serviced throughout the year. If that is the case, the Park would not meet the definition of a residential trailer park.

Paragraph 7(b) of Part I of Schedule V to the ETA exempts the supply of certain sites in a residential trailer park. However, if the Park is not a residential trailer park, the exemption in paragraph 7(b) cannot apply.

Subparagraph 7(a)(i) of Part I of Schedule V to the ETA exempts the supply of a site where the sites are not situated in a residential trailer park and the supply is made under a lease, licence or similar arrangement for a period of continuous possession or use of at least one month to the owner, lessee or person in occupation or possession of a residential unit that is or is to be affixed to the land for the purpose of its use and enjoyment as a place of residence for individuals. This exemption could apply, for example, to the supply of a site on which a mobile home is affixed provided the occupant uses the mobile home as a place of residence. However, this exemption in subparagraph 7(a)(i) of Part I of Schedule V to the ETA does not apply if the recreational vehicles in the Park are not affixed to the site. For a discussion on whether a recreational unit is a residential unit that is affixed to a site for the purpose of its use and enjoyment as a place of residence, see policy statement P-104, Supply of Land for Recreational Units such as Mini-homes, Park Model Trailers, and Travel Trailers.

If our above understanding is correct and the supply of a site in the Park is not exempt under either of the foregoing provisions, the supply will be subject to the GST/HST.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-8852. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,
Hugh Dorward
A/Manager
Real Property Unit
Financial institutions and Real Property Division
Excise and GST/HST Rulings Directorate
i 1 A public service body is defined in that subsection as a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university;
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UNCLASSIFIED