GST/HST Ruling

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

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

[Addressee]

Case Number: […]
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
      		Application of GST/HST to […][the Product][a chicken based product] 

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to varieties of […] (the Product) manufactured by […] (the manufacturer).

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

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

2. The Product is sold in a prepackaged container as a single serving.

3. The Product requires refrigeration and is not heated.

4. The net weight of the Product is […] grams for […] varieties and […].

5. The Product contains […] precooked chicken along with […][describes flavoring].

6. […][List of product varieties].

7. The Product is promoted as being […][describes benefits and convenience]

8. The Product is labelled as “[…]”.

9. As the Product requires refrigeration, based on retailer preference, the Product may be shelved in the prepared salads section, the self-serve deli section or the packaged meat section. […].

10. The Product’s website […] describes the Product as follows: […]

RULING REQUESTED

You would like to know whether the supply of the Product is zero-rated or taxable at the full rate of GST/HST.

RULING GIVEN

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

EXPLANATION

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply. Zero-rated supplies (listed in Schedule VI to the ETA) are subject to the GST/HST at the rate of 0% and exempt supplies (listed in Schedule V to the ETA) are not subject to the GST/HST.

Section 1 of Part III of Schedule VI to the ETA 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 excluded from zero-rating by way of paragraphs (a) to (r) of that section.

With respect to the Product under consideration, as none of the exclusions in paragraphs 1(a) to (r) of section 1 of Part III of Schedule VI to the ETA apply to a supply of the Product, this supply would be zero-rated.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5220. 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,

Zubair Patel
Basic Groceries and Point-of-Sale Rebates Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

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

[Addressee]

Case Number: 157148
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Eligibility to claim input tax credits on pension plan related expenses

Thank you for your [correspondence] of September 26, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to pension plan related expenses.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

Our understanding of the facts based upon your submission of September 26, 2013 and our subsequent conversations […], is as follows:

1. […]. [A Co] is registered for GST/HST purposes (BN […]). [A Co] is a specified person for GST/HST purposes as its threshold amounts under subsection 249(1) exceed $6 million.

2. [A Co’s] Pension Plan (the Plan) was established effective [mm/dd/yyyy] by the […] Directors of [A Co]. The Plan provides pension benefits to eligible employees of [A Co] who choose to participate in the Plan. The Plan is governed by the Pension Benefits Standards Act, 1985, R.S.C. and regulations thereunder (PBSA) and is registered for purposes of the Income Tax Act. The Plan is not registered for GST/HST purposes.

3. The revised and restated articles of the Plan ([mm/dd/yyyy]) state that the Plan has two components: the Defined Benefit component and the Defined Contribution component. The Defined Benefit component is limited to employees who transferred to [A Co] from the public service and were formerly under the […][Public Service Superannuation Act (PSSA)] Plan. The Defined Contribution component is available to all other employees, as well as to the continued employees (referred to above) who elect to participate. The “Administrator” of the Plan is defined to mean [A Co].

4. According to section […] of Article […] of the Plan, […], [A Co] as the Administrator, administers and operates the Plan including: engaging counsel and agents and obtaining and paying for clerical, medical, legal, investment, management, trustee, custodian and actuarial services, for the administration and operation of the Plan.

5. Under section […] of the Plan, the Administrator is entitled to obtain investment information and advice from an investment advisor(s) selected by the Administrator.

6. In accordance with section […] of the Plan which directs that [A Co] establish a Trust Fund or an insurance contract for the funding of the Plan, [A Co], as the Administrator, established an insurance contract for the funding of the Plan. The Pension Fund is administered in accordance with the terms of the insurance contract. The insurance contract was not provided for review.

7. The Pension Fund is to be held separate and distinct from [A Co]’s assets and its assets are to be accounted for separately between the Defined Benefit component and the Defined Contribution component.

8. [A Co] has contracted with […]([…][B Co]) to be the pension plan service provider and funding agent for the Plan. Both components of the Plan are funded under this contract.

9. According to section […] of the Plan, […], all normal and reasonable expenses incurred in the operation of the Plan and all taxes levied or assessed with respect to the Pension Fund may, at the discretion of [A Co] as the Administrator, be paid from the Pension Fund.

10. […].

11. Section […], sets out that the Plan is to be administered and construed in accordance with the laws of Canada, including, but not limited to the PBSA and the Income Tax Act.

12. […]

13. The submission includes a detailed listing of […] fees payable from the Plan. [A Co] enters into agreements with and contracts for these services with third parties (e.g., […][C Co], a pension consulting firm). The fees payable from the Plan are as follows:

* Administration: Annual statements, benefit calculations, PA and data handling, retirees’ indexation, questions and general consulting, annual information return, pension adjustment reversals and Office of the Superintendent of Financial Institutions’ assessment form.

* Actuarial Consulting: Committee-preparation and attendance, actuarial valuation, regulations and defined contribution provision changes (plan text, booklet, etc.), general consulting, actuarial valuation report-additional disclosure required by the Canadian Institute of Actuaries, actuarial valuation change in going concern assumptions and preparation of the presentation for the Board of Directors’ Audit Committee regarding the actuarial valuation.

* Investment Consulting: Defined benefit component performance review, defined contribution component performance review, defined contribution communication program, defined benefit surplus monitoring and rebalancing for the de-risking strategy, committee-preparation and attendance, general consulting and special requests, asset mix and Statement of Investment Policies and Procedures review for defined contribution component, preparation of the presentation for the Board of Director’ Audit Committee regarding de-risking, investment instructions to [B Co] on fund change and analysis and manager search for fund replacement.

14. An example of the discharging of such an expense for which [A Co] has contracted with [C Co] and for which you wish to claim an ITC is as follows:

* Sample invoice [#] dated [mm/dd/yyyy], for the amount of $[…] plus $[…] […][GST/HST] was issued to [A Co] from [C Co], a pension consulting firm.

* Work is completed by the pension consultant, [C Co].

* The invoice is sent to [A Co] for payment.

* The Vice President of Human Resources reviews and approves the invoice for payment.

* The Plan service provider, [B Co] is then notified that the funds can be taken from the Plan for payment.

* Invoice is paid by the Plan to [C Co].

RULINGS REQUESTED

You would like to know

1. Is [A Co] entitled to claim an input tax credit (ITC) on the pension expenses related to the plan that are itemized in Fact # 13 and that are discharged in the manner described in Fact # 14?

2. If [A Co] can claim ITCs, how far back is it eligible to claim them?

3. If [A Co] is eligible to claim an ITC, can it claim 100% of the GST/HST paid or a certain percentage?

RULINGS GIVEN

Based on the facts set out above, we rule that

1. [A Co] may claim ITCs for the GST/HST paid or payable on expenses described in Fact # 13 incurred in connection with the administration of the Plan where [A Co] is the recipient of the supplies described and to the extent that expenses were incurred in the course of [A Co]’s commercial activity. However, [A Co] is required to account for GST/HST on amounts paid from the Pension Fund in connection with these expenses.

2. An ITC that arises in a particular reporting period during which [A Co] is a specified person must generally be claimed in a return filed by the due date of the return for the [A Co]’s last reporting period that ends within two years after the end of the fiscal year that includes the particular reporting period.

3. Subject to all requirements of section 169 being met, [A Co] is eligible to claim an ITC in respect of GST/HST to the extent (expressed as a percentage) the property or service is acquired or imported for consumption, use or supply in the course of [A Co]’s commercial activities.

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

EXPLANATION

Generally, under section 169, where a person acquires or imports property or a service and, during a reporting period of the person in which the person is a registrant, the GST/HST in respect of the property or service becomes payable by the person or is paid by the person without having become payable, that person will be eligible to claim an ITC in respect of the tax to the extent (expressed as a percentage) the property or service is acquired or imported for consumption, use or supply in the course of the person's commercial activities.

A “commercial activity” of a person means a business carried on by the person, or an adventure or concern of the person in the nature of trade (other than certain exclusions), except to the extent that the business or adventure or concern in the nature of trade involves the making of exempt supplies by the person. A commercial activity also includes the making of a supply (other than an exempt supply) by the person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply.

In the present case, the expenses incurred by [A Co] (the person liable to pay the consideration under the agreement for the supply) with respect to services related to the administration of the Pension Plan relate to property or services acquired for consumption, use or supply in the course of [A Co]’s activities. As the person liable to pay for the services, [A Co] may claim ITCs on GST/HST paid on expenses incurred in connection with the administration of the Plan to the extent that the expenses were incurred in the course of [A Co]’s commercial activity subject to all requirements of section 169 being met.

However since the expenses incurred have been paid from the Pension Fund assets, [A Co] must account for the GST/HST on these amounts. As with the investment management services of [C Co], where expenses incurred by [A Co] have been paid from the Pension Fund, we would consider [A Co] to have made a taxable supply of services for consideration equal to the invoice amounts. [A Co] would therefore be required to account for the GST/HST calculated on these amounts under sections 221, 225 and 228.

Time limits for claiming ITCs are set out in subsection 225(4). An ITC for a particular reporting period must generally be claimed by a person who is a specified person in a return filed by the person on or before the due date of the return for the last reporting period of the person that ends within two years after the end of the particular reporting period, or that ends within four years for a person who is not a specified person. A specified person is generally defined under subsection 225.1(4.1) to include a person whose threshold amounts under subsection 249(1) exceed $6 million.

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

Yours truly,

Nancy Jardine
Special Provisions - FI Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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

Excise and GST/HST Rulings Directorate
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 158099

Dear [Client]:

Subject:	GST/HST Ruling
		Application of the GST/HST to core charges

Thank you for your fax of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to core charges.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

STATEMENT OF FACTS

We understand the facts are as follows:

1. You, an individual who is not registered and is not required to be registered for the GST/HST, purchased a remanufactured break calliper from ([…][the Company]).

2. You paid the HST in the amount of $[…] which was calculated on the consideration for the part which included a core charge of $[X].

3. Subsequent to the initial transaction you supplied [the Company] with a used part for rebuilding or remanufacturing in exchange for consideration in the amount of $[X].

4. The amount paid by [the Company] for the used part did not include the HST.

RULINGS REQUESTED

You would like to know how the GST/HST applies to your supply of the used part to [the Company] and what happens to the HST that you paid to [the Company].

RULINGS GIVEN

Based on the facts set out above, we rule that GST/HST was not applicable to the supply of the used part made by you to [the Company]. In addition, [the Company] is required to include HST it collected on the total consideration payable for the remanufactured break caliper, including the core charge in its net tax calculation and remit any positive amount of net tax to the Receiver General for Canada.

EXPLANATION

Generally, every recipient of a taxable supply made in Canada shall pay the GST/HST calculated at the rate of 5% on the value of the consideration for the supply (15% in Nova Scotia, 13% in Ontario, New Brunswick, Newfoundland and Labrador and 14% in Prince Edward Island) unless the circumstances of the supply satisfy a specific exempting or relieving provision.

An additional amount is charged by some vendors when certain automotive parts are sold to a person. This is often referred to as a core or a casting charge.

Old or failed parts such as batteries, alternators, starters, CV shafts, brake callipers, and distributors contain a “core” or recyclable component. These cores can be provided to the manufacturer for rebuilding or recycling. Rebuilding or remanufacturing is the process of taking used parts, completely disassembling and thoroughly cleaning them, replacing the faulty and/or worn components with new components, and restoring them to their original specification.

A vendor may choose to impose a core charge to encourage the person to bring the used part to the vendor for rebuilding or remanufacturing. Some vendors of automotive parts do not apply a core charge.

Where an automotive part is sold and the vendor who is a GST/HST registrant charges a core charge, the core charge forms part of the consideration payable for the sale of the part. As such, the vendor is required to charge the applicable rate of GST/HST calculated on the total consideration payable for the part including the core charge. As a result, [the Company] correctly charged the HST for the supply of the new part. [The Company] is required to include the amount of HST charged on the total consideration including the core charge, in its net tax calculation. Any positive amount of net tax is required to be remitted to the Receiver General for Canada.

Where you provide a used part to the vendor, after the purchase of the new part from the vendor, you are making a supply of the used part to the vendor. If the used part is recyclable and the vendor agrees to purchase the used part, the vendor will pay an amount to you for the used part. Since you are not registered or required to be registered for the GST/HST, you do not charge or collect GST/HST from the vendor for the supply of the used part. As a result, [the Company] does not pay the GST/HST to you when you supply the used part to [the Company].

We have enclosed a copy of GST/HST Info Sheet GI-167 Application of the GST/HST to Core Charges which discusses the GST/HST treatment in detail, including the special trade-in rules that may apply in certain circumstances.

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

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

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

Enc.: GST/HST Info Sheet GI-167

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

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

[Addressee]

Case Number: 155193
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Host rewards provided to sales representatives

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to host rewards provided by […] (“the Company”), to its sales representatives.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

Based on your letter, the Company’s website ([…]), and the information you provided […], we understand:

1. The Company is […] [a] corporation that is establishing a direct selling business using sales representatives (“Representatives”) who earn commissions by arranging for sales of the Company’s products to consumers.

2. The Company is registered for the GST/HST (BN: […]).

3. The Company has received approval to operate pursuant to the Network Sellers Method (NSM) set out in section 178, effective [mm/dd/yyyy].

4. The Company’s Representatives are “sales representatives” and its products are “select products” as those terms are defined in subsection 178(1).

5. Under the Company’s marketing plan, a third party (who is not a Representative), that hosts a party for the purpose of a Representative promoting and arranging for the sale of the Company’s products, will be entitled to “Host Rewards” if certain sales and customer volumes are met at the party (this is then referred to as a […][the Party]). No Host Rewards are provided where the sales and number of customer levels are not met.

6. The Host Rewards are products from the Company’s line of select products, and the value of the Host Rewards will equal […]% of the value of the sales arranged at [the Party] (the percentage used to determine the value of the Host Rewards increases as the total sales value from the party increases).

7. Under the Company’s marketing plan, a Representative that hosts a party for the purpose of promoting and arranging for the sale of the Company’s select products by the Representative will earn the same type and value of Host Rewards as a third party host, provided the same sales and customer volumes are met at the party ([…]). No Host Rewards are earned where the sales levels and number of customers are not met.

8. You provided an excerpt from the Company’s Compensation Plan that outlines the […] Program: […]

9. You indicate that the reference to the GST/HST in the Company’s Compensation Plan will be revised depending on the outcome of this ruling request.

10. At our request, you also provided a complete copy of the Company’s Compensation Plan. The Cover of the Compensation Plan includes the following statements: […]

11. The introductory paragraph of the Compensation Plan lists [#] ways in which a Representative receives compensation: […]

12. Certain terms used in the Compensation Plan are defined in the first section, including the following: […]

13. The subsequent sections of the Compensation Plan outline the various ranks of Representatives, how business ranks and pay ranks are achieved, and the commissions a Representative earns at each rank. […].

14. The Compensation Plan also has a section on the “Company Rewards” that a Representative can earn, which can be used to purchase the Company’s products. […]. The excerpt describing the […] Program is included in this section of the Compensation Plan.

15. The final sections of the Compensation Plan outline when and how compensation is paid, and set out the Company’s Commission Rules and Policy.

RULING REQUESTED

You would like to know whether the select products provided as Host Rewards to a Representative under the Compensation Plan as indicated above will be:

(a) non-taxable under subsection 178(9) on the basis that the network seller is making a supply of property (i.e., select products provided as Host Rewards) to an individual as consideration for the supply by the individual of a service of acting as a host at an occasion that is organized for the purpose of allowing a sales representative of the network seller (in this case, the host […]) to promote or arrange the sale of the network seller’s select products; or

(b) non-taxable under subsection 178(7) on the basis that the select products provided as Host Rewards constitute “network commissions” as they are payment of an amount which became payable to the sales representative as a contractual right under an agreement with the network seller (i.e., the Compensation Plan) as consideration for the supply of a service of arranging for sales of the network seller’s select products.

RULING GIVEN

Based on the facts set out above, we rule that subsection 178(7) applies to deem the Representative’s service, which includes hosting a party for the purpose of promoting and arranging for the sale of the Company’s select products, not to be a supply, and GST/HST would not apply to any part of the consideration for the supply, including any select products provided as Host Rewards.

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

EXPLANATION

The Company was granted approval under subsection 178(5) to use the NSM effective [mm/dd/yyyy], and as such, meets the definition of a network seller in subsection 178(1).

Under subsection 178(7), if, at any time when an approval granted under subsection (5) in respect of a network seller and each of its sales representatives is in effect, a network commission becomes payable by the network seller to a sales representative of the network seller as consideration for a taxable supply (other than a zero-rated supply) of a service made in Canada by the sales representative, the taxable supply is deemed not to be a supply for GST/HST purposes.

In the scenario described, it is the service or services being provided by the Representative directly to the Company that is at issue. Therefore, it is the paragraph (a) part of the definition of “network commission” in subsection 178(1) that has to be met: “network commission” of a sales representative of a person means an amount that is payable by the person to the sales representative under an agreement between the person and the sales representative as consideration for a supply of a service, made by the sales representative, of arranging for the sale of a select product or a sales aid of the person.

As defined in subsection 123(1), “amount” means money, property or a service, expressed in terms of the amount of money or the value in terms of money of the property or service, while “property” means any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money. The Host Rewards are property and may be expressed as an amount for GST/HST purposes.

To meet the paragraph (a) part of the definition of “network commission,” the Host Rewards have to be payable by the person to the sales representative under an agreement between the person and the sales representative. The […] Program, setting out the manner and value of Host Rewards that may be earned by a Representative, is outlined in the Compensation Plan, the written agreement between the Company and its Representatives that outlines the terms under which the Company compensates the Representatives for arranging for the sale of the Company’s select products. As such, this condition of the definition of network commission is met.

As well, the Host Rewards have to be consideration for a supply of a service, made by the sales representative, of arranging for the sale of a select product or a sales aid of the person to be a “network commission.” As defined in subsection 123(1), “consideration” includes any amount that is payable for a supply by operation of law, while a “service” means anything other than property, money, and anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person.

A single supply versus multiple supply analysis of a Representative’s activities, one of which is a service of acting as a host of a party under this scenario, using the criteria in GST/HST Policy Statement P-077R2, Single and Multiple Supplies, can help determine whether the Representative is providing a single supply of a service of arranging for the sale of the Company’s select products, or also providing a separate supply of a service of hosting the party to the Company. An analysis of the Representative’s activities would indicate that all of the activities performed by the Representative with respect to the Company’s select products and in accordance with the Compensation Plan, including hosting a party for the purpose of promoting or arranging for the sale of the Company’s select products at that party, are in respect of a single supply of a service of arranging for the sale of the Company’s select products.

Therefore, hosting a party as described in the facts set out above would be considered part of the Representative’s single supply of a service of arranging for the sale of select products of the Company, and all amounts provided as consideration, including the select products provided as Host Rewards, are “network commissions.” Subsection 178(7) deems the Representative’s service 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 613-952-7909. 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

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

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

[Addressee]

Case Number: 156633
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Application of the GST/HST to a lease of real property on which an apartment building is constructed

Thank you for your letter of [mm/dd/yyyy] (received by our office by fax on [mm/dd/yyyy]) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a supply of real property on which an apartment building is constructed.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the following from your letter and your phone message of [mm/dd/yyyy]:

1. […] (the Lessee) entered into a lease agreement (the Agreement) with […] (the Lessor) whereby the Lessee will lease certain real property (the Property) located at […]. The Property includes a portion of […] (the Existing Building), on top of which the Lessee will construct an apartment building, and other real property referred to as […][Related Areas]. The Existing Building consists of […].

2. The Lessee constructed a […] storey, […]-unit residential apartment building (the Complex) on the rooftop of the Existing Building. You indicated that the residential units in the Complex will be leased for use as a place of residence by an individual for periods of continuous occupancy of at least one month. As such, we assume that the supply of each unit in the Complex is an exempt supply under section 6 of Part I of Schedule V to the ETA. We also assume that the entire Complex is a residential complex, as that term is defined in subsection 123(1), and that the [Related Areas] form part of the residential complex.

3. Under the Agreement, the Ground Rent payment will be $[…] for the first […] years of the Term of the Agreement and will increase every […] years as indicated therein. […].

4. In addition to the Ground Rent payment, the Lessee must pay, as Additional Rent, an amount in respect of the portion of the municipal property tax bill attributable to the residential space constructed by the Lessee. You estimate this amount to be approximately $[…] annually.

5. You indicated that the construction of the Complex was completed in […][yyyy] and at that time the Lessee self-assessed the GST/HST on the fair market value of the Complex pursuant to subsection 191(3). As such, we assume that the Complex is a multiple unit residential complex.

6. You indicated that the Lessor has been charging the Lessee the GST/HST on the Ground Rent and the Additional Rent since the commencement of the Agreement.

7. We make specific note of the following content of the Agreement:

a) Paragraph […] states that the Construction Period will begin on [mm/dd/yyyy] and end on the earlier of [mm/dd/yyyy] and the date an occupancy permit is issued by […] in respect of the Complex.

b) Paragraph […] indicates that the Term of the lease is […] years which, pursuant to paragraph […], will commence on the first day after the expiry of the Construction Period (the Commencement Date). The lease term will end one day prior to the […] anniversary of the Commencement Date as indicated in paragraph […].

c) Under Article […], “Additional Rent” is defined under paragraph […] as all sums of money or charges required to be paid by the Lessee under the Agreement (except Ground Rent and Rental Taxes) either to the Lessor or otherwise, including, without limitation, payment of Realty Taxes and charges for water, gas, electricity, and other utilities servicing the Complex where not separately metered, whether or not the same are designated as “Additional Rent”.

d) Paragraph […] defines “Realty Taxes” as all real property taxes, rates, duties and assessments (including local improvement rates) impost charges or levies, whether general or special, that are levied, charged or assessed against the Complex and forming part of the residential assessment against the Lands (which is described under […] from time to time by any lawful authority, whether federal, provincial, municipal, school or otherwise. “Realty Taxes” also include any taxes payable by the Lessor in respect of the Complex which are imposed in lieu of, or in addition to, any such real property taxes, whether of the foregoing character or not, and whether or not in existence at the date hereof, and any such real property taxes levied or assessed against the Lessor on account of the Complex, but specifically excluding any taxes assessed upon the income of the Lessor and/or taxes forming part of any commercial assessment against the Existing Building and the Lands.

e) Article […] provides the terms with respect to Additional Rent. Paragraph […] states, in part, that in addition to the Ground Rent, the Lessee shall, throughout the Construction Period and the Term, pay to the Lessor or as otherwise provided in the Agreement, as Additional Rent, the following costs incurred and attributable to the Leased Lands (the portion of the Lands on which the Complex will be located) and the Complex:

		* all Realty Taxes;

		* all charges, costs, accounts and any other sums payable by reason of the supply of the utilities and services to the Complex or the [Related Areas] (as shown on Schedule […]);

		* the Lessee’s share of the Shared Expenses as set out in Article […];

		* all other sums, amounts, costs, cost escalations and charges specified in the Agreement to be payable by the Lessee.  

Paragraph […] states that all the payments set out in the Agreement (other than Rental Taxes) constitute Ground Rent or Additional Rent, and shall be deemed to be and shall be paid as rent, whether or not any payment is payable to the Lessor or otherwise, and whether or not as compensation to the Lessor for expense to which it has been put. The Lessor has all the rights against the Lessee for default in payment of Additional Rent that it has against the Lessee for default in payment of Ground Rent.

RULINGS REQUESTED

You would like to know the following:

1. Is the supply of real property made under the Agreement a taxable supply or exempt supply for purposes of the ETA?

2. Is the Lessor required to charge and collect GST/HST on the Ground Rent payments payable under the Agreement?

3. Is the Lessor required to charge and collect GST/HST on amounts charged as Additional Rent that is in respect of Realty Taxes paid by the Lessor?

RULINGS GIVEN

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

1. The supply of real property made under the Agreement is a taxable supply of real property from the commencement of the Agreement up to the end of the lease interval (as discussed below) in which the Lessee is considered to have made and received a taxable supply of the Complex pursuant to subsection 191(3) (hereinafter referred to as the “Taxable Supply Period”). The supply of real property made under the Agreement is an exempt supply from the beginning of the lease interval immediately following the lease interval in which the Lessee is considered to have made and received the taxable supply of the Complex in accordance with subsection 191(3) and for the remainder of the lease intervals up to the termination of the Agreement (hereinafter referred to as the “Exempt Supply Period”), provided the use of the Complex by the Lessee does not change during the term of the Agreement.

2. The Lessor is required to charge and collect GST/HST on the Ground Rent payments that are paid or become payable under the Agreement for lease intervals that fall within the Taxable Supply Period. The Lessor is not required to charge and collect GST/HST on the Ground Rent payments that are payable under the Agreement for lease intervals that fall within the Exempt Supply Period.

3. The Lessor is required to charge and collect GST/HST on the consideration charged as Additional Rent in respect of Realty Taxes where the Additional Rent is paid or becomes payable during lease intervals that fall within the Taxable Supply Period. The Lessor is not required to charge and collect the GST/HST on the consideration charged as Additional Rent in respect of Realty Taxes where the Additional Rent becomes payable during lease intervals that fall within the Exempt Supply Period.

EXPLANATION

Taxable Supply Period

The Lessee’s construction of the Complex is a commercial activity as it results in a deemed taxable supply under subsection 191(3). Under this subsection, a deemed sale and re-purchase occurs where the construction of a multiple unit residential complex (MURC) is substantially complete and:

* the builder of the complex gives possession or use of the complex, or a residential unit in the complex, to an individual who is the first individual to occupy the complex, or a unit in the complex, after substantial completion of the construction;

* possession or use of the complex, or a residential unit in the complex, is given under a lease, licence or similar arrangement, and

* the lease, licence or similar arrangement is entered into for the purpose of occupancy of the complex, or a unit in the complex, by the individual as a place of residence.

Generally, a supply of real property made in Canada is subject to the GST/HST unless a specific exemption or relieving provision applies. There is no exemption or relieving provision that applies to the Lessor’s supply of real property made under the Agreement during the Taxable Supply Period. Therefore, any Ground Rent or Additional Rent payment that is paid or becomes payable under the Agreement during lease intervals that fall within the Taxable Supply Period are subject to the GST/HST.

Exempt Supply Period

After the taxable supply of the complex is deemed to be made under subsection 191(3), the Lessee will be considered to be engaged in making exempt supplies pursuant to section 6 of Part I of Schedule V to the ETA. The exemption in section 6 applies to either of the following:

* A supply of a residential complex or a residential unit in a residential complex made by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by the same individual where continuous occupancy of the complex or unit is at least one month, or

* A supply of a residential unit by way of lease, licence or similar arrangement made for the purpose of its occupancy as a place of residence or lodging by an individual, where the consideration for the supply does not exceed $20 for each day of occupancy.

Consequently, the supply by way of lease of the Complex from the Lessor to the Lessee is an exempt supply pursuant to section 6.11 of Part I of Schedule V to the ETA. Section 6.11, in part, exempts the lease of that part of a building that forms part of a residential complex for a lease interval throughout which the lessee makes supplies of the property or parts of the property and all or substantially all of those supplies are exempt under section 6 of Part I of Schedule V to the ETA. Any Ground Rent or Additional Rent payment that becomes payable during lease intervals that fall within the Exempt Supply Period are exempt of the GST/HST.

Lease interval

For GST/HST purposes, a “lease interval” is a period of time in a lease arrangement that is attributable to a lease payment. Subsection 136.1(1) provides that where a supply is made by way of lease, licence or similar arrangement, a separate supply of the property is considered to be made for each lease interval. This provision is particularly relevant for determining whether a supply is a taxable supply or an exempt supply.

While the lease of the Complex to the Lessee is initially subject to GST/HST, it becomes exempt in the lease interval immediately following the lease interval in which the Lessee is considered to have made the taxable sale of the Complex under subsection 191(3). As a result, the Lessor would no longer be required to charge or collect GST/HST in respect of any further Ground Rent or Additional Rent payments made by the Lessee as long as the Lessee continues to make supplies of the units in the Complex and all or substantially all of those supplies are exempt under section 6 of Part I of Schedule V to the ETA.

We note that paragraph […] of the Agreement states that the Lessee will be permitted to use the Complex for the purpose of a residential apartment building, furnished suites, and a hotel. You indicated that the residential units in the Complex will be leased on an exempt basis to individuals for use as a place of residence for periods of continuous occupancy by the individual of at least one month. If the Lessee changes the use of the Complex in the future, the tax status of the supplies of the real property made under the Agreement by the Lessor would need to be re-examined to determine whether the exemption in section 6.11 of Part I of Schedule V to the ETA still applies.

Additional Rents

Standard lease agreements commonly provide for the payment of amounts known as "additional rents" as well as basic rent. Examples of amounts that might be included in a lease agreement as additional rents are percentage rents, common area expenses and certain cost reimbursements such as property taxes, insurance or utilities. Where these amounts form part of the total consideration for the supply of real property, they will take on the same tax status as the rent.

The Lessee’s reimbursement of the municipal property taxes to the Lessor is considered additional rent under the Agreement. Therefore, the Additional Rent relating to Realty Taxes is additional consideration for the supply of real property made under the Agreement.

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.

ADDITIONAL INFORMATION

Tax paid in error

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

Where a refund or credit is not issued by the supplier, the person may make an application under subsection 261(1) for a rebate of the tax paid in error by completing and submitting application form GST 189, General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST). It should be noted that a rebate application made under section 261 cannot include amounts that were paid in error more than two years before the application is filed.

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

Yours truly,

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

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

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

[Addressee]

Case Number: 156722

Dear [Client]:

Subject:	GST/HST RULING
		Post-Bariatric Plastic Surgery Involving the Removal of Excess Skin

This is further to your letter of [mm/dd/yyyy] and our telephone conversation in [mm/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain plastic surgery procedures performed after you experienced significant weight loss following Bariatric surgery.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.

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

STATEMENT OF FACTS

On the basis of your letter and our additional research, our understanding of the facts is as follows:

1. In [mm/yyyy] you underwent gastric bypass Bariatric surgery which was funded by the Government of Ontario through the Ontario Health Insurance Plan (OHIP).

2. OHIP is a plan established under the Health Insurance Act, RSO 1990, c H.6, pursuant to which the Government of Ontario pays for insured health care services provided to insured persons.

3. We understand that Bariatric surgery is a treatment for severe obesity in adults. Bariatric surgery restricts food intake and results in massive and rapid weight loss, typically in excess of 100 lbs. It is generally used by people who cannot lose weight by diet and exercise alone or who suffer from serious health problems related to obesity. Examples of such health problems are diabetes, heart disease, hypertension and severe sleep apnea (when breathing stops for short periods during sleep).

4. Following the Bariatric surgery you lost […] pounds and have maintained the weight loss for one year. Since the weight loss you have experienced numerous rashes and infection in the lower abdomen and under the breast area which was documented by your family physician.

5. Our research indicates that the massive and rapid weight loss following Bariatric surgery often leaves a patient with poor abdominal support, incisional hernias and significant and disfiguring excess skin. The associated symptoms of the excess skin include disabling rashes and recurrent skin infections due to the folds of the skin and sometimes functional impairment (e.g., walking impaired due to excess skin, inability to participate in sports and exercise), back strain, and cosmetic deformity. Areas affected include the arms, breasts, abdomen, back, and thighs. The folds of excess skin cannot be reduced with diet or exercise. It can only be removed surgically.

6. The surgeon who performed the Bariatric surgery sent referrals on your behalf to two plastic surgeons for excess skin removal to prevent further infection and rashes.

7. The procedures recommended by the two plastic surgeons to remove the excess skin in your case are Fleur de lis abdominoplasty combined with a mastopexy procedure.

8. The first surgeon advised you that the procedures have a medical purpose and are medically necessary to remove the excess skin resulting from significant weight loss and to prevent further rashes and infection. The second surgeon said that it was his understanding that this form of cosmetic surgery is “HST applicable”.

9. According to our research, a Fleur de lis abdominoplasty is generally for severe cases of excess skin and fatty tissue in extreme weight loss cases. This procedure has two components: a panniculectomy, which involves excess skin removal of the lower portion of the abdomen and an additional vertical component of excision above the umbilicus to excise the excess tissue in the upper abdomen.

10. Mastopexy involves the removal of excess breast tissue and raising sagging breasts. This procedure is typically performed after a woman has lost substantial weight and due to decreased breast tone.

11. You advised that the panniculectomy component of the Fleur de lis abdominoplasty was approved by OHIP for funding as the amount of excess skin on the lower abdomen and documented rashes met OHIP requirements. In addition, other aspects of the surgery, such as the anesthesiologist and the hospital operating room are to be paid for by OHIP.

12. The additional upper vertical component of the Fleur de lis abdominoplasty and the mastopexy are not covered by OHIP and the cost to you for these procedures is $[…].

13. The Fleur de lis abdominoplasty and the mastopexy are to be performed at the same time by the same surgeon.

RULING REQUESTED

You would like to know whether you are required to pay the HST on the consideration charged to you by the surgeon for the additional upper vertical component of the Fleur de lis abdominoplasty and the mastopexy procedures.

RULING GIVEN

Based on the information set out in the Statement of Facts above, we rule that the additional upper vertical component of the Fleur de lis abdominoplasty and the mastopexy procedures are exempt supplies pursuant to section 5 of Part II of Schedule V. Therefore, the HST does not apply to the consideration charged to you by the surgeon for these supplies.

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

The general rule under the GST/HST legislation is that every recipient of a taxable supply made in Canada shall pay tax calculated at the applicable GST or HST rate on the value of the consideration charged for the supply, unless the supply is exempt from tax or a zero-rated supply (i.e., taxed at the rate of 0%).

The specific property and services that are exempt from GST/HST are listed in Schedule V to the ETA. Part II of Schedule V lists the health care services that are GST/HST exempt. The supplier does not charge tax on exempt supplies. Because the exempting provisions are tax relieving provisions, the supplier is responsible for demonstrating to the Canada Revenue Agency that the conditions for exempting a supply are met. Where the conditions are not met, the supplier is required to charge the GST/HST on the supply.

Part II of Schedule V - Health care services

Section 5 of Part II of Schedule V exempts a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual. A “medical practitioner” for purposes of this section is defined in section 1 of Part II of Schedule V to mean a person who is entitled under the laws of a province to practise the profession of medicine or dentistry. A medical practitioner therefore includes licensed physicians and surgeons.

Section 9 of Part II of Schedule V exempts a supply (other than a zero-rated supply) of any property or service but only if, and to the extent that, the consideration for the supply is payable or reimbursed by the government of a province under a plan established under an Act of the legislature of the province to provide for health care services for all insured persons of the province. For purposes of this section, an “insured person” is defined in section 1 to have the same meaning as in the Canada Health Act. (Footnote 1) We also note that OHIP is a plan established under the Health Insurance Act pursuant to which the Government of Ontario pays for insured health care services provided to insured persons. Accordingly to the extent that a supply of a health care service is paid or reimbursed under OHIP, the supply is exempt under section 9 of Part II of Schedule V.

However, with the exception of supplies that are paid or reimbursed by a provincial or territorial health insurance plan (such as OHIP), health care services may be taxable or exempt under the provisions of Part II of Schedule V depending on their purpose, as section 1.1 and section 1.2 exclude the following from the exempting provisions of that Part, other than supplies that are exempt under section 9:

* Section 1.1 excludes a cosmetic service supply and any separate supply made in connection with a cosmetic service supply that is not made for a medical or reconstructive purpose.

* Section 1.2 excludes supplies that are not qualifying health care supplies.

“Cosmetic service supply” means a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes. In this context we consider a medical purpose to mean maintaining health, preventing disease or treating, relieving or remediating an injury, illness, disorder or disability. A reconstructive purpose means surgery performed on abnormal structures of the body caused by congenital defects, developmental abnormalities, trauma, infection, tumors, or disease. Within the context of this interpretation, the word “trauma” includes trauma due to treatment such as surgery. Reconstructive surgery is generally performed to improve function, but it may also be performed to approximate a normal appearance.

Surgical and non-surgical procedures requested by an individual for aesthetic purposes, e.g., to alter or enhance normal structures of the body to improve the individual’s appearance and that have no medical or reconstructive purpose are considered to be cosmetic service supplies. Examples of common “purely” cosmetic procedures are liposuction, hair replacement procedures, botulinum toxin injections to diminish the appearance of facial wrinkles, breast augmentation surgery, and tooth whitening.

“Qualifying health care supply” means a supply of property or a service that is made for the purpose of:

* maintaining health,
* preventing disease,
* treating, relieving or remediating an injury, illness, disorder or disability,
* assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or
* providing palliative health care.

Generally, supplies deemed not to be included in Part II of Schedule V would be taxable at the applicable rate of GST/HST. This would include any separate supply provided in connection with that supply such as the services of an anaesthetist. Thus all property and services involved in the provision of a taxable supply are taxed accordingly. Therefore, when a supply of a health care service rendered by a medical practitioner is not paid for or reimbursed by a provincial health insurance plan but meets the conditions of section 5 of Part II of Schedule V, it is necessary to determine the purpose of that supply in order to determine the application of the GST/HST to the supply.

If a supply is made for more than one purpose, all of the purposes are considered when determining if the supply is made for medical or reconstructive purposes (notwithstanding any aesthetic element) and is a qualifying health care supply. Accordingly, a plastic surgery procedure rendered by a surgeon to remove excess skin and fatty tissue for the purpose of alleviating or correcting a deformity or other significant defect in appearance arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or from a disfiguring disease is not excluded from the exemption in section 5 of Part II of Schedule V by section 1.1 or section 1.2. When performed for this purpose, the procedure would also be considered to have a purpose of maintaining health, preventing disease, or treating, relieving or remediating a disorder or to treat a medical condition.

In contrast, a plastic surgery procedure to remove excess skin and fatty tissue where there is no abnormal body structure or symptoms causing a degree of impairment, recurrent infection, pain, etc., or to treat a medical condition would be considered to be provided for cosmetic purposes and excluded from the exempting provisions in Part II of Schedule V by sections 1.1 or 1.2.

Therefore, in order to distinguish plastic surgery performed for medical or reconstructive purposes from plastic surgery performed purely for cosmetic purposes we would need to understand the particular abnormal physical structure that the procedure is intended to correct or the symptomatology associated with the condition that the procedure is intended to treat, e.g., recurrent rashes, chronic skin infections, occurrence of chronic pain and functional impairment.

The distinction between the purposes for which a supply is made is not always clear. Generally, the Canada Revenue Agency does not make a determination as to the medical or reconstructive necessity of a particular procedure and instead relies on the views of the medical profession as well as the guidelines of the provinces, given that the provincial governments have jurisdiction over the delivery of health care services within their respective jurisdictions.

Because of the purpose tests that are applied to the exempting provisions and that the exempting provisions are tax relieving provisions, whether a cosmetic procedure is a qualifying health care supply with a medical or reconstructive purpose should be supported by evidence to demonstrate that the supply is not excluded from the exempting provisions of Part II of Schedule V by section 1.1 or section 1.2. Thus whether a procedure rendered to a particular individual has a medical or reconstructive purpose and is provided for the purpose of maintaining health, preventing disease, or treating, relieving or remediating an injury, illness, disorder or disability is a question of fact and is determined on a case-by-case basis. Accordingly, the opinion of the physician or surgeon is important in making the determination of medical or reconstructive necessity with respect to an individual’s unique circumstances.

We understand that the medical profession generally considers plastic surgery procedures involving excess skin and fatty tissue removal such as Fleur de lis abdominoplasty and mastopexy to be cosmetic surgery. Further, we note that you indicated that one of the surgeons advised you that these procedures are a form of cosmetic surgery.

However, a cosmetic surgery procedure is not automatically excluded from the exempting provisions in Part II of Schedule V. If there is a medical or reconstructive purpose and the procedure is performed by the surgeon for the purpose of maintaining health, preventing disease, or treating, relieving or remediating an injury, illness, or disorder, then the supply falls within the exemption in section 5 of Part II of Schedule V.

Based on your circumstances, we understand that the Fleur de lis abdominoplasty and mastopexy procedures were performed for reconstructive purposes to correct a defect in appearance due to excessive disfiguring skin as well as to treat the symptomatology of skin infections and rashes due to the folds of the excess skin. The folds of excess skin were the result of the massive and rapid weight loss you experienced due to the Bariatric surgery, where plastic surgery is the only way to remove the folds of excess skin.

We also note that part of the Fleur de lis abdominoplasty procedure was paid for by OHIP. Therefore, to the extent that the Fleur de lis abdominoplasty was paid for by OHIP, that part of the procedure is exempt pursuant to section 9 of Part II of Schedule V. The additional upper vertical component of the Fleur de lis abdominoplasty and the mastopexy are exempt pursuant to section 5 of Part II of Schedule V. These procedures are not excluded from section 5 because they were rendered for the purpose of correcting the resulting deformity caused by significant and disfiguring excess skin and to provide relief of rashes and infection associated with the excess skin.

Tax paid in error

Where the recipient of a supply pays the GST/HST “in error”, that person is encouraged to request a refund or credit of the tax paid from the supplier, pursuant to section 232. Paragraph 232(1)(b) provides that where a supplier has collected from the recipient an amount of tax in excess of the tax that was collectible by the supplier from the recipient, the supplier may, within two years after the day the amount was collected, refund or credit the excess amount to that recipient.

Where this is not possible, pursuant to section 261 the recipient may request a rebate of the amount paid in error directly from the Canada Revenue Agency by filing the form GST 189E, General Application for Rebate of Goods and Services Tax ,which is available under Forms and Publications from our web site. Among other criteria, to qualify for a rebate under this section, the recipient must file their rebate claim within two years from the day the amount was initially paid to the supplier.

Additional Comments

[…]. Please be advised that this ruling applies to the facts of your specific situation and as such, it is not a general application ruling.

We will consider providing information on the application of the GST/HST to cosmetic surgery procedures in a general publication in the future.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-6761. 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
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 Section 2 of the Canada Health Act, R.S.C. 1985, c. C-6 defines “insured person” to mean, in relation to a province, a resident of the province other than:

(a) a member of the Canadian Forces,
(b) [Repealed, 2012, c. 19, s. 377]
(c) a person serving a term of imprisonment in a penitentiary as defined in the Penitentiary Act, or
(d) a resident of the province who has not completed such minimum period of residence or waiting period, not exceeding three months, as may be required by the province for eligibility for or entitlement to insured health services.

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

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

[Addressee]

Case Number: 153133
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Tax Status of  […] Stevia Extracts in Powder and Liquid Form

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of […] Stevia Extracts (the “Products”) in powder and liquid form. We apologize for the delay in responding.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

1. The Products are manufactured and distributed by […] (the Distributor).

2. Distribution is made to a variety of food retailers across Canada.

3. The Products are sold in […] formats: Liquid Extract sold in […] mL and […] mL bottles and available in […][flavour 1] and […][flavour 2]; Powdered Extract sold in […][packaging 1]; and […][packaging 2] or […][packaging 3].

4. As part of its ruling request, the Distributor has provided copies of current labels for the Products and revised labels that will soon appear on all of the packaging.

5. The current and new Stevia Liquid Extract labels state the following:

Current Labelling: […][description of product, use and ingredients]

Proposed Labelling: […][amended description of product, use and ingredients]

6. The current and new labelling for the Stevia Liquid Extract […][flavour 1] is as follows:

Current Labelling [flavour 1]: […][description of product, use and ingredients]

Proposed Labelling [flavour 1]: […][amended description of product, use and ingredients]

7. The current and new labelling for the Stevia Liquid Extract […][flavour 2] is as follows:

Current Labelling [flavour 2]: […][description of product, use and ingredients]

Proposed Labelling [flavour 2]: […][amended description of product, use and ingredients]

8. The current and new labelling for the Stevia Powdered Extract is as follows:

Current Labelling: […][description of product, use and ingredients]

Proposed Labelling: […][amended description of product, use and ingredients]

9. The current and new labelling for the Stevia Extract […] is as follows:

Current Labelling: […][description of product, use and ingredients]

Proposed Labelling: […][amended description of product, use and ingredients]

10. The Distributor’s website […] describes stevia as follows: “[…].”

11. The website lists the following uses for stevia: […]

12. The website also references the following: […][description of use of product]

13. Recipes are posted on the website […]

14. In a telephone conversation on [mm/dd/yyyy], the Distributor confirmed that, in addition to health food stores, the Products are sold in [various] retail outlets such as […].

15. As part of the incoming request, reference was made to a notice issued by Health Canada titled “Notice of Modification to the List of Permitted Sweeteners to Enable the Use of Steviol Glycosides as a Table-Top Sweetener and as a Sweetener in Certain Food Categories (the Notice).” The Notice was issued with an effective date of November 30, 2012. It is the Distributor’s opinion that, as steviol glycosides are now classified as sweeteners, the Products in question should qualify as an ingredient and thus should be afforded zero-rated status.

RULING REQUESTED

In light of Health Canada adding steviol glycosides to the List of Permitted Sweeteners and the Distributor’s transition to the revised labelling for the Products, would supplies of the Products be zero-rated under section 1 of Part III of Schedule VI to the ETA?

RULING GIVEN

Based on the facts set out above, we rule that supplies of the Products with the proposed revised labelling are zero-rated under section 1 of Part III of Schedule VI to the ETA. The Products are ingredients that are not captured by any of the exclusionary paragraphs of (a) to (r) in that section.

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

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply. Zero-rated supplies (listed in Schedule VI to the ETA) are subject to the GST/HST at the rate of 0%. Exempt supplies (listed in Schedule V to the ETA) are not subject to the GST/HST.

Section 1 of Part III of Schedule VI to the ETA 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. As stated in paragraph 2 of the GST/HST Memoranda Series 4.3, Basic Groceries, we consider 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.

The term “ingredient” is also not defined in the ETA. Generally, our view is that an average consumer would consider a product to be an ingredient if the product added to the flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, must be a food or beverage.

With respect to the Products, the proposed revised labelling clearly identifies the Products as sweeteners and has removed any risk information previously referenced. Furthermore, the Products are advertised as sweeteners and are marketed as alternatives to sugar and artificial sweeteners. The Products are used, recognized, and commonly sold as an ingredient. The primary use of the Products is to impart a sweet taste to food and drink to which it is added. Thus, we consider each of the Products with the proposed revised labelling to be an ingredient.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5220. 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,

Zubair Patel
Basic Groceries and Point-of-Sale Rebates Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

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

[Addressee]

Case Number: 153151
Business Number: [...]

June 10, 2013

Dear [Client]:

Subject: GST/HST RULING
FCTIP-Tour Package Eligibility

Thank you for your fax of April 26, 2013, concerning the eligibility of certain tours for purposes of the Goods and Services Tax (GST)/ Harmonized Sales Tax (HST) rebate provided under the Foreign Convention and Tour Incentive Program (FCTIP).

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.

Statement of Facts

Based on your fax of April 26, 2013, our conversation of May 7, 2013, and information on your Web site, we understand the following:

1. [...] (hereafter, the Tour Operator) is registered for GST/HST purposes under Business Number [...].

2. The Tour Operator assembles a tour which it markets as [...] (hereafter, the Tour) and which takes place between [mm/dd] and [mm/dd]. The Tour is sold to persons who are not resident in Canada (hereafter, non-resident persons).

3. The Tour is from [...] to [...] days in duration and includes short-term accommodation in Canada at [...] in [...][Particpating Province A] [...] [describes location, accommodation and amenities]
4. The Tour includes one service: a passenger transportation service [...].

5. The Tour Operator sells the Tour for an all-inclusive price.

6. The Tour Operator pays or credits an amount on account of the FCTIP rebate to non-resident persons at the point of sale.

Ruling Requested

You would like to know if the Tour is an eligible tour package for purposes of the FCTIP.

Ruling Given

Based on the facts set out above, we rule that the Tour is an eligible tour package for purposes of the FCTIP.

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 Excise Tax Act (ETA), regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

The Tour is an eligible tour package for purposes of the FCTIP since it is a tour package that includes short-term and/or camping accommodation in Canada and at least one service, and it is sold for an all-inclusive price.

ADDITIONAL INFORMATION

Under the FCTIP, a non-resident person may be entitled to a rebate of up to 50% of the GST/HST payable on an eligible tour package purchased from a GST/HST registrant. Generally, a non-resident person is entitled to a rebate where it:

• pays GST/HST on the purchase of the eligible tour package; and
• meets all other conditions and restrictions set out in the ETA. Different conditions and restriction may apply, depending on whether the non-resident person is an individual, a business, an organization, or a tour operator. Information on these conditions and restrictions can be found in GST/HST Guide RC4160, Rebate for Tour Packages, Foreign Conventions, and Non-Resident Exhibitor Purchases.

A non-resident person that is entitled to a rebate could file Form GST115, GST/HST Rebate Application for Tour Packages, to claim the rebate. However, since the Tour Operator pays or credits an amount on account of the rebate to which the non-resident person may be entitled, the non-resident person is considered to have received its rebate and should not file Form GST115.

Before paying or crediting an amount on account of the rebate to the non-resident person at the point of sale, the Tour Operator should verify that the non-resident person is entitled to the rebate. In addition, the Tour Operator must meet other conditions and restrictions found in
GST/HST Guide RC4036, GST/HST Information for the Travel and Convention Industry.

Where the Tour Operator pays or credits an amount on account of the rebate, the Tour Operator must maintain documentary evidence that the non-resident person would be entitled to the rebate if the non-resident person had paid the GST/HST and filed a rebate application with the Canada Revenue Agency (CRA). Examples of forms that may be used to obtain this evidence are included in Appendices A to D to GST/HST Memorandum 27.3, Foreign Convention and Tour Incentive Program-Rebate for Eligible Tour Packages and Accommodation Supplied as Part of Eligible Tour Packages.

This ruling letter should not be construed as being a declaration by the CRA that a particular non-resident person is entitled to a rebate.

More information on the FCTIP is available at www.cra.gc.ca/visitors, including the forms and publications mentioned in this letter.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8814. 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,
Christiana De Benedetti
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

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

[Addressee]

Case Number: 153472
Business Number: [...]

October 18, 2013

Dear [Client]:

Subject: GST/HST RULING
Tax status of Agave Syrup

Thank you for your letter of April 24, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to [...] (the Product) supplied by [...] (your Company) as described below.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.

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

Statement of Facts

1. From your Company's website [...], our understanding of the facts is as follows:

The Product
• is a [...], natural sweetener [...];
• is marketed as an alternative to sugar, [...];
• [...][Usage description];
• is labelled as [...] agave syrup;
• is available in [...][flavours];
• [...][Packaging information and quantities] ;
• can be used in cooking, baking, and making coffee, tea, or alcoholic beverages;
• [...][Usage of the product];
• [...][Additional description];
• [...][Additional description];
• [...];
• [...][Nutrition factor];
• [...][Additional description]; and
• [...][Additional nutritional properties].

2. The "Nutrition Facts" sheet received from you shows the following: [...]
Ruling Requested

You would like confirmation that supplies of the Product are zero-rated under section 1 of Part III of Schedule VI to the ETA.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are zero-rated under section 1 of Part III of Schedule VI to the ETA. The Product is not captured by any of the exclusionary paragraphs of (a) to (r) in that section.

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

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply, unless the supply is zero-rated (listed in Schedule VI to the ETA and subject to the GST/HST at the rate of 0%) or exempt (listed in Schedule V to the ETA and not subject to the GST/HST).

Section 1 of Part III of Schedule VI to the ETA 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. As stated in paragraph 2 of the GST/HST Memoranda Series 4.3, Basic Groceries, we consider 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.

The term "ingredient" is also not defined in the ETA. Generally, our view is that an average consumer would consider a product to be an ingredient if the product added to flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, must be a food or beverage.

Your Company labels the Product as [...] agave syrup, advertises the Product as a pure sweetener, and markets the Product as an alternative to sugar, [...]. The Product is used, recognized, and commonly sold as an ingredient of food. The primary use of the Product is to impart a sweet taste to food and drink to which it is added. Thus, we consider the Product to be an ingredient.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5217. 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,
Denise Chan
Basic Groceries & Point-of-Sale Rebates Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

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

[Addressee]

Case Number: 154220
Business Number: […]

February 18, 2014

Dear [Client]:

Subject:	GST/HST RULING
		Application of GST/HST to insurance related administrative services

Thank you for your letter of May 24, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your insurance related administrative services.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.

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

STATEMENT OF FACTS

We understand that pursuant to a contract (the Agreement) you entered into with […] (the Corporation) on [mm/dd/yyyy], you provide […].

Under the Agreement, you are paid a fee by the Corporation of $[…] per case to $[…] per case, based on the work involved in the case. Under the Agreement, you are a contractor and not an employee of the Corporation, […].

In a conversation with […] of the […][Province A] GST/HST Rulings office, you advised that clients apply for insurance with a licensed insurer […]. In the course of providing your services under the Agreement, you contact the clients by telephone and ask them insurance application questions, such as their medical history, and if necessary […][further services provided]

When you have all of the required information, you review the insurance application. Based on established guidelines, you provide a recommendation as to whether the insurance application should be approved […] or declined.

You are not a licensed insurance agent or broker in [Province A].

[…][registration requirements]

RULING REQUESTED

You would like to know if your services provided to the Corporation under the Agreement are financial services which are exempt from GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that your services to the Corporation under the Agreement are taxable for GST/HST purposes.

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

Generally, most supplies of property or services made in Canada are taxable and subject to the GST/HST, unless the supply is specifically zero-rated (subject to GST/HST at the rate of 0%) or exempt (not subject to the GST/HST).

Supplies of financial services are generally exempt from the GST/HST, other than certain zero-rated financial services (e.g., certain financial services provided by a financial institution to a non-resident). A financial service is defined in subsection 123(1) to mean anything that is included in any of paragraphs (a) to (m) of that definition and that is not excluded by any of paragraphs (n) to (t) of that same definition. It includes the following services (described in part in the paragraphs below), unless they are excluded by any of paragraphs (n) to (t) of the definition of financial service:

* paragraph (d) - the issue, granting and transfer of ownership or repayment of a financial instrument (such as an insurance policy),
* paragraph (h) - the underwriting of a financial instrument, and
* paragraph (l) - the arranging for certain financial services (for example, arranging for the issuance of an insurance policy).

Under the Agreement, you are providing a supply to the Corporation of administrative services related to assessing insurance applications. Your services may be used by an insurer in its process of underwriting and issuing insurance policies; however, it is the insurer that underwrites and issues its insurance policies. Therefore, your services are not financial services under either of paragraphs (d) or (h) of the definition of financial service.

As discussed in our GST/HST Memorandum 17.9, Insurance Agents and Brokers (revised June, 2013), the term “arranging for” is generally intended to refer to intermediation activities that are normally performed by certain financial intermediaries, such as licensed insurance agents and brokers. As you are not a licensed insurance agent or broker performing financial intermediation activities of a licensed insurance agent or broker, you are not arranging for the issuance of an insurance policy under paragraph (l) of the definition of financial service, and are not providing financial services for GST/HST purposes.

As there is no exemption for your supply of services under the Agreement, it is a taxable supply.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 780-495-6321. 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,

Eleanor Struth
Insurance and ITC Allocation Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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

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

[Addressee]

Case Number: 155053r

Attention: [Client]

Dear [Client]:

Subject:	GST/HST RULING
		Application of GST/HST to core charges

This is in response to your concerns raised regarding a response received from our […][City 1] office dated [mm/dd/yyyy]. That letter discussed the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to core charges included in the consideration for the supply of replacement automotive parts. Pursuant to your discussions with […][a CRA official] of this office and your subsequent letter of [mm/dd/yyyy], we are providing the following ruling.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

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

STATEMENT OF FACTS

We understand the facts to be as follows:

1. […] ([…][the Company]) […] is in […][Province 1] […]. You have provided third party authorization from [the Company] with your request.

2. [The Company] is registered for the GST/HST.

3. [The Company] supplies certain new automotive parts such as alternators, starters, CV shafts, brake callipers, and distributors. The consideration charged for these parts contains a […][“core” or recyclable component] sometimes called a core charge […]. When [the Company] supplies a new part, a core charge is added to the consideration payable for the new part. The non-registrant consumer pays GST/HST on the consideration payable for the part including the core charge.

4. An amount equal to the core charge may be paid by [the Company] to a non-registrant consumer where the consumer brings a used part to [the Company]. Pursuant to [Company] policy this may occur at the time of the original supply of the new part or within […] days of the original supply.

5. When the non-registrant consumer brings in the used part at the same time as he/she purchases the new part, [the Company] charges the core charge to the non-registrant consumer and credits an amount equal to the core charge. GST/HST is charged on the consideration payable for the new part taking into account the core charge and the credit for the core charge.

6. When the non-registrant consumer brings in the used part to [the Company] after the original supply of the new part, [the Company] pays to the consumer an amount equal to the amount of the core charge. This amount paid to the non-registrant consumer does not include any amount paid as GST/HST.

7. You have provided sample invoices evidencing the current tax treatment of transactions involving core charges. The first invoice dated [mm/dd/yyyy], was for a supply made by [the Company] of an automotive battery. The invoice shows that a core exchange was included in the consideration for the battery but the actual amount of the core charge was not identified.

8. You also provided a transaction log printout for the transaction, which you refer to as a receipt. The receipt shows that [the Company] credited an amount equal to the core charge before applying the HST.

9. A further transaction log printout also referred to as a receipt dated [mm/dd/yyyy], where a consumer brought in a battery core and [the Company] applied a credit to the customer’s VISA account in the amount of $[X] for the core. The $[X] was characterized as a credit. No HST was paid by [the Company] to the consumer.

In your letter you propose that, when a consumer brings in the used part and is paid an amount equal to the core charge by [the Company], the amount should be considered a price adjustment. You further state that as a price adjustment, subsection 232(2) should apply and consequently the amount paid to the non-registrant consumer should include an amount paid as GST/HST.

RULING REQUESTED

You would like the Canada Revenue Agency (CRA) to confirm your understanding of the application of subsection 232(2) to the scenario when a non-registrant consumer brings a used part into [the Company] after the initial purchase as described above.

RULING GIVEN

Based on the facts set out above, we rule that when a non-registrant consumer purchases from [the Company] an automotive part and the consideration paid for the part includes a core charge and the consumer later brings in a used part to [the Company] and is paid an amount equal to the core charge, the amount paid by [the Company] to the consumer is considered to be consideration for the supply of the used part made by the consumer and not an adjustment under subsection 232(2).

EXPLANATION

Where there is a supply of the core or used part by a non-registrant consumer who is not required to charge GST/HST to the retailer, the trade-in rules for tangible personal property under subsection 153(4) are designed to apply to this situation where the used part is supplied to [the Company] at the same time [the Company] sells a new part to the consumer. This treatment is not at issue in your letter.

At issue is the situation where a non-registrant consumer brings in the used part at a point in time after the initial supply of the new part by [the Company].

In your case, the issue is whether the amount equal to the core charge paid by [the Company] for the used part at a point in time after the original supply of the new part is an “adjustment” to the consideration for the original supply, as that term is used in section 232 or whether it is consideration in its own right for a separate supply made by the consumer.

It is the CRA’s position that based on the definition of “supply” in subsection 123(1), the non-registrant consumer is making a supply of the used part to [the Company]. The amount paid to the non-registrant consumer by [the Company] is linked to that supply. For example, the greater the value of the used part, the greater the amount paid by [the Company] to the non-registrant consumer for the acquisition of the used part. As the recipient, [the Company] can also refuse to accept the used part, and therefore not pay any amount for the used part. However, if [the Company] accepts the used part, [the Company] is required to pay the amount to the non-registrant consumer as a result of the agreement entered into with the consumer. As such, it is also the CRA’s position that the amount paid by [the Company] to the non-registrant consumer is consideration for the supply of the used part.

As a result, when the non-registrant consumer supplies the used part at the same time that it purchases a new part from [the Company], the trade-in rules under subsection 153(4) apply.

However, these trade-in rules do not apply when the used part is supplied to [the Company] at a later time. Given that the consumer is a non-registrant, [the Company] is not required to pay GST/HST to the consumer in respect of the supply of the used part.

Given that the amount is consideration for the supply of the used part, it is the CRA’s position that the amount is not an adjustment or reduction of the consideration for the supply of the new part made by [the Company]. Therefore, subsection 232(2) does not apply in these circumstances.

In your letter, you note GST/HST case 107428 wherein the CRA applied subsection 232(2) in a scenario which you believe is similar to the case at hand. Case 107428 was a ruling on the application of the GST/HST to the supply of wooden pallets, specifically where customers were charged an amount characterized as a deposit for the supply of the pallet. In this case, it was concluded that where a separate charge is made by the supplier of a pallet, the pallet is being sold, with ownership and all rights to that container transferred to the purchaser. This is not a deposit for GST/HST purposes. The amount is consideration for the supply of the pallet. Therefore, the amount paid to purchase the pallet is subject to GST/HST. This scenario differs from the core charge scenario in that the core charge amount is added to the consideration for the supply of the new part and only the new part is being supplied.

Case 107428 also differs from your case in that:

* the returned pallet is understood to be a return of the original pallet back to the original supplier; and

* the supplier and the recipient are both GST/HST registrants.

These significant facts are absent from your scenario.

[…] we have recently published GST/HST Info Sheet GI-167, Application of the GST/HST to Core Charges, which will help ensure an awareness of the application of the GST/HST. A copy of the Info Sheet is enclosed.

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

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

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

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

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

[Addressee]

Case Number: 151465
Business Number: [...]

August 27, 2013

Dear [Client]:

Subject:		GST/HST RULING
       [...] hockey camp	

Thank you for your fax of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to hockey camps provided to non-resident students.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.

Statement of Facts

Based on your [correspondence], and [...], we understand the following:

1. [...] ([...][ACo]) is [...] registered for GST/HST purposes under Business Number [...].

2. [ACo] is a [...] [describes mandate and features of ACo]

3. [ACo] provides a variety of hockey [...] programs for [...] athletes, including [...] hockey camps. [ACo's] [...] hockey camps are intended to challenge hockey players and to offer them instruction and encouragement with the goal of improving their overall skills and performance in the game of hockey.

4. [ACo] provides a [...] hockey camp which it markets as [...] (Package 1) and which takes place [...] [lists camp dates]. Package 1 is provided to athletes at the [...] levels in hockey who are not resident in Canada.

5. Package 1 includes [...] short-term accommodation in Canada at [...] in [...] [a City], meals, [...] hours of ice per day, coaching services ([...] coach to student ratio), supervised conditioning and strength training, video and lecture sessions, [...], access to [...] [sport] facilities ([...].), weekend excursions, and airport transfers.

6. Package 1 includes services such as coaching services, [...], supervisory services, and transportation services.

7. [ACo] sells Package 1 for an all-inclusive price.

8. [ACo] also provides a parents' package (Package 2) that provides an opportunity for parents to accompany an athlete [...]. Package 2 [...]takes place during the same time period as Package 1. Package 2 is provided to parents of athletes acquiring Package 1 who are not resident in Canada.

9. Package 2 includes [...] short-term accommodation in Canada at [...] in [...] [a city], meals, and access to [...] [sport] facilities ([...].).

10. Package 2 does not include any services.

11. [ACo] sells Package 2 for an all-inclusive price. A person may acquire Package 2 for [...] up to the duration for which the accompanied athlete acquires Package 1.

Ruling Requested

You would like to know if Package 1 and Package 2 are eligible tour packages for purposes of the Foreign Convention and Tour Incentive Program (FCTIP).

Ruling Given

Based on the facts set out above, we rule that Package 1 and Package 2 are not eligible tour packages for purposes of the FCTIP.

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

For GST/HST purposes, a tour package is a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, when the property and services are sold together for an all-inclusive price. For purposes of the FCTIP, an eligible tour package is a tour package that includes short-term and/or camping accommodation in Canada but does not include a tour package that includes a convention facility or related convention supplies.

All combinations of two or more services or of property and services are not necessarily tour packages for GST/HST purposes. The nature and purpose of the package being sold has to be considered in order to determine whether it is a tour package or something else. If the overall purpose of a package is to provide a specialized service, it is not considered to be a tour package for GST/HST purposes. Examples of such packages are wellness packages, educational and counselling packages, children's overnight camps, sport tournaments, and concert tours.

Package 1 is not an eligible tour package because the overall purpose of what is being supplied is a specialized service of hockey instruction. Package 2 is not an eligible tour package because it does not include any services.

More information on the FCTIP is available at www.cra.gc.ca/visitors including GST/HST Info Sheet GI-044, Foreign Convention and Tour Incentive Program - Tour Packages: What is an Eligible Tour Package.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 604-658-8528. 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,
Rosalind Erceg
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate