GST/HST Ruling

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ETA Sch. V, Part II, 2, ETA Sch. V, Part II, 5, ETA Sch. V, Part II, 7

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

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

Case Number: 106745
Business Number: XXXXX
Attention: XXXXX
March 12, 2009

Subject:

GST/HST RULING
Services provided by XXXXX

Dear XXXXX:

Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to independent medical examination services and independent medical assessment services XXXXX. In your letter you inquired if legislative changes would have an effect on the tax status of the above-mentioned services for which we provided a ruling on XXXXX.

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

The advice given to you is based on the assumption that independent medical examination ("IME") services and independent assessment services ("IA") have the same meanings as those described in GST/HST Policy Statement P-248, The Application of the GST/HST to the Supply of an Independent Medical Examination ("IME") and to Other Independent Assessments ("P-248"). To be consistent with the terms used in P-248, the reference to an IMA (independent medical assessment) in the appendices is referenced as an IA service for the purposes of this letter. It is also assumed that Medical Practitioner and Practitioner in each of the detailed descriptions reviewed meet the definitions of "medical practitioner" and "practitioner" in section 1 of Part II of Schedule V to the ETA.

Statement of Facts

We understand that:

1. In a letter dated XXXXX, XXXXX requested a ruling of the GST/HST status of independent medical examination and independent medical assessment services.

2. On XXXXX, CRA issued a ruling confirming the tax status of the supplies as described in scenarios in Appendices I to VI of the original letter. The ruling was based on the ETA and P-248.

3. The Budget dated February 26, 2008 included proposed changes to sections 5 and 7 of Part II of Schedule V to the ETA. These proposed amendments were passed into law on June 18, 2008 and apply to supplies made after February 26, 2008.

4. XXXXX operates an XXXXX that offers independent medical examinations and other independent assessments to its client base, the majority of which are insurance companies.

5. XXXXX is a GST/HST registrant. It currently charges GST on the supply of its IME and IA services to its clients. Some clients are refusing to pay the GST charged by XXXXX for the provision of its services. XXXXX, as described in your letter dated XXXXX and our letter of XXXXX, provide a detailed description of the services, the types of professionals involved, as well as the place where the services are rendered.

6. The variety of services are subcontracted and performed by either a Medical Practitioner (MD) or by a Practitioner. The evaluation or assessment services can be rendered at the XXXXX facilities, at the offices of the MD or Practitioner, and at a patient's home.

7. All of the facts remain the same from the original letter requesting a ruling. The ruling given in our letter of XXXXX is as follows:

XXXXX

We rule that the supply of the IME service by a MD to XXXXX is exempt pursuant to section 5 of Part II of Schedule V. The supply of the service by XXXXX to its customer is taxable as no exempting provisions within Schedule V apply.

XXXXX

We rule that the supply of the IME service by a MD to XXXXX is exempt pursuant to section 5 of Part II of Schedule V. The supply of the service by XXXXX to its customer is exempt pursuant to section 2 of Part II of Schedule V.

XXXXX

We rule that the supply of the IA service by a Practitioner to XXXXX is exempt pursuant to section 7 of Part II of Schedule V. The supply of the service by XXXXX to its customer is taxable as no exempting provisions within Schedule V apply.

XXXXX

We rule that the supply of the service by XXXXX to its customer is taxable in the case of XXXXX, XXXXX, XXXXX and XXXXX as no exempting provisions within Schedule V apply.

As noted above, the supply of the service by XXXXX to its customer is exempt in the case of XXXXX pursuant to section 2 of Part II of Schedule V.

Ruling Requested

You would like to know if there are any changes to the tax status of the services provided by XXXXX as described in XXXXX to XXXXX as a result of the changes to sections 5 and 7 of Part II of Schedule V to the ETA which received Royal Assent on June 18, 2008.

Ruling Given

Based on the facts as described in your letter of XXXXX, we rule that the legislative changes to sections 5 and 7 of Part II of Schedule V will not change the tax status of services as described in the ruling letter dated XXXXX.

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

On June 18, 2008 section 5 of Part II of Schedule V was amended to:

"A supply of a consultative, diagnostic, treatment or other health care service (other than a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes) that is rendered by a medical practitioner to an individual."

Section 5 was amended to exempt the supply of those services if they are rendered by a Medical Practitioner, regardless of whether they are supplied through a corporation or directly by the Medical Practitioner.

Section 7 was amended to:

"A supply of any of the following services if the service is rendered to an individual by a practitioner of the service:

(a) optometric services;
(b) chiropractic services;
(c) physiotherapy services;
(d) chiropodic services;
(e) podiatric services;
(f) osteopathic services;
(g) audiological services;
(h) speech-language pathology services;
(i) occupational therapy services;
(j) psychological services; and
(k) midwifery services."

Section 7 was amended to exempt the supply of those services if rendered to an individual by a practitioner of the services and to remove the requirement that the services be supplied by the practitioner. As a result, the exemption will apply if the services are rendered by a practitioner, regardless of whether they are supplied through a corporation or directly by the practitioner.

The amendments apply to supplies made after February 26, 2008.

The GST/HST is a multi-stage tax and each transaction is a separate supply. This means that when XXXXX subcontracts with a Medical Practitioner or a Practitioner the service supplied to XXXXX is a separate supply from XXXXX supply to its client. It is important to note that if the independent contractor's supply to XXXXX is exempt; this exemption does not flow through to XXXXX supply. The tax status of XXXXX supply to its client is determined independently of the contractor's supply to XXXXX because for purposes of the GST/HST, XXXXX supply to its client is a distinct supply from the independent contractor's supply to XXXXX.

In our letter to you dated XXXXX the supply of an IME service by a Medical Practitioner to XXXXX was ruled to be an exempt supply pursuant to section 5. The supply of an IA service by a Practitioner to XXXXX was ruled to be exempt pursuant to section 7. Based on the scenarios as described in XXXXX the legislative amendments to these sections would not extend the exemptions to the supply made by XXXXX to its clients.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7952. 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,
Arthur Blommesteijn
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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ETA Sch. V, Part VI, 11

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 106915
Business Number: XXXXX

February 4, 2009

Subject:

GST/HST RULING

XXXXX.

Dear XXXXX:

We are in receipt of the letter of your authorized representative dated XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by the XXXXX (the Society).

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

Statement of Facts

We understand that:

1. The Society was incorporated to organize, manage, promote and conduct the XXXXX
2. Your representative has indicated that the Society meets the definition of a "non-profit organization", as that term is defined in subsection 123(1).

3. The Society's GST/HST number is XXXXX.

4. The Society will sell admission tickets to the XXXXX.

5. The Society will sell admission tickets XXXXX. These XXXXX will include paid professional participants. The advertising and promotional material for XXXXX will feature the paid professional participants.

6. The Society will sell admission tickets to XXXXX events that will include paid professional participants. The advertising and promotional material for these events will feature the paid professional participants.

7. The price for the admission tickets XXXXX, will exceed $1.00.

8. XXXXX
9. XXXXX

10. The Society will sell XXXXX XXXXX. The Society will normally sell the goods for a price above its direct cost.

Ruling Requested

You have asked us to confirm the following:

i) The Society's supply of the admission tickets XXXXX is a taxable supply and will be subject to the GST.

ii) The Society's supply of admission tickets to XXXXX events is a taxable supply and will be subject to GST.

iii) The Society's supply of the admission tickets and passes, with the exception of those noted above XXXXX will be an exempt supply.

In our recent telephone conversation with your representative it was further requested that we confirm that:

iv) The Society's supply of the merchandise, as described in paragraph 10 above, is a taxable supply and will be subject to GST.

v) XXXXX.

vi) XXXXX.

Ruling Given

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

i) The supply of all the admission tickets XXXXX is a taxable supply by the Society and subject to GST at the rate of 5%.

ii) The supply of all the admission tickets XXXXX is a taxable supply by the Society and subject to GST at the rate of 5%.

iii) The supply of the admission tickets and passes XXXXX, is an exempt supply by the society pursuant to section 11 of Part VI of Schedule V.

iv) The supply of the merchandise XXXXX is a taxable supply by the Society and subject to GST at the rate of 5%.

XXXXX:

v) XXXXX.

vi) XXXXX.

Explanation

Section 11 of Part VI of Schedule V exempts the following type of supply:

A supply of a right to be a spectator at a performance, athletic event or competitive event, where all or substantially all of the performers, athletes or competitors taking part in the performance or event do not receive, directly or indirectly, remuneration for doing so (other than a reasonable amount as prizes, gifts or compensation for travel or other expenses incidental to the performers', athletes' or competitors' participation in the performance or event, or grants paid by a government or a municipality to the performers, athletes or competitors), and no advertisement or representation in respect of the performance or event features participants who are so remunerated, but does not include a supply of a right to be a spectator at a competitive event in which cash prizes are awarded and in which any competitor is a professional participant in any competitive event.

None of the XXXXX are remunerated for taking part XXXXX. Further, cash prizes are not awarded XXXXX As a result, the supply of the right to be a spectator XXXXX is an exempt supply pursuant to section 11 of Part VI of Schedule V.

Given that XXXXX events will include paid professional participants and the advertising and promotional material for these events will feature the paid professional participants, the supply is not exempt under section 11 of Part VI of Schedule V. Since the price of each admission will exceed $1.00, the supply of the right to be a spectator (i.e., the admission tickets) at these events by the Society will be subject to GST at the rate of 5%.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-946-7962. 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,
Michael Mavis
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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ETA 135

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

Case Number: 106916
Business Number: XXXXX
Attention: XXXXX
XXXXX
18th February 2009

Subject:

GST/HST RULING

XXXXX XXXXX.

Dear XXXXX:

We are in receipt of the letter of your authorized representative XXXXX XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made XXXXX XXXXX XXXXX. (the Society).

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

Statement of Facts

We understand that:

1. The Society was incorporated to organize, manage, promote and conduct the XXXXX (XXXXX) XXXXX
2. Your representative has indicated that the Society meets the definition of a "non-profit organization" as that term is defined in subsection 123(1).

3. The Society's GST/HST number is XXXXX.

4. The Society will enter into various agreements with a variety of businesses to be recognized as sponsors of XXXXX.

Sponsor Agreements
5. Your representative has provided us with a "Sponsor Agreement". This agreement provides for a supply of rights, privileges, options and opportunities to a XXXXX
6. XXXXX of the Sponsor Agreement sets out the rights, privileges, options and opportunities that the Society may grant to a sponsor:

XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
XXXXX

- XXXXX.

XXXXX

- XXXXX.

XXXXX

- XXXXX.

7. The sponsor does not have the right to grant or sub-license in any form whatsoever its rights and status as a XXXXX sponsor to any third party or affiliate without the prior express written consent of the Society.

8. To facilitate the supply of the media rights set out above, the Society will enter into an agreement with a XXXXX broadcaster (XXXXX Broadcaster) to supply XXXXX broadcasts XXXXX. In addition, there may be XXXXX broadcast agreements. The XXXXX Broadcast Agreement ensures that the XXXXX Broadcaster will work closely with the Society to allow signage and visual advertising at XXXXX venues with respect to those entities that have entered into Sponsorship Agreements. The XXXXX Broadcaster has XXXXX advertising packages available for Games sponsors.

9. XXXXX to the XXXXX Agreement, XXXXX, details the conditions under which the right to use the XXXXX Marks are granted. This Appendix provides

- The general conditions of use,
- How the XXXXX Marks are to be used on Products,
- The use of XXXXX Marks in advertising and promotion, and
- The protection of the XXXXX Marks.

10. The sponsor agrees that any Product on which there is a XXXXX Mark shall not be sold at any time after XXXXX.

11. The consideration for the supply made by the Society to the signatory of the Sponsor Agreement includes both cash and value-in-kind.

XXXXX

12. Your representative has also provided us with the "XXXXX" package. This package sets out the different levels of sponsorship that are available to sponsors. We understand that all agreements for sponsors at these levels are similar in nature and include the following sponsor levels:

- XXXXX
- XXXXX,
- XXXXX
- XXXXX
- XXXXX

13. The rights, privileges, options and opportunities supplied by the Society and the nature of the value in kind supplied by the sponsor, will vary in proportion to the level and value of each Sponsorship Agreement. However, the supplies made by the Society under each level of sponsorship agreement are of the same nature and kind as those described in paragraphs 6 to 10 above.

Ruling Requested

You would like to know:

1. If the supply made by the Society under the Sponsor Agreement at each of the following sponsor levels is deemed not to be a taxable supply pursuant to section 135 of the ETA:

- XXXXX,
- XXXXX
- XXXXX
- XXXXX
- XXXXX

2. You would also like to know if the goods and services provided to the Society as consideration for the rights, privileges, options and opportunities supplied at the XXXXX Sponsor levels XXXXX are deemed to be a supply for GST/HST purposes.

Ruling Given

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

1. The supply of the rights, privileges, options and opportunities by the Society under the Sponsor Agreement to a XXXXX are supplies to a person who is the sponsor of an activity of the Society for use by the sponsor exclusively in publicizing the sponsor's business. As a result the supply by the Society shall be deemed not to be a supply under section 135 XXXXX and is therefore not subject to GST/HST.

2. The deeming provision in section 135 only applies to supplies made by the Society; it does not apply to any supplies of goods and services provided to the Society as consideration for the Society's supply of the rights, privileges, options and opportunities described in paragraphs 6 to 10.

Interpretation Given

3. We can also provide an interpretation with respect to the supply of the rights, privileges, options and opportunities by the Society under a Sponsor Agreement at other sponsorship levels. Such a supply by the Society shall be deemed not to be a supply under section 135 XXXXX (and therefore not subject to GST/HST) provided that:

a) the nature of the rights, privileges, options and opportunities supplied by the Society under each level of sponsorship agreement is the same as those described in paragraphs 6 to 10 above;
b) these rights, privileges, options and opportunities are supplies to a person who is the sponsor of an activity of the Society for use by the sponsor exclusively in publicizing the sponsor's business; and
c) the total value of the rights, privileges, options and opportunities supplied by the Society are proportional to the value of the respective sponsorship level agreed to.

Explanation
Under section 135 XXXXX, where a public sector body (which includes an non-profit organization such as the Society) makes
(a) a supply of a service, or
(b) a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property of the body,

to a person who is the sponsor of an activity of the body for use by the person exclusively in publicizing the person's business, the supply by the body of the service or the use of the property shall be deemed not to be a supply, except where it may reasonably be regarded that the consideration for the supply is primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically or for a prescribed service.

Although XXXXX to the Sponsorship Agreement does provide for the Society to supply some goods and services to the Sponsors, we find that these goods and services are elements that are part of the single supply of the right to use the Society's copyright, trade-mark, trade-name or other similar property.

The Sponsor Agreement's dominant and principal purpose is to set the parameters for the sponsor to use the Society's copyright, trade-mark, trade-name and other similar property. The supply is not primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically or for a prescribed service. This position is true for all the supplies made at each sponsorship level. Therefore the supply of the rights, privileges, options and opportunities described for each of the sponsorship levels is deemed not to be a supply in accordance with section 135 and therefore is not subject to GST/HST.

While section 135 deems certain supplies by a public sector body to a sponsor not to be a supply, it does not deem any property or service provided by a sponsor to a public sector body not to be a supply.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-0329. 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,
Michael Mavis
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division Division
Excise and GST/HST Rulings Directorate

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ETA 165, ETA Sch VI, Part III, 1(f)

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 16th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX

Case Number: 107134
Business Number: XXXXX

January 6, 2009

Dear XXXXX:

Subject:

GST/HST RULING

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

HST applies at the rate of 13% in the participating provinces of Nova Scotia, New Brunswick and Newfoundland and Labrador. 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

Our understanding of the facts is as follows:

1. The Product is manufactured by XXXXX (the Company).

2. The web site for the Company XXXXX) states that the XXXXX.

3. The products of the Company are separated into various categories, one of which is XXXXX. XXXXX.

4. The web site also states that XXXXX

5. XXXXX.

6. The Product is packaged in a resealable plastic bag and has a weight of XXXXXg.

7. The Product ingredients are: XXXXX

8. The Product label and the web site give the same general information. The Product is described as a "XXXXX." The label states "XXXXX" and gives the following serving suggestions: "XXXXX."

Ruling Requested

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

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 5% GST, or 13% HST pursuant to section 165.

Explanation

The tax rate in respect of a zero-rated supply is 0%. Taxable supplies that are zero-rated for GST/HST purposes are described in Schedule VI.

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

In particular, paragraph 1(f) of Part III of Schedule VI excludes from zero-rating the following:

"chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal."

GST/HST Memoranda Series 4.3, Basic Groceries outlines factors that are used to determine if a particular product is similar to a chip, crisp, puff, curl or stick as described under paragraph 1(f) of Part III of Schedule VI. These factors include the properties of the product (ingredients, flavours, texture, cooking process and appearance), its labelling, its packaging, and its marketing.

The Product in this case is considered to be a "similar snack food" for purposes of paragraph 1(f) of Part III of Schedule VI. The Product is comprised of thin, crispy bite-size XXXXX with a flavour that is similar to the products enumerated in paragraph 1(f). The Product is packaged loosely in a plastic bag and is labelled as a snack. All of these factors combined lead to the conclusion that the Product is considered to be a "similar snack food" for purposes of paragraph 1(f) of Part III of Schedule VI. As such, the Product is excluded from section 1 of Part III of Schedule VI and is therefore, a taxable supply subject to the GST at 5% or HST at 13% as applicable.

It should be noted that no one factor is determinative of the tax status of a product and changes in the labelling, packaging and/or marketing (e.g., a change in the product name or varieties offered) would not necessarily result in a different tax status. All factors must be considered in determining whether a product falls within paragraph 1(f) of Part III of Schedule VI.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. 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
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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ETA 165(1)

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

Case Number: 100154

March 4, 2009

Subject:

GST/HST RULING
GST status of XXXXX Gift Pack

Dear XXXXX:

Thank you for XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to an XXXXX Gift Pack.

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

Effective January 1, 2008, the rate of the GST will be reduced from 6% to 5% and the rate of the HST from 14% to 13%. The new rates will apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules will apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

Statement of Facts

From the information in XXXXX and from the information available on the XXXXX website referred to in your message, we understand the facts of your case are as follows:

1) You purchased the subject gift pack and you were charged GST.

2) The subject pack, listed at a consideration of $XXXXX, includes the following:

(a) XXXXX certificates, valid from XXXXX to XXXXX.

(b) XXXXX on the purchaser's birthday, valid from XXXXX to XXXXX.

(d) Free XXXXX with the purchase of a XXXXX, valid from XXXXX to XXXXX.

(e) $XXXXX off a $XXXXX purchase at XXXXX, including XXXXX. Valid from XXXXX to XXXXX.

(f) $XXXXX off a $XXXXX purchase at XXXXX, valid from XXXXX to XXXXX.

(g) $XXXXX off the purchase of any XXXXX specifically-marked XXXXX, valid from XXXXX to XXXXX.

(h) On becoming a XXXXX member earn XXXXX points for joining, valid from XXXXX to XXXXX.

Ruling Requested

You would like to know whether GST is applicable to the gift pack.

Ruling Given

Based on the facts set out above, we rule that the gift pack is subject to GST under subsection 165(1).

Explanation

There are no provisions in the Excise Tax Act that provide an exemption from GST to the supply of the gift pack. The supply is subject to GST under subsection 165(1).

The supply is considered to be one of coupons made for consideration. The qualities of the gift pack that indicate that it is a supply of coupons are as follows: there are conditions enforced upon the use of its components, such as the requirement for the purchase of a specific item in order to receive a free item; there is a requirement for a specific redemption, such as for the XXXXX with the purchase of a specific item; and there is a fixed dollar discount on a purchase made of $XXXXX at specific retailers.

Only when coupons are supplied for no consideration are they free of GST at the time of issue.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-1175. 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 or at our XXXXX.

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

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ETA 123(1) financial service, ETA 165(1), ETA 221(1), ETA 232, B-067, Grants, Subsidies, Transfer Payments

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Attention: XXXXX
XXXXX
Case Number: 100974
Business Number: XXXXX

July 10, 2009

Subject:

GST/HST RULING
XXXXX Program

Dear XXXXX:

Thank you for your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (XXXXX) customer accounts for the XXXXX Program financial incentive. We apologize for the delay in responding.

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

Statement of Facts

We understand that on XXXXX, XXXXX and the XXXXX entered into a XXXXX Program Agreement whereby XXXXX would deliver the XXXXX Program to its customers with funding provided by XXXXX. The details of this agreement and the XXXXX Program are as follows.

1. XXXXX.

2. XXXXX.

3. XXXXX.

4. The objectives of the Program were to:

• XXXXX;
• XXXXX; and
• XXXXX.

5. Pursuant to the XXXXX Agreement between XXXXX and XXXXX, XXXXX was approved for funding to administer and deliver the Program.

6. Section XXXXX of the XXXXX Agreement states the relationship between XXXXX and XXXXX is that of an independent business relationship and in no way does the agreement contemplate or create a relationship of employment, partners, joint venturers, fiduciary, principal and agent or any other relationship.

7. XXXXX. The customers qualified if their prorated energy consumption for the Savings Year represented a reduction of XXXXX% as compared to the Base Year weather normalized prorated energy consumption. The threshold of XXXXX% represented the XXXXX% Program savings requirement plus a tolerance of plus XXXXX% to accommodate calculation assumptions related to prorating and weather normalization.

8. If customers reduced consumption by XXXXX% between the two periods, they received a financial incentive equal to XXXXX% of the total amount of their prorated XXXXX period billing.

9. Section XXXXX of Schedule "XXXXX" to the XXXXX Agreement required XXXXX to market and communicate the Program to its customers.

10. Section XXXXX of Schedule "XXXXX" to the XXXXX Agreement required XXXXX to apply the financial incentive applicable to each customer that qualified as a participant in the Program as a credit on the first electricity bill sent to the customer after the completion of the Program Season (XXXXX), or where that was not practical for XXXXX, to apply the credit on the second electricity bill sent to the customer following completion of the Program Season.

11. Customers were automatically enrolled and became participants in the Program if:

• XXXXX, and
• XXXXX.

12. XXXXX.

13. XXXXX.

14. XXXXX, as Program Manager, was to be reimbursed its actual costs incurred in delivering the Program. At the end of the Program, the following items would be paid to XXXXX in accordance with program milestones and the XXXXX evaluation of performance:

• XXXXX, and
• XXXXX.

Ruling Requested

1. Should the GST be charged on the total amount of the customer's electricity invoice before the XXXXX% financial incentive is applied, or is the financial incentive netted against the total of the invoice and GST is charged on the net amount?

2. If GST is charged only on the net amount invoiced, does XXXXX collect GST from XXXXX?

Ruling Given

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

1. GST applies on the total amount of the consideration payable for the electricity before the XXXXX% financial incentive is applied.

2. As stated above, GST applies to the total amount of the electricity charged, and not on the net amount invoiced.

Explanation

Although not asked in your request for a ruling, we would like to point out that XXXXX is required to collect GST from XXXXX on the consideration payable for its taxable supplies made to XXXXX under the Program. This consideration includes the management fees, bonus payments, and the reimbursed costs, other than the financial incentives.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-9699. 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,
M. Patricia Taylor, CMA
Industry Sector Specialist
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Attention: XXXXX
Case Number: 101532

July 14, 2009

Dear XXXXX:

Subject:

GST/HST RULING

"Cost Sharing Agreement"

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a "cost sharing agreement" between XXXXX (the Corporation) and XXXXX.

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

Statement of Facts

We understand the following.

1. XXXXX entered into a ground lease with the XXXXX in XXXXX for certain land located in XXXXX. The lease is for a term of XXXXX years.

2. XXXXX constructed a building (the Project) on the leased land. The Project contains a retail area on the lower levels, several residential floors above the retail area and underground parking spaces.

3. XXXXX filed a Declaration under the XXXXX, creating a residential leasehold condominium and the Corporation. The leasehold condominium (the Condominium) is comprised of XXXXX leasehold condominium units, storage units, parking spaces and common areas. The legal description of the Condominium is set out in XXXXX to the Declaration as follows, XXXXX.

4. The retail area of the Project is defined in the Declaration as the "Retail Development" and is designated as XXXXX. iFootnote 1 The definition also provides that the Retail Development forms no part of the Condominium. As such, no part of the Retail Development (the Retail Portion) of the Project is governed by the Corporation.

5. XXXXX continues to own a leasehold interest in the Retail Portion and subleases space therein to persons who operate stores and restaurants.

6. The Declaration contains the following provisions:

(a) Under XXXXX, each owner is to have an undivided interest in the common elements of the Condominium as a tenant in common with all other owners and the owner is to contribute to the common expenses in the proportion set out in XXXXX to the Declaration. iiFootnote 2

(b) Under XXXXX, the Corporation is to repair and maintain the common elements of the Condominium at its own expense. Under XXXXX, each owner is to pay the Corporation the owner's proportionate share of the common expenses of the Corporation. The common expenses are set out in XXXXX to the Declaration.

(c) Under XXXXX, the Corporation is to enter into an agreement (the Reciprocal Agreement) with XXXXX that provides, among other things, for the sharing of costs for the operation and management of the shared facilities, including making all payments thereunder. XXXXX provides that "Shared Facilities" means the portion of the common elements of the Condominium which are subject to the provisions of the Reciprocal Agreement between the Corporation and XXXXX.

7. The Reciprocal Agreement, dated XXXXX, was entered into between XXXXX and the Corporation and contains the following provisions:

(a) The recitals provide that XXXXX and the Corporation are entering into the agreement for the purposes of providing for the mutual use, maintenance and cost sharing of the common interior roadways, outdoor pedestrian walkways and shared utility and service easements which will serve and benefit both the Corporation and the Retail Portion, i.e., that part of the property whose leasehold interest is owned by XXXXX.

(b) XXXXX lists a number of easements, rights and rights in nature of easements that the Corporation and XXXXX grant to each other which provide for the mutual use and maintenance of interior roadways, pedestrian walkways and other areas such as the loading dock. For example, under XXXXX grants the Corporation, owners of units in the Condominium and any occupants of the Residential Portion the right to use XXXXX (XXXXX owns the leasehold interest for these Parts) for the purposes of a loading dock.

(c) Under XXXXX, XXXXX is responsible for making any repairs to the Retail Portion and the Corporation is responsible for making any repairs to the Condominium. Further, XXXXX and the Corporation are each responsible for governing and arranging for the maintenance, operation, replacement and inspection of the Required Easements situated on each of their respective properties (i.e., the Retail Portion for XXXXX and the Condominium for the Corporation). iiiFootnote 3 In the event that either party fails to perform such maintenance, operation, replacement or inspection, the other party may undertake the work and the cost of such is to be borne in accordance with the agreement.

(d) Under XXXXX, XXXXX, the Corporation and the owners of units in the Condominium agree that the Shared Facilities are for the benefit of both the Condominium and the Retail Portion and are to be operated, maintained, repaired, improved, altered, and replaced only in accordance with the manner set out in the agreement. ivFootnote 4

(e) The Shared Facilities are defined in XXXXX as those portions of the Building that are for use by both XXXXXand the Corporation in accordance with XXXXX of the agreement, regardless of who actually owns the leasehold interest in the facility. The Building is defined in XXXXX to mean the Residential Portion, as defined in XXXXX, and the "Retail Portion", as defined in XXXXX. The Residential Portion means the Lands (i.e., XXXXX) together with the Condominium, while the Retail Portion means the Lands together with that part of the building whose leasehold interest is held by XXXXX. As such, the Shared Facilities purportedly include such areas as the common interior roadways, outdoor pedestrian walkways, and the utility easements, all as identified in the recitals, in addition to the areas set out in Fact #7(f). (Footnote 5)

(f) Under XXXXX, the Shared Facilities include the Transformer Rooms and the Electrical Room, which form part of the Condominium. Under XXXXX, the Shared Facilities include the Loading Area (which we assume refers to the Loading Dock described in XXXXX), the Garbage Room and the Emergency Generator, all of which form part of the Retail Portion.

(g) Under XXXXX, XXXXX and the Corporation agree to share the costs of operating and maintaining the Shared Facilities and Required Easements in accordance with the cost sharing formula set out in XXXXX. We note that there is no formula, per se, in XXXXX, only an indication that XXXXX's share is XXXXX% of the "Total Cost" (that phrase is not defined) of certain property and services and the Corporation's share is XXXXX% of the Total Cost. Under XXXXX unless otherwise provided under the agreement, XXXXX is responsible for maintaining and paying all costs in connection with the Retail Portion and the Corporation is responsible for maintaining and paying all costs in connection with the Condominium.

(h) Under XXXXX, in using the Shared Facilities and Required Easements, XXXXX and the Corporation are each responsible for any damages they cause to the property of the other person.

(i) XXXXX provides that an agency relationship between XXXXX and the Corporation is not created under the agreement.

(j) XXXXX provides that a failure by the Corporation or XXXXX to pay its share of the costs related to the Shared Facilities may lead to the suspension of its enjoyment of all easements, rights or privileges and where such failure covers a period of twelve (12) months it may lead to the termination of all easements, rights and privileges provided for under the Reciprocal Agreement.

8. You indicated that the Corporation generally pays the costs with respect to the Shared Facilities and recovers a portion of those costs from XXXXX. You provided the following example of a cost with respect to the operation of the Shared Facilities. The Corporation has an account with a supplier and receives an invoice from the supplier in respect of services supplied in relation to the Shared Facilities. The Corporation pays the full amount invoiced by the supplier and then issues a statement to XXXXX for its share of the cost, including GST/HST, based on the proportion set out in XXXXX to the Reciprocal Agreement. The Corporation attaches a copy of the supplier's invoice to the document it sends to XXXXX. The Corporation does not claim any input tax credits (ITCs) in respect of the tax paid to the supplier, nor does it remit any tax on any part of the payment received from XXXXX.

9. The Corporation is not registered for GST/HST purposes. XXXXX is registered for GST/HST purposes.

Rulings Requested

You would like to know the following.

1. Does an agency relationship exist between the Corporation and XXXXX with respect to the costs incurred by the Corporation relating to the Shared Facilities?

2. Can the Corporation remain a non-registrant?

3. Is the Corporation's current procedure for passing on invoices from suppliers sufficient to enable XXXXX to claim ITCs with respect to the GST paid on Shared Facility costs?

Rulings Given

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

1. The Corporation is making a taxable supply of real property by way of lease, licence or similar arrangement to XXXXX in respect of the Shared Facilities for which the leasehold interest is owned by the Corporation and certain amounts payable by XXXXX to the Corporation under the Reciprocal Agreement are consideration for the supply.

2. The Corporation is required to register for the GST/HST unless it is a small supplier.

3. Where the Corporation is not a small supplier, the Corporation is required to charge and collect GST is respect of taxable supplies of real property and provide XXXXX with the necessary documentation to enable XXXXX to claim ITCs in respect of the GST payable for those supplies.

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

EXPLANATIONS
Ruling 1

We are unable to conclude that the Corporation is an agent of XXXXX in respect of paying certain costs of the Shared Facilities. Information with respect to the issue of agency is included below under the heading "Interpretation Given". However, we would like to address the fact that the Corporation is making supplies of real property by way of lease, licence or similar arrangement to XXXXX.

It is important to note that the Reciprocal Agreement does not provide for the sharing of costs incurred in respect of real property whose leasehold interest is owned jointly by the Corporation and XXXXX. Any leasehold interests in the Project, at least with respect to the leasehold interests relevant to our response, are owned by either the Corporation or XXXXX, not by both. As such, when the Corporation grants XXXXX the easements, rights and rights in the nature of easements, as is provided in XXXXX of the Reciprocal Agreement, the Corporation is making a supply of real property to XXXXX. As there are no exemptions for such supplies, the supplies are subject to tax. We view that portion of the costs that XXXXX is required to pay the Corporation for maintaining, operating, repairing, replacing and inspecting the Shared Facilities whose leasehold interest is held by the Corporation as consideration for the Corporation's supply of real property.

For example, the Transformer Rooms and Electrical Room form part of the Condominium (i.e., the rooms form part of the real property whose leasehold interest is owned by the Corporation). Nonetheless, these rooms form part of the Shared Facilities and the Corporation has granted XXXXX the rights to access and use these rooms. If the Corporation incurs a maintenance expense of $XXXXX for these rooms, XXXXX is required to pay $XXXXX (XXXXX% of $XXXXX) to the Corporation. We view this $XXXXX as consideration for the taxable supply of the right to use the rooms made by the Corporation and XXXXX is required to pay the GST to the Corporation in respect of this amount.

Where an agency relationship does not exist and the Corporation makes a taxable supply to XXXXX, before claiming an ITC, XXXXX must obtain sufficient evidence that enables the amount of the ITC to be determined, including the information prescribed in the Input Tax Credit Information (GST/HST) Regulations (the Regulations).

Ruling 2

If the Corporation is making taxable supplies it will generally be required to register pursuant to subsection 240(1). In general, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for GST/HST purposes.

A "commercial activity" of a person, as defined in subsection 123(1), includes a business carried on by the person, or an adventure or concern of the person in the nature of trade, except to the extent it involves the making of exempt supplies by the person. It also includes making a supply (other than an exempt supply) of real property, including anything done by the person in the course of or in connection with the making of the supply.

One exception to the registration requirement is for a person who is a small supplier. A person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies, including zero-rated supplies, made by the person (or an associate of the person at the beginning of the particular calendar quarter) that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000 or, where the person is a public service body, $50,000. The calculation excludes consideration attributable to the sale of goodwill of a business, supplies of financial services, and supplies by way of sale of capital property.

However, a person ceases to be a small supplier at any time in a calendar quarter if the total value of the consideration that becomes due, or is paid without becoming due, in that quarter for world-wide taxable supplies made by the person, or an associate of the person at the beginning of the calendar quarter, exceeds $30,000 or, if the person is a public service body, $50,000. The person ceases to be a small supplier immediately before the consideration becomes due or is paid for the particular taxable supply that puts the person over the $30,000, or $50,000 for a public service body, small supplier threshold.

Interpretation Given

As stated in GST/HST Policy Statement P-182R, Agency, the position of the CRA is that, for GST/HST purposes, a person is an agent with respect to a particular transaction if that person is an agent based on a determination of fact and an application of the principles of law, certain of which are set out in the policy statement. The policy statement sets out the three essential qualities of an agency relationship, discusses its fiduciary nature, and lists a number of indicators and questions to consider in determining whether a particular relationship is one of agency.

In a true agency relationship it should be evident that a person acting in the capacity of agent has been given the authority to affect the principal's legal position. The most common example of the ability to affect a principal's legal position is where the agent is authorized to enter into contracts with third parties on behalf of the principal.

In a relationship of agency, it should be clear that the principal has a degree of control over the actions of the agent; the agent would be acting as an extension of the principal and, therefore, would be under the principal's general direction and control. This is sometimes evidenced by requiring the principal's approval for certain expenditures.

The Reciprocal Agreement does not establish, on its own, that an agency relationship exists between XXXXX and the Corporation, either generally or in respect of any particular transaction. There is no indication that XXXXX has granted the Corporation the authority to affect its legal position. In addition, the fact that the parties have expressly indicated that they did not intend to enter into an agency relationship, while not determinative, cannot be ignored. It is our view that the essential qualities of agency have not been demonstrated.

Where an agency relationship does not exist between parties, the agreement between the person(s) and the third party from whom the acquisition is made should be examined to determine who the recipient of the supply is. In certain situations, all of the cost-sharing principals may be parties to an agreement for a particular acquisition and all could be recipients. In this case, each would be considered to have paid GST/HST on their respective portion of the purchase, notwithstanding that one party makes the actual payment. If one party alone enters into an agreement for the acquisition, then it alone is the recipient (i.e., the person who is liable to pay the consideration for the supply) of the initial supply from the third party.

Where an agency relationship is not established, the allocation of costs under a cost-sharing arrangement may result in the imposition of the GST/HST when one party pays the other party.

To the extent that the Corporation is incurring and paying expenses with respect to property for which it owns the leasehold, the Corporation is acting on its own behalf and not as agent for XXXXX. To the extent that the Corporation pays a supplier with respect to property for which XXXXX owns the leasehold, the Corporation may be paying such amounts as an agent of XXXXX.

If XXXXX is the owner of a unit in the Condominium, the payment of common expenses by the Corporation would not be made as an agent of XXXXX. However, the amount that XXXXX pays to the Corporation as condominium fees, which are in respect of the common expenses, may be in respect of an exempt supply. Section 13 of Part I of Schedule V to the ETA, in part, exempts a supply of property or a service made by a condominium corporation to the owner of a residential condominium unit described by the condominium plan if the property or service relates to the occupancy or use of the unit.

In any situation, where a person acts as agent on behalf of another person (principal) in acquiring or importing property or services, it is the principal who is liable to pay the consideration in respect of the supply, and therefore, is the recipient of the supply. As a result, even if the agent pays the consideration and tax on behalf of the principal, it is the principal who may be entitled to claim an ITC in respect of the tax payable.

Generally, subsection 169(1) provides that each registrant principal/recipient is entitled to claim an ITC for the tax that becomes payable by the principal/recipient to the extent to which the principal/recipient acquired or imported the property or services for consumption, use or supply in the course of its commercial activities. However, subsection 169(4) provides that a registrant principal/recipient cannot claim an ITC until it has obtained sufficient evidence in such form containing such information as will enable the amount of the ITC to be determined, including any such information prescribed under the Regulations. Such evidence might include invoices, written agreements, letters or other supporting documentation. Finally, it should be noted that the Regulations provide that instead of the recipient's name being shown on invoices of $XXXXX or more, the name of the duly authorized agent or representative may be shown, for example, when supplies of property or services have been acquired or imported under the agent's or representative's name.

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

i 1. XXXXX.

ii 2. XXXXX.

iii 3. XXXXX.

iv 4. XXXXX.

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Text of Severed Letter

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

Case Number: 101768
Attention: XXXXX
March 10, 2009

Subject:

GST/HST RULING
Supplies made by XXXXX to XXXXX

Dear XXXXX:

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

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

Statement of Facts

We understand the facts as follows:

1. XXXXX is in the business of supplying computerized axial tomography (CT) and magnetic resonance imaging (MRI) diagnostic services and has been granted licences by the XXXXX to provide such services to the public through XXXXX facilities located in XXXXX.

2. XXXXX has been granted separate licences for the operation of each facility.

3. XXXXX has also entered into an equal number of service agreements with the XXXXX to provide CT and MRI diagnostic services to the public, for which the XXXXX will remunerate XXXXX.

4. On XXXXX and XXXXX, XXXXX was granted such licences and entered into such service agreements to provide CT and MRI diagnostic services through XXXXX facilities (Facilities) located in XXXXX, respectively.

5. From that time until XXXXX, XXXXX made supplies of CT and MRI diagnostic services through the Facilities.

6. The supplies of CT and MRI diagnostic services supplied to the public by XXXXX through the Facilities were made on the order of a medical practitioner in all instances.

7. On XXXXX, XXXXX entered into an XXXXX with XXXXX, whereby it sold, assigned and transferred the licences issued to it by the XXXXX for the operation of the Facilities to XXXXX These licenses are listed in XXXXX of this agreement.

8. Pursuant to the XXXXX, all billings for imaging services rendered at the Facilities on or after the closing date of XXXXX or other closing date as determined by the parties belong to XXXXX and XXXXX will remit all payments for such billings received by the XXXXX to XXXXX.

9. The XXXXX also provides that as of the opening of business on the closing date, XXXXX will enter into separate subleases with XXXXX for each of the Facilities. The rent charged by XXXXX to XXXXX will be based on the rent, including taxes and operating costs that XXXXX pays to the head landlord.

10. XXXXX remains the operator of the remaining XXXXX facilities in XXXXX.

11. On XXXXX, XXXXX also entered into a XXXXX (Agreement) with XXXXX to manage the provision of CT scans and MRI services at the Facilities, including the general operation and management thereof. This Agreement refers to XXXXX as the "Service Provider" and XXXXX as the "Operator".

12. Under the Agreement, the Operator XXXXX is entitled to provide CT scans and MRI services to the public according to the terms of the XXXXX agreements. The Operator has engaged and retained the Service Provider XXXXX to perform CT scans and MRI services at the Facilities and the actions and services that are constituent elements thereof and to operate and maintain the Facilities in accordance with standards established by the XXXXX, with the terms of the Licenses and with the terms and conditions hereof. The scope of services performed by the Service Provider are enumerated in XXXXX and include:

(a) Provision of efficient and competent staff to perform CT scans and MRI services and to operate the Facilities;
(b) Quality assurance and quality management programmes to ensure compliance with standards established by the XXXXX to minimize radiation risks and maximize quality of diagnostic information;
(c) Provision of imaging equipment necessary to provide CT scans and MRI services and to operate the Facilities;
(d) Oversight and administration of the Operator's relationship with the XXXXX, including billing to the XXXXX pursuant to the terms of the XXXXX agreements;
(e) Preparation, maintenance of medical records and submission of documents or records for use in programs administered by the XXXXX;
(f) All administration, bookkeeping, accounting and reporting relating to the provision of CT scans and MRI services at the Facilities, including reporting and records;
(g) Cleaning and janitorial supplies and services; and
(h) All other actions necessary for the operation of the Facilities and the provision of CT scans and MRI services to the public.

13. Under the Agreement, XXXXX, as the Operator of the Facilities, will be the lessee of the Facilities, as well as the equipment within the Facilities used by XXXXX.

14. Under the Agreement, XXXXX, as the Service Provider, will select, train and employ at the Facilities such number of employees as necessary. All employees at the Facilities, including employees performing CT scans and MRI services, will be employees of XXXXX. The supervision and control of employees, as well as all compensation and benefits, is the sole responsibility of XXXXX.

15. You advised that on XXXXX, XXXXX entered into an agreement with XXXXX, whereby it assigned to XXXXX the service agreements it entered into with the XXXXX for the provision of CT and MRI diagnostic services to the public through the Facilities.

16. Effective XXXXX, XXXXX commenced making supplies of CT and MRI diagnostic services through the Facilities.

17. The supplies of CT and MRI diagnostic services through the Facilities are made by XXXXX to the public on the order of a medical practitioner in all instances.

18. Members of the public requesting CT or MRI diagnostic services through the Facilities must provide an order from a medical practitioner to receive these services.

19. XXXXX will have the right to install and maintain signs displaying its name outside each of the Facilities, notwithstanding the fact that XXXXX is the Operator of the Facilities. However, XXXXX must be identified as the licensee under the licenses on all signage.

20. XXXXX will pay XXXXX a monthly "Services Fee" for the services provided, which are described in Fact 12.

Ruling Requested

You would like to know whether the services supplied by XXXXX, which are described in Fact 12, to XXXXX under the Agreement are exempt under section 10 of Part II of Schedule V.

Ruling Given

Based on the facts set out above, we rule that the services supplied by XXXXX, which are described in Fact 12, to XXXXX under the Agreement are taxable because they are elements of a single composite supply under a general contract for the operation and maintenance of the Facilities. As explained below, this supply is not exempt under section 10 of Part II of Schedule V.

Explanation

Section 10 of Part II of Schedule V exempts a supply of a prescribed diagnostic, treatment or other health care service rendered to an individual if made on the order of:

• a medical practitioner or practitioner; or
• a registered nurse authorized under the laws of a province to order such a service if the order is made within a nurse-patient relationship.

Please note that this section was amended to include prescribed diagnostic services that are ordered by registered nurses. This amendment was announced by the Minister of Finance on February 26, 2008. This amendment received Royal Assent on June 18, 2008 and it applies to supplies made after February 26, 2008. Thus prior to February 27, 2008, prescribed diagnostic services for individuals were taxable when ordered by a registered nurse.

For purposes of section 10 of Part II of Schedule V, a prescribed health care service is described in the Health Care Services (GST/HST) Regulations (Regulations) to mean a laboratory, radiological or other diagnostic service generally available in a health care facility and it includes the administration of drugs, biologicals or related preparations provided in conjunction with these diagnostic services. However, a service related to the provision of a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes is excluded from the Regulations.

The exemption in section 10 of Part II of Schedule V is limited to the services described in the Regulations. The phrase "laboratory, radiological or other diagnostic services generally available in a health care facility" in the Regulations is held to mean a test, study or investigative and analytical procedure, together with the report of findings, used to assist in the determination of a disease that are of the type generally available in a health care facility (a hospital). These services are laboratory diagnostic services such as in vitro diagnostic testing, serological testing, urinalysis, and microscopic analysis; radiology and other diagnostic imaging services such as X-ray, CT scans, MRI, mammography and ultrasound; and diagnostic services such as fluoroscopy, echocardiography, electrocardiography, and electromyography.

As you noted, the first step in determining the tax status of the transaction made between XXXXX and XXXXX under the Agreement is to determine whether the various elements enumerated in the Agreement are regarded as a single supply or multiple supplies. This determination is made pursuant to the common law principles of single supply and multiple supplies.

The common law principles of single supply and multiple supplies are described in GST/HST Policy Statement P-077R2, Single and Multiple Supplies. In applying these principles, one must consider factors such as the interrelationships among the various elements of the transaction as well as the purpose of a transaction and the needs of the customer. The distinction between whether an agreement is in relation to a transaction involving a single supply or multiple supplies is important where some goods or services would be taxable at 5% or 13% and some would be exempt from the GST/HST if supplied separately.

Please note that in deciding questions pertaining to the liability of a supplier to collect the GST/HST, the manner in which parties to transactions choose to label themselves or to label the supplies does not necessarily govern. Generally, the ETA applies to the effects produced by contracts. What must be done is to evaluate the legal form of the transaction and the legal relationships and obligations between the parties based on the evidence of written contracts and all applicable facts to determine the character of the transaction and render a decision accordingly.

We agree with your conclusion that the Agreement is a transaction involving a single supply. However, we find that the substance of the Agreement represents a transaction involving a single composite supply of the operation and maintenance of the Facilities. Our finding is based on careful consideration of the facts including the obligations of XXXXX under the Agreement, XXXXX being the licensee in respect of the provision of diagnostic services, the legal relationship between XXXXX and XXXXX, as well as the scheme of the ETA and common law principles of single supply and multiple supplies.

The characterization of XXXXX supply requires identifying its elements. The elements of this supply include the performance of CT scans and MRI services, in addition to human resource activities including selecting, training and employing staff, providing equipment, management and administrative services such as preparing financial statements and budgets, bookkeeping, accounting, reporting, and cleaning and janitorial services necessary to operate and maintain the Facilities. The purpose and economic reality of the Agreement is for XXXXX to supply all the necessary goods and services to operate and maintain the Facilities. There is more than a diagnostic service rendered to an individual paid for in the Agreement. The management and administrative elements are of substantial relevance in the general operation and maintenance of the Facilities, which is what XXXXX is purchasing. Their value leads to the conclusion that the management and administrative elements are not minor or ancillary to diagnostic services nor are they inputs to a diagnostic service rendered to an individual.

As you indicated, XXXXX of the Agreement provides that XXXXX XXXXX Thus we agree with your statement that this clause indicates that the primary intention of the Agreement is for the day-to-day operation of the Facilities by XXXXX.

Under the ETA a composite supply is not defined by any one of its elements, and in our view it would be arbitrary to do so. Rather, a composite supply is defined by the sum of its elements. In the case at hand, the various actions and services are elements of the supply of something new that is not a prescribed diagnostic service rendered to an individual. The single composite supply made by XXXXX is taxable because the Agreement is a general contract for the operation and maintenance of the Facilities.

Accordingly, we do not agree with your suggestion that the supply made by XXXXX is that of a prescribed diagnostic service that is exempt under section 10 of Part II of Schedule V and that the services supplied by XXXXX to XXXXX share the same fundamental elements as the diagnostic services provided by XXXXX for which it receives funding from the XXXXX As support for your suggestion, you noted that operators of facilities that are licensed under the XXXXX are funded for costs associated with the provision of licensed services, either on a fee-for-service basis or under an approved annual budget. The XXXXX payment of such costs is authorized under

XXXXX which provides that the XXXXX may pay all or part of the capital costs or operating costs of XXXXX health facility or of the costs of the services provided in XXXXX health facility according to the method of payment approved by the XXXXX.

The nature of the supplies made by XXXXX to XXXXX is not comparable to the nature of XXXXX activities that are funded by the XXXXX for diagnostic services provided to the public. The authority XXXXX under which the XXXXX funds operators of facilities for the costs of licensed services does not serve to characterize XXXXX supplies made to XXXXX nor is it determinative that XXXXX is making a supply of a prescribed diagnostic service to XXXXX. Rather, the nature of the supply made by XXXXX is determined with reference to the Agreement, which describes what it is contracted to supply to XXXXX as well as the legal form of the transaction and XXXXX legal relationship with XXXXX. As explained above, such a determination also considers the scheme of the ETA and the common law principles of single supply and multiple supplies.

In conclusion, the facts are determinative that XXXXX role is to provide the staffing, equipment, management and administrative services so that XXXXX may provide diagnostic services to the public. The performance of CT scans and MRI services are an essential part but nonetheless only a component part of what is, as a matter of economic reality, a single composite supply under a general contract for the operation and maintenance of the Facilities by XXXXX.

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

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ETA Sch VI, Part III, 1

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 101883R
Attention: XXXXX
XXXXX
December 10, 2009

Dear XXXXX:

Subject:

GST/HST RULING
XXXXX - Whether an Ingredient or a Dietary Supplement

Thank you for your letter of XXXXX, and accompanying documents, in which you requested that we reconsider our ruling issued to XXXXX, regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX. We apologize for the delay in responding to you.

Statement of Facts

Our understanding of the facts is as described in our ruling letter of XXXXX. We also considered the following additional statements submitted in your reconsideration request.

1. XXXXX.

2. XXXXX are found in the human gastrointestinal tract attesting to the ability to digest XXXXX.

3. The presence of XXXXX attests to the essential nutritional nature of this XXXXX.

4. XXXXX is used as a XXXXX.

5. Unlike XXXXX, the XXXXX are entirely man-made.

6. The XXXXX are either bitter or salty tasting and do not enhance the taste of food.

Ruling Requested

In light of these new facts and the comments in your letter, you asked that we reconsider our ruling of XXXXX, in which we ruled that XXXXX is not a food or ingredient for GST/HST purposes and is subject to GST at 5% or HST at 13%.

Ruling Given

Based on the statements and facts set out above and in our ruling of XXXXX, we confirm our ruling that XXXXX is not a food or ingredient for GST/HST purposes and is subject to GST at 5% or HST at 13%.

Explanation

Having carefully considered the additional information and comments provided in your letter and accompanying documents, our position regarding the application of GST/HST to XXXXX remains as outlined in our ruling letter of XXXXX. To the considerations already addressed in the explanation of our previous ruling letter, we add the following.

In your letter of XXXXX, you provided comments regarding Fact number XXXXX of our ruling of XXXXX, as if these paragraphs presented arguments. These paragraphs are found under the subtitle "Statement of facts" and are not arguments: they merely indicate facts. We reexamined the facts contained in these paragraphs and we concluded that they were accurate.

Paragraph 148 of GST/HST Memorandum 4.3, Basic Groceries, states that products commonly referred to as dietary supplements are consumed for their therapeutic or preventative effects (e.g., to correct actual or perceived health problems), or to achieve specific beneficial effects related to performance or physique. Also, it states that products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI. As such, these products are taxable.

The labeling, packaging and marketing criteria set out in GST/HST Memorandum 4.3 are aimed at determining the intention of the consumer in acquiring a product. They are guides to answer the following questions: how does the consumer perceive the product, and for what reason is the consumer acquiring it? It is from applying the labeling, packaging and marketing criteria that we can determine whether the consumer is acquiring the product for its "therapeutic or preventative effects" or rather as an ingredient. This is the only determination we have to make in this case.

In making that determination, we applied the labeling, packaging and marketing criteria to the facts of the case, and in the explanation of our previous ruling letter, outlined certain factors that led us to our conclusion. In your letter of XXXXX, you provided comments on each of these elements and expressed the opinion that each applied separately or in isolation did not permit us to conclude that XXXXX was a dietary supplement.

As noted in paragraph 155 of GST/HST Memorandum 4.3, no one factor is determinative of the nature of the product. In identifying the impression of the average consumer, one must look at all factors together and consider the context and interaction of those factors. Using this approach, as we did in arriving at our previous ruling, our position continues to be that the labeling, packaging and marketing criteria considered together provide an overall indication that XXXXX is a dietary supplement XXXXX.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4397.

Yours truly,
Chris Lewis
Manager
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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ETA 123(1) commercial activity

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

Case Number: 102654
Business Number: XXXXX

July 10, 2009

Dear XXXXX

Subject:

GST/HST RULING
GST status of Finder's Fee on Private Placements of Shares

In your letter of XXXXX you requested that we review our ruling issued XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your supplies of services for which the consideration is a finder's fee. We apologize for the delay in providing you a response.

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

As part of our review of the above noted ruling, we have also carefully considered and thoroughly reviewed the information and various documents provided by you including the following:

• your letters of XXXXX;
• the blank sample Finder's Fee Agreement (standard FFA);
• the blank XXXXX including XXXXX and related correspondence to that placement;

• various signed agreements between XXXXX and the following persons:

- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX;
• a letter agreement issued by XXXXX confirming payment of a finder's fee to you XXXXX;
• a letter from XXXXX referring to a payment of the finder's fee earned in connection with a recent private placement;
• a list of XXXXX invoice numbers for finder's fees related to private placement offerings; and
• various correspondences between you and certain corporations seeking financing through private placements (Issuers).

Statement of Facts

Based on the information provided including during various telephone conversations with you, we understand the following:

1. You are registered for GST/HST purposes XXXXX. According to our records, your business activity includes XXXXX.

2. You are a Canadian resident.

3. In XXXXX, you extended your business to act as a finder of "accredited investors" for corporations that are issuers of a "private placement" offering.

• "Accredited investor" refers to person who meets the definition of "accredited investor" as defined in Part 1.1 of National Instrument 45-106 entitled "Prospectus and Registration Exemptions" implemented by the Canadian Securities Administrators.

• "Private placement" refers to an issuance from treasury of securities for cash without Prospectus disclosure, in reliance on one or more of the exemptions under applicable Securities Laws, including the issuance of shares for debt, acquisition, take-over bid or offering by a Short Form Offering Document.

4. To act as a finder, you research and may correspond with companies to find investing opportunities that meet the objective criteria of your investors in order to identifying an issuer in need of financing and ascertain the dollar amount sought, timeline, share price, warrant price and other terms of the offering. Once an issuer has been identified, you discuss the specific terms of the financing and negotiate a finder's fee with the issuer.

5. Once you have an accredited investor or accredited investors interested in the suggested terms provided by a specific issuer, the issuer will forward a blank subscription agreement for each potential investor with the signed Finder's Fee Agreement.

6. In all XXXXX private placement transactions, you have forwarded, either by email, fax or in person, the applicable blank subscription agreement to the accredited investor(s). Prior to forwarding the subscription agreement, you review the agreement to ensure that the terms and conditions are as agreed. Where you have found errors, you have taken steps to have these errors corrected. You are not contractually obligated to the issuer or an investor to carry out these activities.

7. You communicate with the investors to facilitate timely delivery of funds and executed subscription agreements to the appropriate issuer. XXXXX.

8. XXXXX.

9. The Finder's Fee Agreements (based on the standard FFA) entered into between the Issuer and you (the Finder) provides, in part:

• XXXXX.

• XXXXX:

- XXXXX

• XXXXX.

10. The Finders Agreement dated XXXXX between you (XXXXX) and XXXXX XXXXX. (XXXXX) (XXXXX) states that it is to confirm the agreement of the parties regarding finder's fees which may be payable to you in respect of private placements (XXXXX) by XXXXX of its securities to accredited investors (Investors) introduced to XXXXX by you and provides, in part:

• XXXXX.

• XXXXX:

- XXXXX.

• XXXXX.

11. The Finder's Agreement dated XXXXX between you (XXXXX) and XXXXX states that it is to confirm the agreement of the parties regarding finder's fees which may be payable to you in respect of private placements (XXXXX) by XXXXX of its securities to accredited investors (Investors) introduced to XXXXX by you and provides, in part:

• XXXXX.

• XXXXX:

- XXXXX; and
- XXXXX.

• XXXXX.

12. XXXXX.

13. XXXXX.

14. Since XXXXX, you have been charging GST on your supplies of services for which the consideration is a finder's fee.

15. You are not a licensed securities broker, dealer, or investment advisor XXXXX.

16. XXXXX.

Ruling Requested

You would like to know if the supply of your services as a finder is an exempt supply of a financial service.

Ruling Given

Based on the facts set out above, we rule that the supply of your services to an issuer of a private placement offering for which the consideration is a finder's fee is taxable for purposes of the GST/HST.

Explanation

The GST/HST is a transaction based tax and for each transaction the supplier must determine whether GST/HST is applicable.

In order to determine the tax status of a particular supply, it is necessary to consider what the supplier provided for the consideration received. In doing so, it is also necessary to consider what the parties to the supply transaction agreed to in the context of the recipient's needs. Where a supply and the obligations and entitlements related to the transaction are provided for under a written agreement between the parties to the particular transaction, it is based on that agreement on which the tax status of a particular supply will be determined for purposes of issuing a ruling.

Supplies provided by you to issuers of private placement offering are provided for under a written agreement. Under these agreements you agree to identify and introduce to an issuer accredited investors as defined in Part 1.1 of National Instrument 45-106 from whom the issuer may secure private financing and the issuer agrees to pay you a finder's fee upon completing its financing transaction with the investor. We are confirming our ruling issued XXXXX. This is a taxable supply and is not a supply of "arranging for" the supply of a financial service.

Based on the documentation you have provided and as set out in the above statement of facts, you also provide a number of services to the investors which you introduce to the issuers, however, these investors do not pay you a fee for your services. Generally, no GST/HST is payable where there is no fee paid for a supply. There are certain exceptions when the parties are not dealing at arm's length with respect to a taxable supply. In determining the tax status of the supplies you provide to these investors, you may wish to refer to GST/HST Policy Statement P-239, Meaning of the term "arranging for" as provided in the definition of financial service.

Additional Information

Section 169 of the ETA sets out the general rules for determining a registrant's eligibility to claim input tax credits (ITCs). It provides that, where a person acquires or imports property or a service or brings it into a participating province and during a reporting period of the person in which the person is a registrant, the GST/HST in respect of property or service becomes payable by the person or is paid by the person without having become payable, that person may be eligible to claim an ITC in respect of the tax to the extent (expressed as a percentage) the property or service was acquired, imported or brought into a participating province for consumption, use or supply in the course of the person's commercial activities.

The definition of "commercial activity" of a person in subsection 123(1) of the ETA includes a business carried on by the person (other than a business carried on without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the business involves the making of exempt supplies by the person.

For further information on ITCs, please refer to GST/HST Memorandum 8.1, General Eligibility Rules.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9210. 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,
M. Dawn Weisberg
Manager, Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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ETA 123(1) residential complex, ETA 136(2), ETA 191, ETA 195.1, ETA 206, ETA 221(2), ETA 261, ETA Sch. V, Part I, 6, ETA Sch. V, Part I, 6.1, ETA Sch. V, Part I, 6.11

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

Case Number: 103912
Attention: XXXXX

Subject:

GST/HST RULING
Lease of Long-term Care Facilities

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain lease payments made by XXXXX (OPCO) and the application of the legislative changes made further to Budget 2008 which was announced on February 26, 2008.

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

Statement of Facts

We understand as follows:

1. OPCO is registered for GST/HST purposes.

2. Prior to XXXXX, OPCO purchased, or entered into agreements to purchase, XXXXX parcels of real property in XXXXX and began construction of a long-term care facility on XXXXX of the parcels. The facilities are located in XXXXX and XXXXX, and are referred to in this letter, in the singular, as "a Facility", and in the plural as "the Facilities". Where reference is made to a particular facility, the facility is referred to by its location.

3. OPCO paid GST on various construction inputs and claimed input tax credits (ITCs) with respect to the tax payable on these inputs.

4. On XXXXX, OPCO sold all of its interests in the parcels of real property to XXXXX (LESSOR).

5. OPCO did not collect GST in respect of the sale of the land that formed part of each long-term care facility on the understanding that LESSOR was responsible for paying the tax directly to the Canada Revenue Agency (CRA) iFootnote 1. However, OPCO collected GST from LESSOR in respect of the partially constructed buildings on the parcels at the time of the sale.

6. LESSOR completed, or engaged others (including OPCO) to complete, the construction of each Facility.

7. LESSOR then leased each Facility to OPCO, beginning on a specified date, which was based on the completion date of each Facility. Each lease agreement called for monthly lease payments to be made in arrears on the last day of each month for the term of the respective lease.

8. XXXXX of the Facilities (XXXXX) are nursing homes licenced under the XXXXX (XXXXX). All supplies made by OPCO at these Facilities that include the provision of a room in the Facility were made under a Resident Admission Agreement.

9. The other XXXXX Facilities (XXXXX) provide nursing home beds in one part of the building which is licenced as a nursing home under the XXXXX and also supplied by OPCO under a Resident Admission Agreement. The other separate part of the building is used by OPCO to provide assisted living units. This part of the building is not licenced as a nursing home and is instead governed by the XXXXX. Supplies of the assisted living units by OPCO are made under a Tenancy Residency Agreement.

10. Under the Tenancy Residency Agreement, a tenant is entitled to receive the elements listed under "Residential Facilities" in XXXXX to the agreement. Section XXXXX of the agreement provides that an amount (Accommodation Fee) is payable by the tenant for those elements. The tenant also has the option to receive the "Care Services" set out in XXXXX to the agreement. If the tenant chooses to receive the Care Services, an additional amount, over and above the Accommodation Fee is payable. This additional amount is set out in section XXXXX of the agreement as the XXXXX Fee.

11. LESSOR charged and collected the GST on the lease payments made by OPCO for all of the Facilities for all lease intervals ending prior to February 29, 2008. OPCO did not claim ITCs in respect of the tax paid to LESSOR in respect of the lease payments.

12. OPCO is not a "public service body" as that phrase is defined in subsection 123(1).

13. LESSOR has not made an election under section 236.4 in respect of any of the Facilities.

14. LESSOR is registered for GST/HST purposes.

15. LESSOR and OPCO did not make any improvements to the Facilities or additions to the Facilities after the construction of each Facility was complete.

16. OPCO did not apply for any rebates under the ETA for all, or any part, of the GST paid in respect of the lease payments.

Ruling Requested

You would like to know whether OPCO can adjust its previously filed GST/HST returns to receive credit for the amount of GST it paid to LESSOR in respect of the lease payments that were made prior to February 29, 2008, for all of the Facilities.

Ruling Given

Based on the information provided, we rule that the supplies made by LESSOR of the following Facilities: XXXXX, by way of lease, are taxable supplies where the lease payment for the supply became due on or before February 26, 2008, or was paid on or before that date without having become due. OPCO is not permitted to adjust its previously filed GST/HST returns to receive credit for the tax paid to LESSOR in respect of these lease payments.

We also rule that the supplies made by LESSOR, by way of lease, of the parts, if any, of following Facilities: XXXXX, that do not form part of a residential complex as defined in subsection 123(1) are taxable supplies. OPCO is not permitted to adjust its previously filed GST/HST returns to receive credit for the tax paid to LESSOR in respect of the lease payments that relate to these parts of the XXXXX Facilities.

We also rule that the supplies made by LESSOR, by way of lease, of the parts of following Facilities: XXXXX, that are residential complexes, iiFootnote 2 are exempt supplies regardless of when the lease payments become due or are made. iiiFootnote 3 OPCO was not required to pay GST in respect of these lease payments.

We also rule that, subject to the time limitations and conditions of section 232, OPCO may seek a refund or credit of the amount paid by OPCO as or on account of tax with respect to LESSOR's exempt supplies to OPCO of the residential complex parts of the XXXXX Facilities. Alternatively, OPCO is entitled to claim a refund under section 261, subject to the time limitation for claiming this rebate, for the amounts paid as or on account of tax with respect to LESSOR's exempt supplies to OPCO of the residential complex parts of the XXXXX Facilities.

We also rule that the supplies made by LESSOR, by way of lease, of the parts of the Facilities that are residential complexes are exempt supplies where the lease payment for the supply becomes due after February 26, 2008, and was not paid on or before that date, or was paid after that date without having become due.

We also rule that the supplies made by LESSOR, by way of lease, of the parts, if any, of the Facilities that do not form part of a residential complex as defined in subsection 123(1) are taxable supplies where the lease payment for the particular supply becomes due after February 26, 2008, and was not paid on or before that date, or was paid after that date without having become due ivFootnote 4.

Explanation
Combined supply of a residential complex and other real property

Subsection 136(2) provides, in part, that where a lease of real property includes a residential complex and other real property that is not part of the residential complex, the residential complex and the other real property are deemed to be separate properties and the supply of each property is separate from the other, neither supply being incidental to the other.

A residential complex is defined in subsection 123(1) to include that part of a building in which one or more residential units are located, together with
(a) that part of any common areas and other appurtenances to the building, as well as land immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals, and
(b) that portion of the subjacent land that the residential units and related common areas represent of the entire building vFootnote 5.

It is a question of fact as to whether the lease of each Facility made by LESSOR to OPCO is a supply of a residential complex only or supplies of a residential complex and other real property that is not part of the residential complex. For example, any part of any Facility that is leased to a third party for the operation of a hair/barber shop would not form part of the residential complex. As discussed below, it is only the supply of the residential complex by way of lease that may be exempt under section 6.1, or new section 6.11, of Part I of Schedule V to the ETA. If the supply by LESSOR is that of a residential complex and other real property, the supply is deemed to be two separate supplies and the supply of the real property that is not a residential complex will not be exempt under section 6.1, nor under any other exempting provision, and will be subject to tax. We have not been provided with any information to conclude whether any part of any of the Facilities is not a residential complex. Should you require assistance with this determination, please provide us with a detailed description of the facility in question and the use of all area/rooms that are not residential units that are provided to residents under a Resident Admission Agreement or a Tenancy Residency Agreement.

OPCO's supplies to residents of a nursing home

Section 6 of Part I of Schedule V to the ETA, in part, exempts the supply of a residential unit in a residential complex by way of lease for the purpose of its occupancy as a place of residence by an individual, where the period throughout which continuous occupancy of the unit is given to the same individual is at least one month.

It is our view that the supply by OPCO to a resident made under a Resident Admission Agreement that includes a residential unit is not exempt under section 6 of Part I of Schedule V to the ETA viFootnote 6. Provided that the Resident Admission Agreement is representative of all admissions to the Facilities, or a part thereof, as the case may be, that are licenced as a nursing home under the XXXXX, we consider none of the supplies made under these agreements that include a residential unit to be exempt under section 6 of Part I of Schedule V to the ETA.

OPCO's supplies to residents of assisted living units

It is our view that the supply of the elements listed under "Residential Facilities" in XXXXX to the Tenancy Residency Agreement made by OPCO to a tenant of an assisted living unit at the XXXXX Facility is a single supply of a residential unit. Provided that the Tenancy Residency Agreement is representative of all admissions to assisted living units, OPCO's supplies of residential units made under these agreements at the XXXXX Facilities are exempt under section 6 of Part I of Schedule V to the ETA.

Head lease of the residential complex portion of a Facility prior to the amendments

With respect to supplies for which consideration became due on or before February 26, 2008, or was paid on or before that date without having become due, section 6.1 of Part I of Schedule V to the ETA provided, in part, that the head lease of a residential complex may have been exempt for each lease interval viiFootnote 7. The head lease of the complex for each lease interval was exempt if, throughout the lease interval, the lessee made, or held the complex for the purpose of making, supplies of the complex or parts of the complex and all or substantially all (90% or more) of those supplies were exempt under section 6 of Part I of Schedule V to the ETA.

In determining whether the exemption in section 6.1 of Part I of Schedule V to the ETA applies to any particular lessor's supply, it is necessary to distinguish between the lessee's supplies of property (i.e., rooms in the residential complex) and supplies of services that include the provision of residential units in the complex. It is only the lessee's supplies of property (i.e., residential units) that must be considered in determining whether all or substantially all of the lessee's supplies of property are supplies of the complex that are exempt under section 6 of Part I of Schedule V to the ETA. For purposes of the "all or substantially all" test in section 6.1, supplies of services by the lessee, whether or not they include the provision of residential units, are not taken into account in determining whether the head lease is exempt under section 6.1.

OPCO's supply made under a Resident Admission Agreement, that includes the provision of a residential unit, is characterized as a supply of a service. While the supply of the service includes the provision of a room in a Facility, the supply is nonetheless a service and as such, would not enter into the determination as to whether all or substantially all OPCO's supplies of the complex, or parts of the complex, are exempt under section 6 of Part I of Schedule V to the ETA. If OPCO does not make any supplies that are exempt under section 6 as is the case in the XXXXX Facilities that are licenced as nursing homes, section 6.1 of Part I of Schedule V to the ETA will not apply to any of the lease payments for these Facilities that became due on or before February 26, 2008, or were paid on or before that date without having become due. As no other exemptions apply, these lease payments are in respect of taxable supplies viiiFootnote 8. As the recipient of these taxable supplies made by LESSOR, OPCO was required to pay the tax to LESSOR. The legislation does not provide any means for OPCO to adjust its previously filed GST/HST returns to receive credit for the tax that was properly payable to LESSOR.

With respect to the XXXXX Facilities, the only supplies of the residential complex, or parts of the complex, (i.e., supplies of property) made by OPCO in respect of those Facilities are the supplies of residential units made under the Tenancy Residency Agreements used for the assisted living part of the buildings. Supplies of services that include a room in the part of the building that is licenced as a nursing home under the XXXXX are not supplies of property and as indicated above are not taken into account in applying the all or substantially test in section 6.1 of Part I of Schedule V to the ETA. For each lease interval in question, provided that all or substantially all of OPCO's supplies of residential units in the complex made under a Tenancy Residency Agreement are exempt supplies under section 6 of Part I of Schedule V to the ETA, then the lease of the entire residential complex portion of the XXXXX Facilities from LESSOR to OPCO will be exempt under section 6.1. If any portion of the XXXXX Facilities includes real property that does not form part of the residential complex e.g., any part that is leased to a third party for the operation of a hair/barber shop, any lease payment attributable to that part of the Facility is taxable.

Refund of tax

Since OPCO paid amounts as or on account of GST in error to LESSOR with respect to the residential complex parts of the XXXXX Facilities, OPCO may request a refund or credit of the amounts from LESSOR, subject to the conditions and time limitations provided in section 232. 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.

If OPCO cannot obtain a refund or credit from LESSOR, section 261 provides that OPCO may apply for a rebate of those amounts from the CRA subject to the conditions and time limitations of section 261. 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. If a refund is paid or a credit is issued by LESSOR, OPCO is not eligible to file a rebate application under section 261. Further information on filing a rebate application for tax paid in error is available in guide RC4033, GST/HST General Application for GST/HST Rebates. Both publications are available on the CRA Web site.

Head lease of the residential complex portion of a Facility after the amendments

LESSOR's supplies of the residential complex portion of each Facility will be exempt under section 6.11 of Part I of Schedule V to the ETA for each lease interval in respect of which consideration becomes due after February 26, 2008, and was not paid on or before that date or is paid after that date without becoming due.

INTEPRETATION GIVEN

The ETA contains change in use provisions that may apply where a registrant last acquired capital real property for use in commercial activities and the registrant begins to use the property exclusively for other purposes. Of particular importance in this case is that the change in use provisions apply only in respect of capital property. It should also be noted that the change in use rules, if they apply in this case, would apply only to the residential complex portion of a Facility. Supplies of any part of a Facility that is not part of the residential complex were subject to tax before the legislative changes were made and will continue to be taxable under the legislation.

Section 195.1 provides (other than for certain purposes that are not relevant to this case) that a residential complex is not capital property of a builder of the complex at any particular time unless construction of the complex is substantially complete and at or after the time of substantial completion and at or before the particular time, the builder has received an exempt supply of the complex or was deemed to have made a taxable supply (i.e., a self-supply) of the complex under section 191. Accordingly, the residential complex portion of each Facility will be capital property of LESSOR, and the change in use provisions will apply to LESSOR, only if LESSOR is a builder of the residential complex and LESSOR was deemed to have made a self-supply of the residential complex portion of a Facility prior to LESSOR's supplies of the residential complex portion of the Facility becoming exempt under section 6.11 of Part I of Schedule V to the ETA. ixFootnote 9
Whether LESSOR is a builder

A builder of a residential complex includes a person who, at a time when the person has an interest in the real property on which the complex is situated, carries on, or engages another person to carry on for the person, the construction of the residential complex. A builder also includes a person who acquires an interest in a residential complex at a time when the complex is under construction.

Accordingly, LESSOR is a builder of that portion of each Facility that is a residential complex.

Whether the self-supply rules apply to LESSOR

Prior to the legislative changes announced on February 26, 2008, subsection 191(10) provided, in part, that the self-supply rules in section 191 apply to a builder who makes a supply of a residential complex by way of lease that is an exempt supply under section 6.1 of Part I of Schedule V to the ETA to a recipient who is acquiring the complex or units in the complex for the purpose of making supplies that are exempt under section 6 of Part I of Schedule V to the ETA and gives possession of the complex to the recipient. The builder in this case is deemed to have given possession of the complex or a residential unit in the complex to an individual under a lease, licence or similar arrangement for the purpose of its occupancy by an individual as a place of residence. As a result, the builder is deemed, under either subsection 191(1) or (3), to have made and received a taxable supply of the complex or unit and to have paid and collected tax calculated on the fair market value of the complex or unit.

As provided above, OPCO was making exempt supplies under section 6 of Part I of Schedule V to the ETA only with respect to parts of the XXXXX Facilities. Accordingly, the self-supply rules apply to LESSOR in respect of the entire residential complex portion of each of the XXXXX Facilities. As such, LESSOR was required to account for the tax deemed collected calculated on the fair market value of each residential complex at the time of the self-supply. Based on the information provided, the self-supply of the XXXXX Facility occurred on or about XXXXX. For the XXXXX Facility, the self-supply occurred on or about XXXXX. LESSOR was required to include the tax deemed collected in its net tax calculation for the reporting periods during which the self supplies occurred. It is recognized that LESSOR did not account for the tax deemed collected in respect of these deemed supplies. Where LESSOR has filed, by their due date, its GST/HST returns for the reporting periods during which the self-supplies occurred, the net tax for these reporting periods would be statutebarred in accordance with subparagraph 298(1)(a)(i) subject to the exceptions in subsections 298(3) and 298(4).

With respect to the remaining Facilities (i.e., XXXXX), OPCO made no supplies under section 6 and as such, subsection 191(10), as it read prior to its amendment, does not provide that the self-supply rules apply to the LESSOR. Since OPCO initiated the construction of residential complexes prior to selling the real property on which the complexes are situated, OPCO is also considered a builder for GST/HST purposes. However, the self-supply rules would not apply to OPCO since the conditions of section 191, as it read prior to its amendment, were not met in the circumstances at hand.

Application of section 195.1

As a result, with respect to the residential complex portions of the XXXXX Facilities, section 195.1 does not apply since LESSOR is a builder with respect to the residential complex portions of these Facilities and LESSOR was deemed to have made taxable supplies (i.e., self supplies) of the residential complex portions of these Facilities. As such, these residential complexes are capital property. However, in the case of the residential complex portions of the XXXXX Facilities there is no change in use as the supplies of the residential complex portions of these Facilities made by way of lease by LESSOR were exempt before and after the legislative amendments in question were made.

With respect to the remaining Facilities (i.e., XXXXX), section 195.1 deems the residential complex portions of the Facilities not to be capital property of LESSOR since, as discussed above, the self-supply rules do not apply to LESSOR. As such, the change in use rules do not apply with respect to these Facilities when the supply from LESSOR to OPCO became exempt under section 6.11 of Part I of Schedule V to the ETA.

Application of subsection 221(2) with respect to a supply by way of sale of a partially completed Facility

We wish to add that with respect to OPCO's sales of the partially constructed facilities to LESSOR, the provisions of subsection 221(2) apply to all property that constitutes real property. In your submission, it is stated that OPCO did not collect GST in respect of the sale of land that formed part of each Facility, but that OPCO did collect GST from LESSOR in respect of the partially constructed buildings on the land. Pursuant to subsection 221(2), OPCO was not required to collect any GST in respect of the sales of the partially completed Facilities which are real property. LESSOR was responsible for paying all of the GST payable in respect of the sales of the partially constructed Facilities (land and buildings) directly to the CRA. However, since OPCO collected the GST in respect of the partially constructed buildings on the land, OPCO was required to account for this GST in its GST/HST returns and remit any positive amount of net tax. This information is provided for future references only.

Sale of a Facility

Section 5 of Part I of Schedule V to the ETA exempts the sale of a multiple unit residential complex, or an interest therein, by a person who is a builder of the complex, or an addition thereto, where:

=> the last supply of the complex, or addition, by way of sale to the builder was either an exempt supply or a deemed taxable sale of the complex, or addition, under the self-supply rules in subsection 191(3) or 191(4), unless
=> the builder substantially renovated the complex after the complex was last supplied to the builder, or
=> the builder claimed an ITC in respect of that last acquisition of the complex or addition, or in respect of an improvement thereto since that last acquisition, other than an ITC in respect of the construction of an addition to the complex.

With respect to a future sale of a Facility, or an interest therein, the sale will be taxable if the conditions of section 5 of Part I of Schedule V to the ETA are not met.

For example, the sale of the XXXXX Facility by LESSOR would be a taxable sale. Although, LESSOR is a builder of the XXXXX Facility, the self-supply rules did not apply to LESSOR in respect of this Facility and the last supply of this Facility by way of sale to LESSOR (i.e., the sale by OPCO on XXXXX) was a taxable supply and not an exempt supply.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4393. 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
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

i 1. This position was taken based on OPCO's interpretation of subsections 221(2) and 228(4). Our views on this matter are expressed later in this letter.

ii 2. These parts of the XXXXX Facilities that are residential complexes include the residential units that are located in both the nursing home part of the buildings and the assisted living part of the buildings.

iii 3. Depending on when the lease payment for a supply is made or becomes due, the supply is either exempt under section 6.1 or 6.11 of Part I of Schedule V to the ETA

iv 4. For lease payments that were made on or before February 26, 2008, or that became due on or before that date, the lease payments relating to the part of each Facility that does not form part of the residential complex were also payments for taxable supplies of the Facilities as indicated in the first and second rulings.

v 5. The definition of residential complex contains certain exclusions, i.e., buildings or parts of buildings that would otherwise be residential complexes can be excluded from the definition. The exclusions are not relevant in this case. A complete discussion of the definition of "residential complex" is set out in GST/HST Memoranda Series Chapter 19.2, Residential Real Property. For a discussion on the land included in a residential complex, see policy statement P-069, Land Allowance For Residential Complexes.

vi 6. The supplies made under a Resident Admission Agreement that include a residential unit in the Facility, or that part thereof, that is licenced as a nursing home under the XXXXX are exempt under section 2 of Part II of Schedule V to the ETA. However, the property and services provided and charged for on a "per occurrence" basis as set out in XXXXX to the Resident Admission Agreement used by OPCO are likely separate supplies that may be subject to tax.

vii 7. A lease interval is generally the period of time (e.g., a month) under a lease for which possession or use of the property is given and to which a lease payment is attributable.

viii 8. Paragraph 6.11(b) of Part I of Schedule V to the ETA, as introduced in the legislative changes announced in the budget of February 26, 2008, provides, in part, that the head lease of a residential complex is exempt where the lessee uses the complex in the course of making exempt supplies and as part of the supplies, gives possession or use of all or substantially all of the residential units in the complex under leases, licences or similar arrangements for the purpose of occupancy as a place of residence by an individual. However, where the supplier (e.g., LESSOR) charged, collected or remitted tax on lease payments that became due or were paid on or before February 26, 2008, section 6.11 does not apply to those supplies. In such a case, the coming into force provisions for section 6.11 provide that the section applies only to those supplies for which consideration becomes due after February 26, 2008, without having been paid on or before that date, or is paid after that date without having become due. Supplies for which consideration becomes due, or was paid, on or before February 26, 2008, will not be exempt under section 6.11.

ix 9. LESSOR did not receive an exempt supply of the residential complex portion of any of the Facilities and therefore it is only necessary to determine whether LESSOR was deemed to have made a self-supply of the complex.

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

Case Number: 105425
Attention:XXXXX
March 31, 2009

Subject:

GST/HST RULING
Eligibility for Rebate under the Foreign Convention and Tour Incentive Program

Dear XXXXX:

Thank you for XXXXX, to the Ottawa GST/HST Rulings Centre concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to events held by XXXXX (the Company). Your request has been transferred to our office for reply. We apologize for the delay in our response.

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

Statement of Facts

1. We understand that the Company is an American business that is not registered for the GST/HST.

2. The Company holds events in Canada at different XXXXX each year. In XXXXX, the Company held an XXXXX at the XXXXX (the Hotel) in XXXXX.

3. You provided portions of the XXXXX (the Contract) between the Company and the Hotel. The program dates noted in the Contract are XXXXX toXXXXX.

4. Under the Contract, the Hotel agreed to hold a number of rooms on specific dates for the Company, and to offer these rooms to the Company at special rates. The special rates did not include meals.

5. The final agreed upon numbers of rooms were as follows:

• XXXXX
• XXXXX
• XXXXX
• XXXXX

6. According to the Contract, the charges for the room for each attendee of the Company's group would be applied to the Company's Master Account, while each individual was responsible for all their own incidentals and individual meal charges.

7. The Company also booked a meeting room under the Contract for the dates XXXXX; the room was offered on a complimentary basis to the Company. The room was also used to serve a breakfast buffet each day (starting at 7:00 most days). Charges for coffee breaks, banquets and other services requested by the Company or its group organizer were charged to the Company's Master Account.

8. The Company's Web site (XXXXX) described the XXXXX offered by the Company in XXXXX on these dates.

9. The XXXXX was offered during the week of XXXXX, and was open to all levels of XXXXX. XXXXX

10. The XXXXX cost $XXXXX. Rooms were offered on a double room occupancy basis, with a single room supplement of $XXXXX. A daily breakfast buffet was included, with a daily buffet dinner meal option for an additional $XXXXX.

11. The XXXXX was offered during the week of XXXXX
12. Daily ground transportation was provided to the XXXXX sites selected by the XXXXX

13. The XXXXX cost $XXXXX; it cost an additional $XXXXX to bring a spouse or XXXXX. Single rooms were available to the attending XXXXX. A daily breakfast buffet was included, with a daily buffet dinner meal option for an additional $XXXXX.

Ruling Requested

You would like to know whether the Company qualifies for a rebate under the Foreign Convention and Tour Incentive Program (FCTIP) with respect to the XXXXX.

Ruling Given

Based on the facts set out above, we rule that the Company does not qualify for a rebate under the FCTIP with respect to the XXXXX.

Explanation

Under the FCTIP, a rebate is available to the sponsor of a foreign convention held in Canada with respect to the GST/HST paid on certain properties and/or services used in the course of the convention.

As defined in subsection 123(1) of the ETA, a "foreign convention" means a convention
(a) at least 75% of the admissions to which are, at the time the sponsor of the convention determines the amount to be charged as consideration therefor, reasonably expected to be supplied to non-resident persons, and
(b) the sponsor of which is an organization whose head office is situated outside Canada or, where the organization has no head office, the member, or majority of members, of which having management and control of the organization is or are non-resident.

A "convention" means a formal meeting or assembly that is not open to the general public, but does not include a meeting or assembly the principal purpose of which is
(a) to provide any type of amusement, entertainment or recreation,
(b) to conduct contests or games of chance, or
(c) to transact the business of the convenor or attendees
(i) in the course of a trade show that is open to the general public, or
(ii) otherwise than in the course of a trade show.

In any transaction, it is important to first properly characterize what is being supplied in order to determine how tax applies to that particular transaction. The Company's XXXXX would be considered workshops for GST/HST purposes. Given the nature and purpose of the Company's XXXXX, these events are not regarded as "conventions" for GST/HST purposes. Consequently, the XXXXX cannot be "foreign conventions" and the Company does not qualify for a rebate under the FCTIP in respect of these events.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-7909. 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,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

Case Number: 106371
Attention: XXXXX
January 14, 2009

Subject:

GST/HST RULING
Sale of new house by XXXXX

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of a new residential complex by your client, XXXXX. We apologize for the delay in providing a response.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified. As the real property in question is situated in British Columbia (BC), a province that is not participating in the HST, our response will be restricted to the GST implications.

Statement of Facts

We understand the following:

1. XXXXX is an individual who is currently employed in XXXXX (XXXXX) XXXXX.

2. XXXXX has a Business Number (XXXXX), however the GST/HST account under this Business Number (XXXXX) is in a "non-registrant" status.

3. Prior to the events described below, XXXXX had never owned a house; he currently lives in rental accommodation.

4. On XXXXX, XXXXX purchased a residential complex that consisted of a lot and a house at XXXXX, bearing the legal description of XXXXX (the Original House). The Original House was located within a XXXXX from his work and within a XXXXX from his wife's work.

5. XXXXX financed the purchase of the Original House through a mortgage with XXXXX, along with additional financial assistance, in the form of a personal loan, from XXXXX.

6. XXXXX did not pay GST when he purchased the Original House.

7. XXXXX's stated intention was to renovate the Original House. However, in the summer of XXXXX, after he had discussed the renovations that would be required with an engineer, he decided to remove the Original House and build a new house (the New House).

8. XXXXX obtained additional financial help for the removal of the Original House and construction of the New House from XXXXX.

9. XXXXX, a GST/HST registrant, was hired as the contractor to build the New House.

10. XXXXX's XXXXX is a shareholder/owner of XXXXX.

11. Construction of the New House began in the fall of XXXXX.

12. The New House was designed to be a three-bedroom house with a potential suite downstairs.

13. XXXXX's stated intention was to reside in the upper portion of the New House and rent out the suite in the lower portion of the New House.

14. XXXXX paid GST on the costs he incurred to remove the Original House and construct the New House

15. The New House was completed in XXXXX.

16. After the New House was completed, XXXXX listed the New House with XXXXX for $XXXXX. XXXXX's stated intention for listing the New House was to get an idea of its "price range".

17. In the listing with XXXXX, the New House was described as:

XXXXX

XXXXX.

18. Of the offers received, XXXXX accepted one from XXXXX.

19. On XXXXX, XXXXX entered into a Contract of Purchase and Sale (the Contract) with the XXXXX for the sale of the New House for $XXXXX (with a deposit of $XXXXX). As per the Addendum to the Contract, XXXXX The XXXXX paid $XXXXX in GST, at the tax rate of 6%.

20. Ownership and possession of the unoccupied New House was transferred to the XXXXX on XXXXX.

21. The commission paid to the realtor was $XXXXX plus $XXXXX GST, at the tax rate of 5%.

22. XXXXX did not complete and file a GST22 - Real Property - Election to Make Certain Sales Taxable in relation to the sale of the New House.

23. On XXXXX, XXXXX remitted the GST charged and collected from the XXXXX.

24. XXXXX's stated intention is to purchase another parcel of land and build another new house for his residence.

Ruling Requested

You have asked for a ruling on the tax status of XXXXX's sale of the New House and whether tax was correctly charged, collected and remitted. You have also asked for confirmation that XXXXX is entitled to recover the GST he incurred in constructing the New House through the rebate mechanism under section 257.

Ruling Given

Based on the facts set out above:

1. With respect to the New House, we rule that XXXXX is a builder, as defined in subsection 123(1), and that his supply by way of sale of the New House to the XXXXX was a taxable supply. As a result, XXXXX was required to charge and collect the GST at the tax rate of 5% for the supply of the New House.

2. As XXXXX is a non-registrant for purposes of the GST/HST, we rule that he is entitled to claim a rebate under section 257 equal to the basic tax content of the New House provided that the rebate is claimed in the prescribed form and manner within the time limit for claiming this rebate.

Explanation
Ruling #1

A supply of real property made in Canada is subject to the GST/HST unless there is a specific exempting provision.

In examining the facts submitted, section 2 of Part I of Schedule V to the ETA must be considered to determine if XXXXX's supply of the New House is exempt. As section 2 of Part I of Schedule V to the ETA provides an exemption for a supply by way of sale of a residential complex or an interest in a residential complex made by a particular person who is not a builder of the complex, it is necessary to first determine if XXXXX is the builder of the New House for GST/HST purposes.

An individual who constructs a residential complex, or engages someone to construct the complex on land that they own is considered a builder within the meaning of "builder" set out in subsection 123(1), if the construction is made in the course of a business or an adventure or concern in the nature of trade of the individual. Where an individual constructs, or engages someone to construct, a residential complex on land that they own for his or her own personal use, without the primary or secondary intention of resale, the individual would not normally be viewed as constructing the complex in the course of a business or an adventure or concern in the nature of trade and such an individual would not be considered a "builder" within the meaning of the ETA. However, if the individual has constructed, or engaged someone to construct, the residential complex on land that they own with the primary or secondary intention of resale, the individual may have constructed the complex in the course of an adventure or concern in the nature of trade or in the course of a business. In such a case, the individual would fall within the definition of "builder".

Info Sheet GI-005 - Sale of a Residence by a Builder who is an Individual provides basic information on whether or not an individual is a builder for GST/HST purposes. An individual may be a builder if the individual's primary or secondary intention in building a new residential complex is the prospect of the sale of the residential complex at a profit. This intention may be inferred, for example, where the financing of the purchase of the residential complex is beyond the individual's means and may depend on increased value and saleability of the residential complex in a burgeoning housing market. An individual may also be a builder if the individual arranges for short-term financing or financing without balance repayment penalties, or the individual puts the new residential complex up for sale or undertakes other activities to attract buyers before the individual uses the residential complex as a place of residence.

In examining the various indicators, it was determined that XXXXX falls within the definition of "builder" under subsection 123(1). Therefore, his supply by way of sale of the New House is not exempt under section 2 of Part I of Schedule V to the ETA and he was required to charge, collect and remit GST at the tax rate of 5%.

Please refer to page 6 for information regarding the change in the tax rate and how, under section 261, the XXXXX may be entitled to claim a rebate for the amount of tax paid in error.

Ruling #2

Where a non-registrant person has made a taxable supply by way of sale of real property, the non-registrant person may be entitled to claim a rebate under section 257.

This rebate generally allows the non-registrant to recover all or part of the GST they paid when they acquired the real property and when they made any subsequent improvements to the property. The rebate is equal to the lesser of the "basic tax content" of the property and the tax payable by the purchaser on the sale of the real property made by the non-registrant.

The term "basic tax content" is defined in subsection 123(1). Generally, the "basic tax content" of a property of a person is the tax payable by the person on the last acquisition of the property, plus any tax payable on any subsequent improvements made by the person to the property (e.g., the removal of the Original House and the construction of the New House), less rebates (but not input tax credits) the person was entitled to claim, minus an adjustment for the depreciation, if any, in the fair market value of the property since the property was last acquired. Pursuant to subsection 123(1), "improvement", in respect of property of a person, means any property or service supplied to, or goods imported by, the person for the purpose of improving the property, to the extent that the consideration paid or payable by the person for the property or service or the value of the goods is, or would be if the person were a taxpayer under the Income Tax Act, included in determining the cost or, in the case of property that is capital property of the person, the adjusted cost base to the person of the property for the purposes of the Income Tax Act.

Detailed information on the calculation of the "basic tax content" as it relates to the rebate under section 257 is included in GST/HST Memorandum 19.3.6, Rebate on Non-registrant's Sale of Real Property, starting at paragraph 4. To claim a rebate under section 257, a person must complete GST189 - General Application for Rebate of GST/HST (GST189), using Reason Code 7. Step-by-step instructions on how to complete the rebate form are provided in the guide RC4033, GST/HST General Rebate Application.

As a non-registrant who made a taxable supply of real property by way of sale, XXXXX is entitled to claim the rebate under section 257 equal to the basic tax content of the New House provided that the rebate application is completed as required and filed by the time limit for claiming the rebate. Generally, in this case, the basic tax content of the New House is equal to the GST paid by XXXXX in respect of costs incurred to remove the Original House and construct the New House.

A rebate shall not be paid to a person under section 257 in respect of a taxable sale of real property made by the person unless the person files an application for the rebate (i.e., the GST189) within two years after the day the consideration for the supply of the real property became due or was paid without having become due.

ADDITIONAL INFORMATION

Effective January 1, 2008, the rate of the GST was reduced from 6% to 5%. Where a builder and a purchaser entered into an agreement of purchase and sale after October 30, 2007, the rate of the GST charged on the supply by way of sale of a residential complex depended on when ownership and possession of the complex was transferred. Where either ownership or possession transferred before January 1, 2008, the builder was required to charge and collect GST at the rate of 6%; where both ownership and possession transferred after December 31, 2007, the builder was required to charge and collect GST at the rate of 5%.

As the Contract was entered into after October 30, 2007, and both ownership and possession of the New House was transferred after December 31, 2007, the applicable tax rate for XXXXX's supply of the New House to the XXXXX was 5%, not 6%. In addition, the XXXXX are not entitled to claim the GST/HST transitional rebate. In this case, the transitional rebate is not available since the parties entered into the purchase and sale agreement after October 30, 2007.

Where a person paid an amount as or on account of tax in error, the person may be entitled to claim a rebate for this amount under section 261. To claim the rebate under section 261, the person would complete the GST189 using Reason Code 1. As with the rebate under section 257, step-by-step instructions on how to complete the GST189, using Reason Code 1, are provided in the aforementioned guide RC4033. The person must file the application for the rebate within two years after the day the amount as or on account of tax was paid in error by the person. Provided that all of the conditions for claiming the rebate are met, the XXXXX would be entitled to file a rebate application with the CRA to claim a rebate for the tax paid in error to XXXXX (i.e., the extra 1%). You have indicated that you will be advising the XXXXX of this rebate provision.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 604-691-4742. 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,
Marjorie Stevens
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

FOOTNOTE:

XXXXX

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 14th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 97470
XXXXX
May 6, 2008

Subject:

GST/HST RULING
Importation and Supply of the XXXXX

Dear XXXXX:

Thank you for your letter XXXXX and accompanying brochure, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of the XXXXX and its accessories made by XXXXX.

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

Statement of Facts

1. XXXXX is the XXXXX Canadian importer of XXXXX.

2. XXXXX.

Ruling Requested

You would like to know whether XXXXX is required to charge the GST/HST on its supply of XXXXX and its accessories.

Ruling Given

The supply of the XXXXX and its accessories is a taxable supply and pursuant to subsection 165(1) XXXXX is required to collect the GST/HST on the value of the consideration for this supply at the rate of 5% or pursuant to subsections 165(1) and (2) at a rate of 13% where the supply is made in a participating province (Nova Scotia, New Brunswick, and Newfoundland and Labrador).

Explanation

Generally all supplies of goods and services made in Canada are subject to the GST/HST at the rate of 5% or 13% unless specifically relieved under the ETA. There are exceptions for medical devices that are specifically identified in Part II of Schedule VI as being zero-rated; i.e., the tax applies at the rate of 0%. If a medical device is not included in Part II of Schedule VI, then the supply of the medical device falls under the general rule. There is no provision in Part II of Schedule VI that would apply to the supply of surgical tools and equipment and therefore the supply of the XXXXX and its accessories are properly subject to tax.

Regarding the importation by XXXXX of the XXXXX, please note that the GST/HST applies equally to imported goods as well as to goods supplied in Canada. Section 212 requires every person who is liable under the Customs Act to pay duty on imported goods, or who would be so liable if the goods were subject to duty, to pay GST on the goods calculated at the rate of 5% on the value of the goods. Section 212.1 imposes the provincial component of the HST at a rate of 8% in respect of non-commercial importations by residents of the participating provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador). This tax applies in addition to the tax imposed under section 212. If the supply of a medical device is included in Part II of Schedule VI that device may be imported on a non-taxable basis pursuant to section 6 of Schedule VII. However, as the supply of the XXXXX is not included in Part II of Schedule VI it does not constitute a non-taxable importation for GST/HST purposes.

XXXXX.

Yours truly,

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

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 14th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 98709

May 6, 2008

Subject:

GST/HST RULING
Importation and Supply of the XXXXX

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of the XXXXX and its accessories made by XXXXX.

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

Statement of Facts

1. XXXXX is the exclusive Canadian importer XXXXX.

2. XXXXX is a single use surgical device XXXXX.

3. XXXXX.

4. XXXXX.

Ruling Requested

You would like to know whether XXXXX is required to charge the GST/HST on its supply of XXXXX and its accessories.

Ruling Given

The supply of the XXXXX and its accessories is a taxable supply and pursuant to subsection 165(1), XXXXX is required to collect the GST/HST on the value of the consideration for this supply at the rate of 5% or pursuant to subsections 165(1) and (2) at a rate of 13% where the supply is made in a participating province (Nova Scotia, New Brunswick, and Newfoundland and Labrador).

Explanation

Generally all supplies of goods and services made in Canada are subject to the GST/HST at the rate of 5% or 13% unless specifically relieved under the ETA. There are exceptions for medical devices that are specifically identified in Part II of Schedule VI as being zero-rated; i.e., the tax applies at the rate of 0%. If a medical device is not included in Part II of Schedule VI, then the supply of the medical device remains subject to tax. There is no provision in Part II of Schedule VI that would apply to the supply of surgical tools and equipment and therefore the supply of the XXXXX and its accessories are properly subject to tax.

XXXXX.

Yours truly,

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

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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 94077

July 29, 2008

Subject:

GST/HST RULING
GST/HST treatment of XXXXX rewards vouchers

Dear XXXXX

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX issued by XXXXX

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

We understand the facts as follows.

Facts

1. XXXXX is a XXXXX supplier of various taxable property and services, including zero-rated supplies. XXXXX is a GST/HST registrant.

2. XXXXX.

3. XXXXX.

4. XXXXX XXXXX.

5. XXXXX

6. XXXXX.

7. The reward is stated on the voucher as a specified amount that may be applied against most XXXXX including taxable supplies at both 5% and 0%. The voucher is not specific to any particular product or service.

8. XXXXX.

9. XXXXX.

10. Under the current XXXXX agreements, a reward voucher may not be tendered for cash. However, you confirmed in our telephone conversation XXXXX that XXXXX.

Rulings Requested

1. The rewards voucher is not a gift certificate.

2. The voucher is a non-reimbursable coupon that is subject to subsection 181(3).

3. Where XXXXX chooses under subsection 181(3) to treat the rewards voucher as a reimbursable coupon, the vouchers are subject to subsection 181(2), and a corresponding input tax credit ("ITC") entitlement arises under subsection 181(5).

4. In the alternative, the rewards voucher is a rebate in respect of which section 181.1 applies.

Rulings Given

1. The rewards voucher is not a gift certificate.

2. The rewards voucher is a coupon in respect of which subsection 181(4) applies.

3. Subsection 181(2) is not applicable and no ITC entitlement arises under subsection 181(5).

4. The provisions of section 181.1 do not apply in respect of the rewards voucher.

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

Analysis

Gift certificate

While the ETA does not provide a definition for the meaning of the term, "gift certificate", GST/HST Policy Statement P-202 stipulates that a gift certificate is a "device" (e.g. voucher, receipt, ticket):

• that has a stated monetary value.

• that can be redeemed on the purchase of property or a service from a particular supplier; that is, the supplier agrees to accept the device as consideration, or a part hereof, in respect of the purchase of property or a service,

• for which consideration is given, and

• that has no intrinsic value.

Under the circumstances, we agree that the rewards voucher is not a gift certificate since the third criterion above is not met. The amount of the reward is calculated as a percentage of certain purchases made by the XXXXX. XXXXX does not sell the voucher and no consideration is given for it; therefore, the third criterion above is not met and the voucher fails to qualify as a gift certificate.

Coupon

Subsection 181(1) defines the word "coupon" to include a voucher, receipt, ticket or other device but does not include a gift certificate. Our position is that vouchers, receipts and tickets generally take the form of a physical certificate documenting some right or privilege in favour of the bearer. It is further our position that the words "other device" in the definition address things that are similar to a voucher, receipt or ticket and that the word "device" should have a meaning within that context. As the rewards voucher identifies the amount accruing to a particular XXXXX pursuant to their XXXXX agreement, it qualifies as a "coupon" under subsection 181(1).

Subsection 181(2) describes the tax treatment of reimbursable, fixed dollar coupons accepted in connection with the supply of a good or service. The provisions of subsection 181(2) may also apply where, pursuant to subsection 181(3), a registrant vendor of a non-zero-rated supply accepts a non-reimbursable coupon specifying a fixed dollar or fixed percentage discount and opts to treat the coupon as a partial cash payment that does not reduce the value of the consideration for the supply. While the rewards voucher may bear the attributes of a "coupon" as stated above, it lacks certain qualities identified in subsection 181(3), which applies when:

"a registrant accepts, in full or partial consideration for a taxable supply of property or a service (other than a zero-rated supply), a coupon that entitles the recipient of the supply to a reduction of the price of the property or service equal to a fixed dollar amount specified in the coupon... and the registrant can reasonably expect not to be paid an amount for the redemption of the coupon by another person"

The qualifying provisions of subsection 181(2) are similar to those in 181(3). Subsection 181(2) applies when:

Subsections 181(2) and (3) essentially require that the coupon be accepted in respect of a non-zero-rated supply of a property or a service whose price is reduced by the amount of the coupon. As such, our interpretive view of subsections 181(2) and (3) is that the coupon would have to be designated for use towards the purchase of non-zero-rated supplies. In the present case, however, the value of the voucher may be used against the purchase price of diverse supplies whose GST/HST treatments differ. The fact that the rewards voucher is not supply-specific makes it possible that the voucher may be used against the price of zero-rated supplies, which would directly contravene the requirements of the aforementioned provisions. Given that the rewards voucher is not specific to a particular supply, it is our view that the criteria outlined in subsections 181(2) and (3) are not met. Accordingly, XXXXX will not qualify for the ITCs otherwise accorded by subsection 181(5).

Although the rewards vouchers do not fall within the purview of subsection 181(2) and (3), we nevertheless view them as falling within subsection 181(4). This subsection provides that where a coupon is accepted by a registrant vendor, the value of the consideration for the supply is deemed to be the amount, if any, by which the value of the consideration for the supply as otherwise determined exceeds the discount or exchange value of the coupon. As such, XXXXX would treat the rewards voucher as a reduction in the amount on which GST/HST is calculated at the time of sale. No input tax credit is available with respect to the acceptance of the voucher.

Rebates

Section 181.1 applies to certain rebates paid in respect of property or a service. Under this section, a registrant supplier may claim an ITC in respect of the tax fraction of a rebate paid by the supplier where:

(a) the registrant makes a taxable supply in Canada of property or a service that is not a zero-rated supply,

(b) a particular person acquires the property or service, either from the registrant or from another person,

(c) the registrant pays, at any time, a rebate in respect of the property or service to the particular person and provides written indication that a portion of the rebate is an amount on account of tax, and

(d) subsection 232(3) does not apply to the rebate.

Where these conditions are met, paragraph 181.1(e) provides that the registrant may claim an ITC for the reporting period that includes the time when the rebate was paid. The ITC is equal to the tax fraction in respect of the rebate (5/105 for GST or 13/113 for HST) multiplied by the rebate amount.

Similar to the treatment of coupons in subsections 181(2) and 181(3), section 181.1 precludes an ITC claim for a rebate that is paid in respect of a zero-rated supply. Essentially, the rebate must be paid in connection with a non-zero-rated supply of a particular property or a service. More specifically, paragraph 181.1(c) expressly requires that the rebate be paid with respect to the supply of the particular property specified in paragraphs (a) and (b). Similar to subsections 181(2) and (3) and their application to coupons, our interpretive view of the present provisions is that the rebate would need to be paid in connection with a specific non-zero-rated supply of property or a service. Since the value of the rewards voucher is not specific to a particular supply, it is our view that the criteria of section 181.1 are not met.

ADDITIONAL ANALYSIS

Patronage dividends

A "patronage dividend" is defined in subsection 123(1) as:

"An amount that is deductible under section 135 of the Income Tax Act in computing, for the purposes of that Act, the income of the person paying the amount"

Briefly, subsection 135(1) of the Income Tax Act may allow a taxpayer to deduct patronage dividends issued to customers in computing the taxpayer's income for a taxation year. While the taxpayer involved is usually a cooperative corporation, ordinary corporations may also qualify for the deduction. Income tax bulletin IT-362R, Patronage Dividends (copy enclosed), discusses the conditions set forth in section 135 of the Income Tax Act that must be met in order to deduct the amount of the payments ifootnote 1.

Where it is determined that an amount is deductible under section 135 of the Income Tax Act, the GST/HST treatment of the amount will be subject to the provisions of section 233 of the ETA. Under section 233, a registrant issuer of a patronage dividend is generally required to treat the dividend as having reduced the total consideration for non-zero-rated supplies made by the registrant to its customers during a fiscal year, which in turn gives rise to the appropriate GST/HST adjustment, subject to section 232.

Specifically, where a registrant issues a patronage dividend to another person, all or part of which is in respect of supplies that are non-zero-rated supplies made by the registrant to the person, subsection 233(2) deems the registrant to have reduced the total price of the non-zero-rated supplies purchased over the fiscal year and to have made the appropriate GST/HST adjustment, refund or credit in favour of the person (discussed below). Paragraph 233(2)(a) provides a standard method of calculating the aforementioned price adjustment, but also provides an alternative method that the registrant may elect to use.

Standard method

A registrant issuer of a patronage dividend must generally determine the amount of the price reduction by first calculating the proportion of the dividend attributable to non-zero-rated supplies made by the registrant to its customers during the immediately preceding fiscal year. This proportion is described in subsection 233(1) as the "specified amount", and is calculated by dividing the fiscal year's total of all non-zero-rated supplies (including applicable tax) by the total of that year's taxable supplies (including zero-rated supplies and any applicable tax calculated on non-zero-rated supplies), then multiplying this quotient by the total amount of the patronage dividend. The resulting product is the "specified amount".

Subparagraph 233(2)(a)(ii) provides a formula for determining the portion of the specified amount made in a non-participating province. This is achieved by dividing the non-zero-rated supplies made during the fiscal year in a non-participating province (plus the corresponding GST) by the sum of all non-zero-rated supplies made in both participating and non-participating provinces (plus the corresponding GST/HST). This quotient is then multiplied by the "specified amount", the product of which is multiplied by the consideration fraction, 100/105. The resulting amount is treated as a price adjustment to which the rules of subsection 232(2) apply. Under subsection 232(2), the tax previously collected on the amount of the price adjustment would be treated as a refund of GST paid to the XXXXX, which may be recovered by the registrant in its periodic tax return.

Where supplies were made in a participating province, subparagraph 233(2)(a)(i) would require the "specified amount" to be prorated for supplies made in the participating province. This is calculated in the same manner as described in paragraph 233(2)(a)(ii) above, except that the relevant consideration fraction is 100/113, to reflect the HST rate of the participating province. Again, the price adjustment would be subject to the rules of subsection 232(2), and the HST previously collected on the amount of the adjustment would be treated as a refund of HST paid to the XXXXX, which may be recovered by the registrant.

Election - subsection 233(2)

A registrant issuer of patronage dividends may elect under subsection 233(2) to treat the dividends as individual price adjustments that are based on each customer's purchases of non-zero-rated supplies. Whereas the standard method described above entails calculating the "specified amount" (which employs an aggregate ratio of non-zero-rated supplies to total taxable supplies made by the supplier to all customers during a fiscal year), an election made pursuant to subsection 233(2) would not involve such a calculation.

Instead, the registrant would be required to calculate the subsection 233(2) price adjustment by multiplying the patronage dividend attributable to each customer's non-zero-rated purchases made in a participating province (including the applicable tax) by 100/113, and those non-zero-rated taxable purchases made in a non-participating province (including the applicable tax) by 100/105. The sum of these products is treated as a price adjustment to which the rules in subsection 232(2) apply. The tax previously collected on the adjustment would be treated as a refund of tax paid to the customer, which may be recovered by the registrant in its periodic tax return.

Note the registrant must make the election before any patronage dividend is paid in the fiscal year in which the election is to take effect. The election would apply to all patronage dividends paid by the registrant in a fiscal year, and all patronage dividends paid would be treated in the same manner for GST/HST purposes. The registrant would not be required to file an election form with the CRA, but would still be required to maintain such records as would enable a determination of whether the registrant has elected for the treatment under paragraph 233(2)(a).

Election - subsection 233(3)

Under subsection 233(3), a registrant may elect to avoid calculating the price adjustment as required under subsection 233(2). Under this election, the patronage dividends would not be treated as price adjustments, and the registrant would not be entitled to any deductions in determining its net tax since the dividend would no longer result in a deemed reduction of the consideration for any supplies.

As in the case of the election under paragraph 233(2)(a), the registrant must make the election before any patronage dividend is paid in the fiscal year in which the election is to take effect. The election would apply to all patronage dividends paid by the registrant in a fiscal year, and all patronage dividends paid during the fiscal year would be treated in the same manner. Again, the registrant would not be required to file an election form with the CRA but would still be required to maintain records as would enable a determination of whether the registrant has elected for the treatment under subsection 233(3).

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

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

If you require clarification with respect to any of the issues discussed in this letter, please call me at 613-952-8816.

Yours truly,

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

i 1. The question of whether XXXXX may make deductions pursuant to section 135 of the ITA is within the purview of the Income Tax Rulings Directorate.

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

Case Number: 94917RAttention: XXXXX

November 28, 2008

Dear Ms. XXXXX:

Subject:

GST/HST RULING
Review of ruling on XXXXX Fruit Flavoured Beverage XXXXX

We have reviewed our previous GST/HST ruling (94917) regarding the tax status of supplies of XXXXX Fruit Flavoured Beverage (the Product) XXXXX and have taken into account new information and facts provided subsequent to that ruling. We provide the following ruling, which replaces and supersedes our previous ruling letter issued in case number 94917 and dated XXXXX.

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

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is sold in multiples of XXXXX - XXXXXmL containers pre-packaged by the producer.

2. The Product label states: "XXXXX

3. The ingredients of the Product are: XXXXX

4. XXXXX. (the Producer) Website states: "XXXXX

5. The Producer has stated that the Product is a formulated liquid diet as defined by the Food and Drug Act Regulations, and that it meets the compositional requirements under that Act.

6. XXXXX

Ruling Requested

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

Ruling Given

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

Explanation

Generally, 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 (13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. Taxable supplies that are zero-rated for GST/HST purposes are described in Schedule VI.

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

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

The CRA's approach is based on the views of an "average consumer". Products that meet the special dietary needs of certain segments of the population, such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed by the average consumer as food or beverages. These types of products are commonly referred to as dietary supplements.

However, the CRA's approach would not preclude a product from zero-rating that is specially processed or formulated to meet the dietary requirements of a person in whom a physical or physiological condition exists as a result of a disease, disorder or injury or whom a particular effect is to be obtained by a controlled intake of food. This includes products such as formulated liquid diets, provided these products are intended to allay hunger or thirst or for enjoyment through the digestive system rather than for therapeutic effects. The Regulations under The Food and Drug Act provide that "formulated liquid diet" means a food that is sold for consumption in liquid form, and is sold or represented as a nutritionally complete diet for oral or tube feeding of a person. Further, formulated liquid diets have specific caloric, fat content and vitamin and mineral requirements. Although these products are different from what an ordinary consumer would view as food, their main purpose is to provide nutrition and nourishment for people with a medical condition.

Products that qualify as formulated liquid diets under the Food and Drug Act and Regulations are considered to be basic groceries for GST/HST purposes. All supplies of formulated liquid diets are zero-rated (except when sold from a vending machine). We are of the view that the Product is a formulated liquid diet product and as such its supplies are zero-rated.

In determining the tax status of a particular product, the composition of each particular product in a product line must be considered to determine if each particular product is, for example, a formulated liquid diet, meal replacement, nutritional supplement, dietary supplement, or food or beverage.

If a product is represented as being a formulated liquid diet as evidenced by the label, the CRA will accept this information as fact in determining its tax status. If, however, after a ruling has been issued, it is determined that a product is in fact not a formulated liquid diet, the ruling will not be valid in accordance with GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

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

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

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

Case Number: 95769r
Attention: XXXXX
XXXXX
Business Number: XXXXX

July 10, 2008

Subject:

GST/HST RULING
Tax status of postage stamps and memberships

Dear XXXXX:

XXXXX you request clarification regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to two supplies addressed in a January 16, 2008 ruling issued to the XXXXX (the Organization) XXXXX. Specifically, you would like clarification on the tax status of postage stamps and memberships sold by the Organization.

XXXXX.

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

Statement of Facts

We understand that

1. The Organization is a registered charity under the Income Tax Act, and is therefore a charity for purposes of the ETA.

2. The Organization has been registered for GST/HST purposes since XXXXX.

3. The Organization, through its programs, provides XXXXX.

4. The Organization operates out of a portion of the XXXXX.

Postage Stamps

5. The Organization purchases postage stamps at face value from the Canada Post Corporation and resells them to its members at face value.

6. Members can buy as few as one stamp at a time.

7. Members can deposit their outgoing mail in a mailbox at the Organization's facilities. Once a day, an employee of the Organization will deposit the outgoing mail in a Canada Post drop box.

Memberships

8. The Organization sells its memberships for XXXXX.

9. Members of the Organization are entitled to the following benefits:

• Use of the Organization's facilities (e.g., XXXXX)

• Right to join clubs within the Organization (e.g., XXXXX)

• Right to participate in programs offered by the Organization (e.g., XXXXX)

10. Some programs or clubs are offered free of charge, others have a nominal fee to cover the cost of an instructor. Approximately XXXXX% of members participate in the programs.

11. Members can sign up for an unlimited number of programs or clubs.

12. Program offerings are based on the demand from members and availability of instructors or program leaders.

13. Only members are permitted to sign up for the various programs offered by the Organization.

14. Only the Organization's cafeteria is open to the public. Both the public and members are charged for meals purchased in the cafeteria.

Ruling Requested

You would like to know if GST applies to the Organization's sale of stamps and memberships.

Ruling Given

Based on the facts set out above, we rule that the Organization's supply of the postage stamps is exempt of GST. The Organization's membership is a taxable supply.

Explanation

Generally, supplies of goods and services are subject to GST/HST unless they are specifically exempted. Most supplies made by a charity of property or services are exempt under section 1 of Part V.1 of Schedule V. However, if a supply falls within any of paragraphs 1(a) to 1(n) of Part V.1 of Schedule V the supply is generally taxable. For your information, we have included a copy of section 1 of Part V.1 of Schedule V.

Postage Stamps

The Organization's supply of the stamps (i.e., evidence for the payment of a mail delivery service) is exempt as the supply does not fall within any of the paragraphs 1(a) to 1(n) of Part V.1 of Schedule V.

A postage stamp is a stamp authorized by the Canada Post Corporation for use as evidence of the payment of postage. "Postage" is generally considered to mean the charge or surcharge payable for the collection, transmission and delivery by the Canada Post Corporation of goods (i.e., mail). For GST/HST purposes a freight transportation service means a particular service of transporting tangible personal property, and includes a service of delivering mail. Therefore the postage stamp evidences the payment of a freight transportation service.

Memberships

Some memberships supplied by charities are taxable as they do not fall within the general exemption for charities found in section 1 of Part V.1 of Schedule V.

The Organization's membership is taxable as it is excluded by paragraph 1(g) from the general exemption for charities. Under paragraph 1(g), a charity's membership is taxable when it includes the right to participate in a recreational or athletic activity, or use facilities, at a place of amusement. A "place of amusement" is defined in the ETA to include any place the purpose of which is to provide any type of amusement or recreation. The Organization' facility meets the definition of place of amusement. As the Organization's memberships include a right to participate in a recreational or athletic activity (i.e., the programs offered by the Organization) and use the Organization's facilities, the supply is taxable.

Memberships that provide these rights can remain exempt where the value of the right to participate in a recreational or athletic activity, or use facilities, at a place of amusement is insignificant in relation to the consideration for the membership. In the Organization's case the value of these rights is not insignificant, as the right to participate in the Organization's programs and use the Organization's facilities is only available by acquiring the membership and is the purpose for which membership is acquired. Therefore the value of these rights is equal to the consideration paid for the membership.

XXXXX ruling and individuals who have a disability

The explanation provided in our ruling dated XXXXX indicated that your Organization's memberships were taxable because of paragraph 1(f). As explained in our telephone conversation XXXXX, your membership does not entitle a person to supervision or instruction; therefore it does not fall under that provision. Nevertheless the supply of the memberships is taxable.

You have requested information regarding what types of individuals are referred to in the statement "individuals who...have a disability" found in paragraph 1(f). The CRA's interpretation of the term "disability" is that it generally refers to a long-term impairment that restricts an individual in carrying out his or her activities of daily living. As previously stated, the Organization's membership does not meet the requirements of the provision [paragraph 1(f)] that refers to these types of individuals.

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

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

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

Case Number: 95954

NCS Code: 11950-1
XXXXX
July 14, 2008

Subject:

GST/HST RULING
Sale of Vacant Land

XXXXX

Thank you for your letter XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of a XXXXX-acre parcel of vacant land.

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

Statement of Facts

The following facts are based on the information provided in your letter XXXXX and facsimile transmissions XXXXX.

We understand the facts as follows:

1. XXXXX (the "Vendor") sold a XXXXX-acre parcel of vacant land ("the Land"), XXXXX to the Purchasers, XXXXX, in XXXXX, for the purchase price of $XXXXX.

2. The Purchasers acquired the Land for purposes of constructing a new home for their personal use and enjoyment. About half of the Land is wetlands and the remainder is woods.

3. The Land was severed by the Vendor from the original XXXXX-acre parcel of land (the "Original Parcel") which the vendor purchased XXXXX in XXXXX for $XXXXX.

4. The Original Parcel contained a farmhouse, which the Vendor rented out to XXXXX, the Purchaser, for use as a place of residence, while the Purchaser's new home was being constructed.

5. The Vendor leased the farmhouse for $XXXXX per month, to cover the mortgage payment and heating costs, which were paid by the Vendor.

6. The Vendor leased approximately XXXXX acres of Original Parcel to her brother for an amount approximately equal to the property taxes on the property.

7. Following the severance, of the remaining XXXXX acres, XXXXX acres are forest and XXXXX acres continue to be supplied by way of lease by the Vendor to XXXXX for consideration just to cover property taxes.

8. The Vendor is in the process of severing off a second lot of approximately XXXXX acres, on which the Vendor intends to construct a house for personal use.

9. The Vendor is not a GST/HST registrant and is not in the business of farming. Other than the activities referred to above, the Vendor has not undertaken any other activities with respect to the land. The Vendor is not engaged in any business in respect of real property.

Ruling Requested

You would like to know whether the sale by the Vendor of the XXXXX-acre parcel of vacant land severed by the Vendor from the original XXXXX-acre parcel is subject to the GST/HST.

Ruling Given

Based on the facts set out above, we rule that the supply by way of sale of the Land by the Vendor is not subject to GST/HST.

Explanation

Supplies of real property made in Canada are generally taxable under section 165 of the ETA unless specifically exempted. Under subsection 9(2) of Part I of Schedule V to the ETA, a supply of real property made by way of sale by an individual or a personal trust is exempt from the GST/HST subject to the list of exclusions thereunder.

In particular, subparagraph 9(2)(a)(i) of Part I of Schedule V to the ETA excludes from the general exemption under subsection 9(2), the sale of real property made by an individual or personal trust where immediately before the property is transferred, the property is capital property used primarily (more than 50%) in a business carried on by the individual or personal trust with a reasonable expectation of profit.

Under subsection 123(1), "business" is defined in part to include any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease, licence or similar arrangement." As such, for GST/HST purposes, the supply by way of lease of the XXXXX acres is considered to be a business carried on by the Vendor.

The determination of whether or not land that is capital real property of an individual is used primarily in a business, rather than primarily in non-business uses immediately prior to its sale is generally not based upon a single factor, but rather upon weighing all of the factors in a particular case. Some factors may be more significant than others in making such a determination. Appendix A of GST/HST Memoranda Series 19.5, Land and Associated Real Property, provides guidelines for determining if capital real property is used primarily in a business. In view of the facts in this case, we consider the Vendor to be using the capital real property in question primarily in a business immediately prior to the sale of the Land to the Purchasers.

The supply by way of sale of capital real property by an individual or personal trust that is used immediately prior to the time ownership or possession of the property is transferred to the purchaser primarily in a business carried on by the vendor with a reasonable expectation of profit is a taxable supply by virtue of the exclusion under subparagraph 9(2)(a)(i). Appendix B of GST/HST Memoranda Series 19.5, Land and Associated Real Property, provides guidelines for determining whether or not an activity engaged in by an individual has a reasonable expectation of profit.

Based on the facts in this case, while we consider the Vendor to be using the capital real property in question primarily in the business of leasing the real property, we do not consider that the Vendor had a reasonable expectation of profit from leasing the property. The supply of real property by way of lease, licence or similar arrangement for consideration equal to the maintenance costs of the property would generally not be viewed as an activity undertaken by an individual with a reasonable expectation of profit.

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

Yours truly,

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

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

Case Number: 96012
XXXXX
April 2, 2008

Subject:

GST/HST RULING
Mobile Specimen Collection and Delivery Services

Dear XXXXX:

Your letter XXXXX addressed XXXXX on the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the mobile specimen collection and delivery services provided by your company, XXXXX, was forwarded to the Excise and GST/HST Rulings Directorate. XXXXX. We apologize for the delay in responding.

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

Statement of Facts

Our understanding of the facts relating to the supplies in question is as follows:

1. XXXXX

2. XXXXX

3. The supplies in question are specimen collection and delivery services for individuals residing in XXXXX. These individuals are bedridden or housebound and cannot attend their local hospital or a medical clinic to provide the necessary specimens for laboratory diagnostic testing ordered by their physicians.

4. Your annual sales and other revenue reported for XXXXX from specimen collection and delivery services was in excess of $XXXXX.

5. Essentially, we understand that the individual's physician would order a laboratory diagnostic test for the individual. However, the individual is unable to attend a laboratory to provide a specimen and so it has been arranged that you will attend the individual's home to obtain a specimen from the individual and then deliver the specimen, together with the physician's order for the test, to the laboratory facility at the XXXXX.

6. XXXXX invoices the individual the consideration for the specimen collection and delivery service. However, if the individual has private health insurance, the invoice may be issued to the individual's private health insurance company. In other cases, depending on the individual's circumstances, the invoice may be issued to the XXXXX.

7. You also attend the XXXXX where you collect specimens from residents of the reserve and deliver the specimens together with the corresponding physician's order for a laboratory diagnostic test, to the laboratory facility at the XXXXX. The consideration charged for the supply of the specimen collection services that are provided on the reserve are invoiced to the Indian Band.

8. The specimen collection services provided by your company are not covered under a provincial health insurance plan.

9. You do not operate a laboratory, provide diagnostic testing, or evaluate the specimens you collect.

10. You are not a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse.

11. No diagnostic testing of the specimens takes place until the specimens arrive at the laboratory facility at the XXXXX. That is, after the laboratory receives the specimens in its laboratory it supplies the laboratory diagnostic testing of the specimens and sends a report of the test results to the physician that ordered the tests.

12. XXXXX

Ruling Requested

XXXXX. You would like to know whether the specimen collection and delivery services supplied by XXXXX are prescribed services that are exempt under section 10 of Part II of Schedule V. The services that are prescribed for purposes of this section are described in the Healthcare Services GST/HST Regulations (the Regulations). The prescribed services in question are laboratory diagnostic services generally available in a health care facility.

XXXXX

Ruling Given

After careful consideration of the additional information you provided as well as a further review of the exempting provision, we are confirming the GST/HST ruling of XXXXX, that the specimen collection and delivery services supplied by XXXXX are taxable under the ETA pursuant to section 165.

Effective January 1, 2008, the rate of the GST is reduced from 6% to 5% and the rate of the HST from 14% to 13%. The new rates apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules will apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, Proposed GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

As noted in the GST/HST ruling dated XXXXX and federal government departments pay the HST on taxable supplies made in XXXXX by GST/HST registrants. Accordingly, XXXXX is required to charge the 14% HST on its taxable supplies made before 2008 and 13% for supplies made after XXXXX pays the consideration for these supplies. The only exception to charging the HST is where a supply is made to an Indian Band if certain conditions are met. Please refer to the Explanation below for more information.

Explanation

Generally, all goods and services supplied in Canada are taxable for GST/HST purposes. There are exceptions for certain health care services listed in Part II of Schedule V as being exempt from the GST/HST. Accordingly, the tax always applies unless there is a specific exemption for a particular service.

Section 10 of Part II of Schedule V exempts a supply of a prescribed health care service when made on the order of a medical practitioner (physician or dentist) or a practitioner (optometrist, chiropractor, physiotherapist, chiropodist, podiatrist, osteopath, audiologist, speech-language pathologist, occupational therapist, psychologist, dietitian, or midwife).

On February 26, 2008, the Minister of Finance announced a proposed amendment to specify that section 10 of Part II of Schedule V applies to prescribed diagnostic services rendered to an individual and to expand this section to include prescribed diagnostic services that are ordered by registered nurses where the order is made within a nurse-patient relationship. This proposed amendment applies to supplies made after February 26, 2008.

A prescribed health care service is described in the Regulations as follows:

Prescribed Health Care Services

2. For the purposes of section 10 of Part II of Schedule V to the Excise Tax Act, the following services, other than services related to the provision of a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes, are prescribed:

(a) laboratory, radiological or other diagnostic services generally available in a health care facility; and

(b) the administration of drugs, biologicals or related preparations in conjunction with the provision of services included in paragraph (a).

The exemption in section 10 of Part II of Schedule V is limited to the services described in the Regulations. The phrase "laboratory, radiological or other diagnostic services generally available in a health care facility" in the Regulations is held to mean a test, study or investigative and analytical procedure, together with the report of findings, used to assist in the determination of a disease that are of the type generally available in a health care facility (a hospital). These services are laboratory diagnostic services such as in vitro diagnostic testing, serological testing, urinalysis, and microscopic analysis; radiology diagnostic services such as X-ray; other diagnostic imaging services such as CT scanning, magnetic resonance imaging, mammography and ultrasound; and diagnostic services such as fluoroscopy, echocardiography, electrocardiography, and electromyography.

The facts pertaining to the activities of XXXXX are determinative that the collection and delivery of specimen samples is a separate supply that is distinct from any service provided by a laboratory. This supply flows from an independent arrangement made with physicians to accommodate individuals who are unable to attend a laboratory facility to provide a specimen for the laboratory diagnostic test ordered by their physician. Further, that you deliver the specimens to a laboratory does not confer the status of "laboratory" to XXXXX such that it would be viewed as making a supply of a laboratory service.

It is the CRA's view that phlebotomists and laboratory technologists who operate as independent agents to collect and deliver specimens to laboratories do not supply any laboratory, radiological or other diagnostic services. Their activities consist only of obtaining samples of specimens and transporting them to licensed diagnostic facilities that supply the diagnostic services. Collection and transportation services carried out by phlebotomists and laboratory technologists operating as independent agents are taxable supplies and the consideration they charge for their services is subject to the GST/HST.

As noted, if a service related to the health care of an individual does not qualify as an exempt supply under Schedule V to the ETA, the supply of the service is taxable. A taxable supply of a service made in Canada by a registrant to an Indian individual is only relieved of tax where the service is performed totally on a reserve for the Indian individual who is on the reserve at the time the service is performed. As your specimen collection and delivery service does not take place entirely on a reserve, the HST would apply at the applicable rate of 14% or 13%.

However, where an Indian band or band-empowered entity acquires your service for an individual and you invoice the Indian band or a band-empowered entity, the supply is relieved of tax where your service is acquired for band management activities, as long as the conditions of Technical Information Bulletin B-039R3 - GST Administrative Policy - Application of GST/HST to Indians are met. Band management activities are those activities carried out by Indian bands and band-empowered entities related to their normal administration, programs, and services that are designed and/or delivered for the benefit, well-being, or assistance of band members. If an Indian band or band-empowered entity acquires the service and provides certification to you attesting that the acquisition of your service is being made for band management activities, the supply is relieved of HST.

As requested, we are addressing your arguments set out in points 7, 8, and 9 of your letter dated XXXXX

Point 7

XXXXX

As noted above, the exemption in section 10 of Part II of Schedule V is limited to the health care services prescribed in the Regulations. This interpretation is confirmed by the French version of the ETA. The only services that are currently prescribed for purposes of this section are laboratory, radiological or other diagnostic services generally available in a health care facility. Whether it can be argued that specimen collection is itself a health care service, it is not a service identified in the Regulations prescribing health care services and therefore not an exempt supply under section 10 of Part II of Schedule V.

Point 8:

XXXXX

The interpretation of the ETA and its regulations is made in accordance with recognized rules that are applied to the interpretation of statutes. When two or more terms are linked by "and" or "or", the associated words rule provides that the common feature among the terms is relied on to limit the scope of the terms. The common feature between the terms laboratory, radiological and diagnostic services enumerated in the Regulations is "diagnostic". The phrase "other diagnostic service" characterizes the words "laboratory" and "radiology" such that these are diagnostic services in the Regulations.

Generally speaking, the word "other" is used to mean "akin to" and following an enumeration of particular items, "other" is read as "other such like" and includes only others of the like kind and character of the particular items. The words used in the Regulations are read not in isolation but rather through their connection with each other. The defining feature of the enumerated terms is diagnostic and the phrase is read as laboratory, radiology or other such like diagnostic services typically provided in a hospital. Accordingly, a laboratory service encompassed by the Regulations is held to mean a laboratory diagnostic service; i.e., the laboratory analysis of any blood, tissue, or body fluid by any process or method in a laboratory facility.

Point 9:

XXXXX

A laboratory is understood as being a room or building equipped for diagnostic services, which may include the collection and handling of specimens in addition to the analysis of specimens and the reports of the analysis to provide information to physicians to assist them in the diagnosis of their patients. It is recognized that the collection of specimens may be a component of a laboratory diagnostic service when a laboratory performs the service together with the testing. However, the collection of specimens can also be a stand-alone supply that is not a laboratory service. It is the CRA's view that when supplied separately by another person specimen collection services are not themselves laboratory diagnostic services.

The specimen collection and delivery service supplied by XXXXX is a stand-alone supply of a phlebotomy procedure. Its activities are wholly performed in private residences separate from a laboratory service. XXXXX is not a "laboratory", it does not operate a laboratory, nor does it perform any laboratory service on the specimens it collects. Its services are made in isolation of any laboratory procedure performed by you and no procedure for diagnosis takes place until the specimens arrive at a laboratory facility. Accordingly, the specimen collection services supplied by XXXXX are not laboratory services.

Other Information

We would also like to address the question raised in Point 6 of your letter of whether a health care service can have a different tax status on the basis of who provides it. You would like to know why a fee charged for nursing services rendered by a registered nurse is not subject to the GST/HST, e.g., when a registered nurse collects blood from patients, whereas your fee for collecting blood is taxable. It is your view that your services should have the same exempt status as when registered nurses render these services.

Briefly, the tax policy of Parliament limits the exemptions in the ETA to certain health care services and this policy is reflected in the exempting provisions of Part II of Schedule V pursuant to which a health care service can have a different tax status depending on whether certain conditions are met. The tax policy flows from the provincial health insurance coverage of health care services and the provincial regulation of health care professions. It is Parliament's policy to look to the provinces and territories, given their major role in the regulation of their respective health care systems, when determining which health care services should be exempt. The application of an exemption may be dependent on the identity of the supplier or it may be limited to situations where the service is publicly funded under a provincial health insurance plan.

Further, the application of an exemption may be restricted to particular health care professions. For instance, section 6 of Part II of Schedule V exempts a supply of a nursing service, but only when a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse renders the service. The specimen collection services supplied by XXXXX cannot fall within the exempting provision for nursing services because a registered nurse or other nurse professional does not render these services.

The CRA is responsible for administering the ETA and its regulations as passed by Parliament. The CRA cannot change the legislation that governs the application and collection of the GST/HST. The wording of the exempting provisions in Part II of Schedule V does not allow an interpretation that would include therein services supplied by XXXXX. An amendment to the ETA would be required to treat the supplies of specimen collection and delivery services made by XXXXX as exempt.

Determinations of exempt supplies and legislative and regulatory amendments are a matter of tax policy, which falls within the responsibility of the Department of Finance. Since the issues you raised are tax policy issues, we understand that a copy of your letter has been forwarded to The Honourable James M. Flaherty, Minister of Finance, for consideration.

If you require clarification with respect to any of the issues discussed in this letter, please do not hesitate to contact me at 613-941-3268. Should you have additional questions on the interpretation and application of the GST/HST, please contact the XXXXX GST/HST Rulings Centre at 1-800-959-8287.

Yours truly,

Chantal Desrosiers, Manager
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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

Case Number: 81475r1Business Number: XXXXX

December 15, 2008

Dear XXXXX:

Subject:

GST/HST RULING
XXXXX

My purpose in writing is to advise you that we have recently reviewed the facts pertaining to the XXXXX and have determined that its supply qualifies for zero-rating under section 14 of Part II of Schedule VI to the Excise Tax Act (ETA). This review was conducted as a result of a request made by its manufacturer, XXXXX.

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

Statement of Facts

We understand that:

1. The XXXXX is a XXXXX golf car.

2. XXXXX

3. XXXXX

4. XXXXX

5. XXXXX

6. XXXXX

7. XXXXX

8. XXXXX

9. XXXXX

10. XXXXX

11. XXXXX

12. XXXXX

13. XXXXX

14. XXXXX

15. On XXXXX, you purchased the XXXXX and imported it into Canada. At the time of importation, you paid GST pursuant to section 212 of the ETA as no zero-rating provisions in Part II of Schedule VI applied.

Ruling Requested

You would like to know whether the XXXXX qualifies for zero-rated status under section 14 of Part II of Schedule VI.

Ruling Given

Based on the facts set out above, we rule that the XXXXX qualifies for zero-rated status under section 14 of Part II of Schedule VI.

This GST/HST Ruling supersedes our previous GST/HST Ruling to you dated XXXXX XXXXX wherein we ruled that its supply was subject to the GST/HST.

Explanation

Prior to its amendment, section 14 of Part II of Schedule VI zero-rated "A supply of a chair, commode chair, walker, wheelchair lift or similar aid to locomotion, with or without wheels, including motive power and wheel assemblies therefor, that is specially designed for use by an individual with a disability."

With its amendment, which became applicable to any supply made after February 26, 2008, section 14 of Part II of Schedule VI zero-rates "A supply of a chair, walker, wheelchair lift or similar aid to locomotion, with or without wheels, including motive power and wheel assemblies therefor, that is specially designed to be operated by an individual with a disability for locomotion of the individual."

In our earlier GST/HST Ruling letters to you, as referenced above, we had taken the position that the XXXXX was not zero-rated under section 14 of Part II of Schedule VI because, based on the information provided, we found that it was not "specifically designed for the daily needs and use of people with a disability".

Upon further review, we have determined that the XXXXX was specially designed for use by an individual with a disability because most of its features, qualities and capabilities address the needs of an individual with a disability. As such, the supply of the XXXXX in Canada qualifies for zero-rating status under section 14 of Part II of Schedule VI.

According to our records, effective XXXXX, you registered for GST/HST purposes as a sole proprietor who imports goods into Canada. As the mechanism used to recover the GST by a non-registrant on the importation of a good that is later found not to be payable differs from that of a GST/HST registrant, we offer the following comments.

Importation of goods into Canada

Section 212 imposes the GST at a rate of 5% on goods imported into Canada. It provides that every person who is liable under the Customs Act to pay duty on such goods, or would be so liable if the goods were subject to duty, is liable to pay GST on the value of the goods.

Subsection 212.1(2) imposes the provincial component of the HST at a rate of 8% in respect of certain importations by residents of the participating provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador). This tax applies in addition to the tax imposed under section 212. Generally, the tax imposed under section 212.1(2) will be collected by the Canada Border Services Agency at the time of importation, unless pursuant to subsection 212.1(3), the goods in question are accounted for as "commercial goods" under section 32 of the Customs Act.

Generally, all goods imported into Canada are taxable for GST/HST purposes unless specifically relieved under section 213. Importations of goods relieved of tax under section 213 are set out in Schedule VII.

Section 6 of Schedule VII provides for the non-taxable importation of goods the supply of which is included in any of Parts I to IV and VIII of Schedule VI, other than section 3.1 of Part IV of that Schedule. An importation of a XXXXX is considered to be a non-taxable importation for GST/HST purposes by virtue of the fact that it qualifies for zero-rated status (taxed at 0%) under section 14 of Part II of Schedule VI. GST/HST status code 57 may be used on the relevant Customs documentation to identify the importation as non-taxable for GST/HST purposes.

Importation as a non-GST/HST registrant

Prior to becoming registered for GST/HST purposes, you imported the XXXXX for your personal use. You paid the GST at the time of importation. To obtain a refund of the GST charged on the importation of the XXXXX, you or your customs broker will have to complete either form B2 Canada Customs - Adjustment Request or form B2-G CBSA Informal Adjustment Request in order to amend the original B3 to indicate GST/HST status code 57 applies to the importation. Refund applications made pursuant to subsection 216(6) through the B2 or B2-G must be made within four years from the date of the original import documentation. Electronic versions of these forms may be found on the Canada Border Services Agency (CBSA) website at www.cbsa-asfc.gc.ca.

We recommend that you contact your local CBSA client services office for assistance in completing the adjustment request. An agent of the CBSA will be able to confirm which adjustment form is relevant in your circumstances.

Importation as GST/HST registrant

Importers who are GST/HST registrants usually recover the GST or the federal component of the HST by claiming ITCs.

Where a GST/HST registrant has claimed an ITC to recover an overpayment of the GST on the importation of the good, no further action is required. In this instance, no penalty or interest will apply, provided a rebate is not claimed for the same amount.

Other Issues

During our telephone conversation of XXXXX, you advised that you are a commissioned salesperson and not an employee of XXXXX. You subsequently advised that you have not been charging GST on the commission you receive as sales representative from XXXXX for the sales it makes in Canada.

Based on our conversation, it is my understanding that XXXXX accepts purchase orders from persons wishing to buy the XXXXX. The payment for the purchase of the XXXXX is made by the purchaser directly to XXXXX.

XXXXX ships the XXXXX to XXXXX where you pick it up and deliver to the purchaser, according to arrangements agreed upon between you and the purchaser. You then import the XXXXX into Canada, pay the GST on behalf of the purchaser, deliver the XXXXX to the purchaser and seek reimbursement from the purchaser for the GST paid on the importation. On one occasion, XXXXX shipped an unsold XXXXX to XXXXX where you picked it up. You paid the GST upon its importation into Canada and claimed an ITC on the GST paid. You subsequently sold this XXXXX and another XXXXX to a person in Canada and charged GST on both sales. The GST on these sales was to be remitted to the CRA in your GST/HST return.

Comments

Generally a supply of a service that is made in Canada is subject to the GST at a rate of 5% or the HST at a rate of 13% if the supply is made in a participating province (Nova Scotia, New Brunswick and Newfoundland and Labrador), unless the supply is exempt or zero-rated.

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." A supply made by a Canadian commissioned sales representative, for example to a non-resident person of promoting the non-resident's products in Canada is deemed to be made in Canada in accordance with paragraph 142(1)(g).

Section 5 of Part V of Schedule VI zero-rates a supply made to a non-resident person of acting as an agent of the non-resident or of arranging for, procuring or soliciting orders for supplies by or to the non-resident, where the service is in respect of a supply to the non-resident person that is zero-rated under Part V of Schedule VI or a supply that is made outside of Canada by or to the non-resident person.

The supply made by a Canadian commissioned sales representative, for example to a non-resident would be zero-rated if the supply of the non-resident's products is deemed to be made outside of Canada. Conversely, if the supply of the non-resident's products were made in Canada and did not qualify for zero-rating under Part V of Schedule VI, the Canadian commissioned sales representative would be required to charge the GST/HST on the consideration payable by the non-resident person for their services. There are no exempting provisions that would apply to this supply.

The general place of supply rule in paragraph 142(1)(a) deems a supply by way of sale of tangible person property to be made in Canada if the property is, or is to be, delivered or made available in Canada to the recipient of the supply. However, where a supply of tangible personal property is made in Canada by a non-resident person who is not registered for GST/HST at the time the supply is made and the supply is not made in the course of a business carried on in Canada by the non-resident person, the supply of the tangible personal property by the non-resident person is deemed to be made outside Canada pursuant to subsection 143(1).

In addition, paragraph 142(2)(a) deems a supply of tangible personal property that is made by way of sale to be made outside of Canada if the property is, or is to be, delivered or made available outside of Canada to the recipient of the supply.

Whether a particular non-resident person is carrying on business in Canada is a question of fact to be determined on a case-by-case basis. Generally, a non-resident must have a significant presence in Canada to be considered to be carrying on business in Canada. GST/HST Policy Statement P-051R2 Carrying on Business in Canada provides greater detail in determining when a non-resident is carrying on business in Canada. The electronic version of this policy can be found on the CRA's website at http://www.cra-arc.gc.ca/E/pub/gi/notice194/README.html.

In summary, using the previous example cited, if products supplied by a non-resident are deemed to be made outside Canada under either subsection 142(2) because they are delivered or made available outside Canada or under subsection 143(1) because the non-resident is not registered for the GST/HST and is not carrying on business in Canada, the service of promoting the products in Canada provided by the Canadian commissioned sales representative to the non-resident would be a zero-rated supply.

We would be pleased to provide you with a GST/HST ruling regarding the tax status of your services to XXXXX. If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4395.

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,

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

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

Case Number: 81693
Attention: XXXXX
XXXXX
August 22, 2008

Subject:

GST/HST RULING
Application of GST/HST to financial planning services

Dear Mr. XXXXX:

Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to services provided by you as a partner of XXXXX. We apologize for the delay in responding to your request.

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

The following have been provided for our review:

• an agreement (the "Agreement") between you, as a partner of XXXXX, and XXXXX dated XXXXX;

• a sample Dealer Agreement (the "Dealer Agreement"): XXXXX between XXXXX and XXXXX, referred to as the Dealer;

• a sample Distribution Agreement (the "Distribution Agreement") between XXXXX and a counter party referred to as the "Dealer" in the agreement;

• an undated Dealer Service Agreement (the "Dealer Service Agreement") between XXXXX and XXXXX (the "Dealer");

• a sample Schedule XXXXX Fee for Service Arrangement between XXXXX and an unnamed client (individual investor);

• a sample Fee Schedule (the "Fee Schedule") from XXXXX, effective XXXXX; and

• a variety of e-mails between you and XXXXX.

Statement of Facts

Based on the above documents and your letter, we understand that:

XXXXX is a partnership, is not registered for purposes of the GST/HST and is in the business of providing financial planning services. XXXXX is not registered with the XXXXX as a mutual fund dealer. As a result, XXXXX is registered with XXXXX, who is a registered mutual fund dealer with the XXXXX. XXXXX has agreed to arrange to process all trades through XXXXX.

You, as a partner of XXXXX, have entered into the Agreement with XXXXX. The recitals to the Agreement state that XXXXX is registered with certain applicable securities authorities as a dealer for the purpose of trading in mutual fund securities and other selected products and services. The recitals also state that you, referred to as Agent in the Agreement, are registered with the applicable securities authorities as a salesperson permitted to trade in mutual fund securities and other selected products and services.

Section XXXXX of the Agreement provides that the relationship between you and XXXXX is an Agency Relationship. Agency Relationship is defined in the Agreement to mean a relationship where XXXXX acts as principal and the Agent (you) act as agent. Under Section XXXXX of the Agreement, you are appointed XXXXX non-exclusive agent for XXXXX of the Agreement. You are permitted to act as XXXXX agent in all jurisdictions in which you are lawfully licensed and permitted to trade in XXXXX Products. XXXXX Activities are business activities carried out by XXXXX. XXXXX Products are investment products and services authorized by XXXXX to be offered to clients.

Section XXXXX of the Agreement deals with the conduct of the Agent. All securities related business conducted by you, as agent, shall be conducted in the name of XXXXX. XXXXX is liable to third parties for the acts and omissions of the Agent relating to XXXXX business. You, as Agent, have agreed to comply with certain rules and standards of conduct that are defined in the XXXXX Statement of the Standards of Professional Conduct, Schedule XXXXX of the Agreement. You are required to ensure that all your assistants and/or employees follow this code of conduct as well. Schedule XXXXX lists XXXXX standards and contains various responsibilities within each standard. The XXXXX standards are: XXXXX.

With respect to your relationships with and responsibilities to clients and prospects, you are required to: XXXXX. All advisors must use reasonable care and judgement to achieve and maintain independence and objectivity. With respect to investment recommendations and actions, advisors must make reasonable inquiries into a client's financial situation, investment experience and objectives prior to making investment recommendations and must consider the appropriateness and suitability of investment recommendations or actions.

Section XXXXX of the Agreement deals with the business responsibilities of the Agent. You, as Agent, agree to conduct only XXXXX Activities and offer for sale only XXXXX Products, except as permitted in Section XXXXX (e.g., the selling of life insurance products). You are required to exercise your own judgement regarding the solicitation of clients, to act always in the best interests of your clients, to present all products and services fairly and not make any false or misleading statement regarding them. You, as Agent, also agree to take full responsibility for "XXXXX" and "XXXXX" rules and match the client's investment objectives with recommended products and services.

Section XXXXX of the Agreement deals with payment to the Agent. XXXXX. Commissions are paid at a rate specified in Schedule XXXXX. Commissions are only paid by XXXXX to you as Agent upon XXXXX from the relevant fund. Schedule XXXXX of the Agreement provides that XXXXX% of the fee income earned by the dealer (here, XXXXX) will be paid to you. Further, XXXXX% of the commission income earned by the dealer will be paid to you. Schedule XXXXX, under the heading XXXXX by the Agents, also lists certain costs to be paid by the agents including fixed costs and a XXXXX that calls for an over-ride of XXXXX% on all fees and commissions earned. There are also provisions for minimum and maximum compensation levels.

The sample Distribution Agreement is between XXXXX (also referred to as Manager in the agreement), the manager of certain mutual funds known as the XXXXX, and the Dealer, a person in the business of trading in securities, (in the present case, XXXXX). The recitals of this agreement indicate that the Manager wishes to appoint the Dealer to act as a distributor of units of the mutual funds and the Dealer is willing to act in this capacity.

Section XXXXX of the Distribution Agreement provides that XXXXX appoints the Dealer as a person entitled to offer for sale and distribute units of the XXXXX funds. Section XXXXX provides that these units may only be sold by representatives (Agents) of the Dealer that have been approved by XXXXX.

Section XXXXX of the Distribution Agreement provides:

XXXXX.

The sample Dealer Agreement between XXXXX and XXXXX contains several agreements. One of these agreements, a XXXXX Agreement, allows XXXXX to offer a certain XXXXX. Another agreement, a XXXXX from XXXXX to XXXXX and XXXXX, authorizes and directs XXXXX, upon receipt of certain instructions, to redeem or purchase securities referred to in a wire order. The net proceeds are to be forwarded to XXXXX. Other agreements are included in the Dealer Agreement that allow XXXXX and XXXXX to perform certain administrative and settlement services.

The Dealer Service Agreement between XXXXX and XXXXX is for the provision of products and services by XXXXX to XXXXX and its clients. This agreement states that XXXXX, as Dealer, offers products specified in this agreement to its clients. A recital to this agreement states:

XXXXX.

Schedule XXXXX to the Dealer Service Agreement lists a variety of products. There are XXXXX types of products: Registered plans where XXXXX acts as Trustee and holds the assets; Non-Registered plans where XXXXX holds the assets; and Other plans where XXXXX holds the assets. The Registered plans consist of various self-directed plans. Article XXXXX of the Dealer Service Agreement provides that the Dealer has engaged the services of XXXXX and the products and services offered to clients of the Dealer (XXXXX) as detailed in the Schedules. Schedule XXXXX to the agreement list a variety of services to be provided by XXXXX to XXXXX. These services include: opening accounts; clearing and settlement services; and other services.

The Dealer Service Agreement requires XXXXX to ensure that the instructions communicated to XXXXX in relation to a client's account are fully authorized. Also, XXXXX does not and will not provide advice, recommendations, etc. with respect to a client's loan or investment. XXXXX will clear and settle all transactions placed with mutual fund companies in connection with products for XXXXX. XXXXX shall administer the client's accounts in accordance with the agreement. Section XXXXX of the Dealer Service Agreement provides that there is no agency relationship between XXXXX and XXXXX, for purposes of the agreement and they act, at all times, as independent contractors.

The XXXXX Fee for Service Arrangement states that the client (account holder/individual investor) has agreed with their financial advisor to pay the advisor and/or dealer a fee for the account. The fee will be charged and collected XXXXX by XXXXX as account administrator and remitted to the Dealer (XXXXX). The client acknowledges, in this agreement, that their advisor and/or dealer may already be compensated on assets held in the client's account. Further, collection of this fee is the responsibility of XXXXX and is paid to the Dealer on a XXXXX basis. A portion of this fee is then passed down to you as the advisor referred to in this agreement and as provided for in the Agreement between XXXXX and you.

The Fee Schedule provided by XXXXX to individual investors/unit holders lists a variety of services provided by XXXXX and corresponding fees including: various types of trustee services and fees; fees for a variety of mutual fund transactions; services related to various mortgage investments; and services regarding individual pension plans.

An estimated fee schedule that you have provided, and an e-mail to XXXXX, lists some of the services you provide including: developing a financial plan; preparing an investment policy statement; advising on financial affairs of the client; and ongoing reviews of investments and the financial plan. You verbally explained that general estate, retirement and tax advice, as well as the preparation of tax returns for larger accounts, is a separate service for a separate fee charged by XXXXX. XXXXX also provides additional services that are charged separately including: preparing comprehensive financial plans; selling insurance; corporate financial consulting; preparing and reviewing financial projections and proposals; and corporate valuation. You indicated that XXXXX charges GST/HST on the consideration for these services, other than the sale of insurance.

Ruling Requested

Are the amounts paid to you, as a partner of XXXXX, under Section XXXXX of the Agreement by XXXXX, consideration for a financial service?

Ruling Given

Based on the facts set out above, we rule that the amounts paid to you, as a partner of XXXXX, by XXXXX under Section XXXXX of the Agreement, are consideration for a financial service.

Explanation

Please note that subsection 272.1(1) provides that anything done by a person as a member of a partnership is deemed to have been done by the partnership in the course of the partnership's activities and not to have been done by the person.

Pursuant to section 1 of Part VII of Schedule V, the supply of a "financial service" is exempt for GST/HST purposes unless it is zero-rated under Part IX of Schedule VI. Additional information on zero-rated financial services is available in GST Memorandum 300-3-9, Financial Services. A supply of a financial service may be zero-rated where you are making a supply to a non-resident person.

The definition of "financial service" includes agreeing to provide or arranging for most financial services, including the sale of mutual fund units. To qualify as a service of "arranging for" the supply of a financial service, each of the following elements should be present:

• the intermediary will help either the supplier or the recipient or both, in the supply of a financial service,

• the supplier and/or the recipient count on one or more intermediaries for assistance in the course of a supply of a financial service, and

• the intermediary is directly involved in the process of the provision of a financial service and will therefore, expend the time and effort necessary with the intent to effect a supply of a service described in paragraphs (a) to (i) of the definition of financial service.

For additional information, please refer to GST/HST Policy Statement P-239:

Meaning of the Term "Arranging For" as Provided in the Definition of "Financial Service".

Please note that any additional services that are provided to a client that are not XXXXX Activities as described in the Agreement and are not part of a supply of arranging for the supply of a financial service (here, the sale of mutual fund units), are not included in this ruling and may be taxable supplies.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9577. 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,

Kirk Moore
Financial Institutions Unit
Financial Institutions & Real Property Division
Excise and GST/HST Rulings Directorate

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XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 89235

September 16, 2008

Dear XXXXX:

Subject:

GST/HST RULING
Commissions related to the sale of property

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST) to services of a real estate agent in relation to the sale of shares and other assets. We apologize for the delay in replying.

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

Statement of Facts

Based on your letter dated XXXXX and additional information we received in writing from you and from XXXXX accountant for the vendors, and in discussions with XXXXX and Luba Baran XXXXX of the Canada Revenue Agency (CRA), we understand the facts to be as follows:

1. GST Status: XXXXX is registered for GST/HST purposes and operates a real estate agency under the trade name XXXXX.

2. Brokerage Contract: XXXXX was retained by XXXXX (the Vendors), as evidenced by an MLS Exclusive Seller's Brokerage Contract effective XXXXX (the "Brokerage Contract"), to sell their property, consisting of farm land and all buildings and attached equipment. The location of the property is the XXXXX.

(i) Under the Brokerage Contract, XXXXX is to receive a gross commission of XXXXX% plus GST and PST, subject to additional terms set out in the Brokerage Contract (XXXXX).

(ii) Under the Brokerage Contract, XXXXX agrees to offer a part of its commission to the Buyer's Broker, specified as XXXXX% plus GST and PST (XXXXX);

(iii) In your letter dated XXXXX, you indicate that XXXXX billed the seller commission equal to XXXXX% of $XXXXX plus GST and PST.

3. Offer/Contract of Purchase and Sale: Under a contract of purchase and sale using the standard form of the XXXXX Real Estate Association (XXXXX REA), dated XXXXX (the Offer), XXXXX (the Purchaser) offers to purchase from XXXXX, through XXXXX, farm land (in the line for legal description, there is a reference to XXXXX XXXXX), buildings and XXXXX equipment. The Offer is accepted on XXXXX by XXXXX, with the standard acceptance clause including an acknowledgement to pay commissions pursuant to the listing agreement (see item 2 above; the listing agreement is referred to herein as the Brokerage Contract).

• XXXXX to the Offer, on the standard XXXXXREA form, sets out various terms and conditions, and includes a reference to XXXXX It also states that the names of the sellers are: XXXXX

• XXXXX

• XXXXX.

4. Amendments to Offer: Various amendments to the Offer were made after XXXXX:

(i) An amendment to farm/ranch contract of purchase and sale, on a standard XXXXX REA form, dated XXXXX, extends the acceptance date of the contract of purchase and sale.

(ii) A counter-offer on the standard XXXXX REA form, dated XXXXX, clarifies certain terms of the sale, including which assets are not included, and reiterates that the purchaser's lawyer is to prepare a sales agreement for the sale of shares and assets, as noted in 3 above.

(iii) A notice to remove conditions, on a standard XXXXX REA form, dated XXXXX XXXXX, removes certain conditions in the contract of purchase and sale.

(iv) A further amendment to farm/ranch contract of purchase and sale, on a standard XXXXX REA form, dated XXXXX, changes the possession date to XXXXX.

5. Unsigned Copy of Part of Agreement of Purchase and Sale: Parts of an unsigned copy of an agreement of purchase and sale between the vendors, XXXXX, and the purchaser, XXXXX., (the Agreement of Purchase and Sale) provides for the sale of shares in XXXXX by the individual shareholders to the purchaser XXXXX, the sale of XXXXX house to the purchaser XXXXX, the sale of XXXXX house to the purchaser XXXXX, the sale of XXXXX lands and equipment to the purchaser XXXXX. The closing date under the Agreement of Purchase and Sale was to have effect from XXXXX; however, the parts of the document provided do not include a signature and thus do not confirm the actual closing date.

6. GST Charged and Remitted on Broker's Commission: A letter dated XXXXX, from the Vendors' accountant, XXXXX, confirms that XXXXX charged the Vendors a commission fee at the rate of XXXXX% on the total purchase price of $XXXXX, for services rendered in brokering the sale, resulting in commission of $XXXXX. Your letter dated XXXXX indicates that as a registrant, XXXXX charged, collected and remitted GST at the rate of 7% on your entire commission of $XXXXX, in the amount of $XXXXX.

7. Purchase Price Attributable to Assets/Shares: In the above-noted letter of XXXXX to XXXXX, XXXXX expressed the view that the GST was not applicable to the portion of the commission charged to his client that related to the share sale, on the basis that services provided to arrange for a financial service are exempt supplies for GST purposes. In support of this view, XXXXX refers to obsolete GST/HST Policy Statement P-048, Real Estate Agents Commissions and Housing Co-Op Units. He requested that XXXXX refund an amount of GST to the vendors, calculated based on the proportion of consideration paid on the sale which related to the shares (XXXXX). XXXXX XXXXX' letter also sets out a break down of the $XXXXX purchase price paid by XXXXX. among shares and various other assets, as set out in the table below.

XXXXX

Another letter from XXXXX to XXXXX of the CRA XXXXX dated XXXXX, includes XXXXX pages out of the Agreement of Purchase and Sale, as referenced in item XXXXX above, that clarifies that the additional parcel of farm land in XXXXX name, which sold for $XXXXX as indicated in the previous letter of XXXXX, was added to the transaction at a later date.

8. Broker's Activities: You provided the following additional information to XXXXX of the CRA, in a telephone conversation on XXXXX:

• You confirmed that the sale was arranged so that all components of the sale were required to be included. The transaction would not have occurred if any of the components (e.g., XXXXX house) was not included. It was the Vendors' requirement that all components of the transaction were to be sold.

• You also clarified what you, as agent, did with respect to the transaction - you obtained a listing for the sale of the business, originally XXXXX. You assisted the Vendors in calculating the likely worth of the business and all of the assets included in the sale. You advertised the business as being for sale and contacted likely purchasers. On a number of occasions, you prepared an offer to purchase the business on behalf of a potential purchaser. XXXXX You also helped the Vendors determine that it would be beneficial to structure the majority of the transaction as a share sale.

Ruling Requested

Is a portion of the commission set out in the Brokerage Contract earned by XXXXX for an exempt supply because it relates to the sale of shares?

Ruling Given

Based on the facts set out above, we rule that the supply provided by XXXXX under the Brokerage Contract related to the sale of various properties is a taxable supply. XXXXX should charge and remit GST with respect to the amount of the gross commission provided for in XXXXX of the Brokerage Contract. To the extent that XXXXX shares its commission with another broker (e.g. the Buyer's broker as set out in XXXXX of the Brokerage Contract) who is a GST registrant, that broker would charge XXXXX GST on the amount of the shared commission. XXXXX would be eligible to claim an input tax credit for the GST related to the shared commission provided the conditions in section 169 are met.

Explanation

One of the first issues to be considered in determining the GST status of the services provided by XXXXX under the Brokerage Contract is whether they constitute a single supply, or multiple supplies consisting of arranging for the sale of various assets and the shares of a corporation, and possibly, providing advice. GST/HST Policy Statement P-077R2: Single and Multiple Supplies discusses the factors to be considered in making this determination. Based on this guidance and related case law, and particularly, in light of that fact that XXXXX could not negotiate the sale of each property and equipment separately for each owner, XXXXX would be considered to be making a single supply.

As set out in P-077R2, the next step is to determine the characterization of the single supply in order to determine its GST status, in particular, the significance of the fact that the transaction was structured, at least in part, as a sale of shares.

For GST/HST purposes, most supplies of services that are made in XXXXX are taxable supplies subject to the GST at the rate of 5% (7% prior to July 1, 2006) unless the supply is specifically identified as being a zero-rated supply or an exempt supply. Zero-rated supplies are taxable at the rate of 0% and are listed in Schedule VI. Exempt supplies are listed in Schedule V and are not subject to the GST/HST.

Section 1 of Part VII of Schedule V exempts the supply of a financial service that is not included in Part IX of Schedule VI (i.e., a zero-rated financial service). The term "financial service" is defined in subsection 123(1) to include the transfer of ownership of a financial instrument, which is defined to include an equity security. Paragraph (l) of the definition of financial service provides that a service of arranging for certain financial services is also a financial service.

In accordance with case law and GST/HST Policy Statement P-239: Meaning Of The Term "Arranging For" As Provided In The Definition Of "Financial Service", in characterizing the single supply under the Brokerage contract, it is necessary to consider the predominant element, or the dominant and essential characteristic of the supply. This should generally be determined in light of the activities undertaken and contracted for, and what is the dominant element of those activities, based on the time and effort expended, and in particular, the intention at the time an agreement is entered into.

While the ultimate agreement to sell the property was structured, in part, as a sale of shares, and in part, as a sale of other assets, under the Brokerage Contract the Seller listed property (i.e. farm land and all buildings and attached equipment) for sale with XXXXX. The predominant element of XXXXX supply under the Brokerage Contract was finding a potential purchaser for the property not arranging for the sale of shares.

The parties to the sale transaction and their lawyers, subsequent to the signing of the Offer/Contract of Purchase and Sale on the standard XXXXX REA form, determined how the sale transaction would be structured.

If you require clarification with respect to any of the issues discussed in this letter, please contact me directly at 613-952-9210 or Luba Baran at 613-941-2046.

Yours truly,

Dawn Weisberg
Manager
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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

Case Number: 108503
Business Number: XXXXX
Attention: XXXXX
November 13, 2008

Subject:

GST/HST RULING
XXXXX

Dear XXXXX:

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

HST applies at the rate of 13% in the participating provinces of Nova Scotia, New Brunswick and Newfoundland and Labrador. 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

Our understanding of the facts is as follows:

1. The Product is a XXXXX

2. The Product is currently available in XXXXX varieties: XXXXX.

3. Each package contains XXXXX individually wrapped bars, each weighing XXXXX grams. They are also available in a XXXXX club pack.

4. The Product is shelved in the freezer case of the supermarket. Consumers must either heat them in a toaster oven or defrost them in the refrigerator before eating.

5. The Products ingredients are as follows:

XXXXX.

6. An Information Sheet with the ruling request provides (in part) the following:

XXXXX.

7. XXXXX web site XXXXX) provides (in part) the following information on the Product:

XXXXX

8. The package containing XXXXX of the Product gives specific heating instructions for thawed and frozen Product. XXXXX. XXXXX.

Ruling Requested

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

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are zero-rated (taxable at 0%) pursuant to section 1 of Part III of Schedule VI.

Explanation

Generally, 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 (13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated, pursuant to subsection 165(3). The tax rate in respect of a zero-rated supply is 0%, where a zero-rated supply is a supply that is included in Schedule VI.

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

cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where:

(i) they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving, or

(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six,

but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating.

XXXXX is a bread product under paragraph 1(m) of Part III of Schedule VI. This paragraph allows bread products to remain a basic grocery product and thus be zero-rated, when it has no sweetened filling or coating.

The filling in the Product consists of XXXXX. However, the ingredients added to the XXXXX do not alter the XXXXX to the extent that it becomes a sweetened filling. As the Product is a bread product, such as bagels, English muffins, croissants or bread rolls without a sweetened filling or coating, it will not be excluded from zero-rating by paragraph 1(m).

Please note that the above ruling applies to the XXXXX flavours as described above. The application of the GST/HST to other flavours will be dependent on an analysis of the specific product and the result may differ from this ruling.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-5124. 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
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

Case Number: 108576
XXXXX
XXXXX
October 16, 2008

Subject:

GST/HST RULING
GST/HST on the temporary importation of goods into Canada

XXXXX

Thank you for your fax of XXXXX and the additional information provided on

XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the temporary importation of a bus and tractor trailer to be used for displaying goods in Canada.

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

Statement of Facts

Our understanding of the facts is as follows:

1. Your client, XXXXX is a non-resident corporation XXXXX. XXXXX is not registered for purposes of the GST/HST.

2. XXXXX is planning to temporarily import a bus and tractor trailer XXXXX.

3. The bus and tractor trailer, which are XXXXX accessible to the general public, will be used for the display and demonstration of products XXXXX.

4. Access to the bus and tractor trailer and the provision of samples and recommendations are all provided for no consideration.

5. XXXXX.

6. XXXXX.

7. The display products and samples will not be imported with the bus or the tractor trailer nor will the bus or tractor trailer be used to transport the goods in Canada. The display products and samples will be shipped directly from XXXXX Canadian subsidiary XXXXX.

8. The Canada Border Services Agency has determined that the bus and tractor trailer would qualify as a temporary import under tariff item No. 9993.00.00 and does not qualify as a temporary import under former tariff item 9819.00.00 or subheading 9823.60.00.

Ruling Requested

You would like to know whether the temporary importation of the bus and tractor trailer is a non-taxable importation for GST/HST purposes.

Ruling Given

Based on the facts set out above, we rule that the temporary importation of the bus and tractor trailer is a taxable importation and as such, is subject to tax at 5%.

Explanation

Generally all goods imported into Canada are taxable pursuant to section 212, unless specifically relieved under section 213. Importations of goods relieved of tax under section 213 are set out in Schedule VII. Section 1 of Schedule VII identifies goods classified under former Customs tariff heading 9819.00.00 and subheading 9823.60.00 as non-taxable imports. Since the CBSA has determined that the bus and tractor trailer would not qualify as temporary imports under the aforementioned heading and subheading then section 1 of Schedule VII would not relieve tax on the importation of these goods. There are no other provisions in Schedule VII that apply to relieve the tax on the importation of the bus and tractor trailer. As a result, the importation of the bus and tractor trailer into Canada does not qualify as a non-taxable import for purposes of the GST/HST.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-7841. 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,

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

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