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: 180458

Dear [Client]:

Subject:	GST/HST RULING
		Temporary Importation of Racing […] Equipment

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the temporary importation of racing […] equipment.

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 Governments of New Brunswick and Newfoundland and Labrador have proposed to increase the rate of the HST in those provinces from 13% to 15% effective July 1, 2016. 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] doing business as […][XYZ] is a non-resident located in […][Country X], that organizes […][events].

2. [XYZ] has […][Event A] scheduled in Canada for the [yyyy] season located in […][City 1, Province 1] from [mm/dd] to [mm/dd], [yyyy].

3. In order to hold this event, [XYZ] intends to temporarily import into Canada the following goods: […][racing equipment]

4. The […] will be for use only in racing […]. Following the race, any […] remaining […] will be exported.

5. The racing […], […][equipment] [is] not for sale, for lease or for further manufacturing or processing while in Canada and will be exported from Canada upon the completion of the event.

6. The CBSA has determined that the temporary importation of the racing […] equipment […] [qualifies] for temporary importation […] and these goods are described in items 38 and 41 of the Schedule to the Temporary Importation (Excise Levies and Additional Duties) Regulations made under the Customs Act.

7. The CBSA has also determined that the temporary importation of the […] equipment, qualify for temporary importation […], and these goods are described in item 42 of the Schedule to the Temporary Importation (Excise Levies and Additional Duties) Regulations.

RULING REQUESTED

You would like to know whether the temporary importation of the racing […] equipment, […] are non-taxable importations for GST/HST purposes.

RULING GIVEN

Based on the facts set out above, we rule that the temporary importation of the racing […] equipment and the temporary importation of […] equipment are non-taxable importations for GST/HST purposes.

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

EXPLANATION

Generally, all goods imported into Canada are taxable for GST/HST purposes unless specifically relieved under section 213 of the ETA. Importations of goods relieved of tax under section 213 of the ETA are set out in Schedule VII to the ETA. Section 8 of Schedule VII to the ETA deems prescribed goods that are imported in prescribed circumstances into Canada to be non-taxable for GST/HST purposes.

Goods described in items 41 and 42 of the schedule to the Temporary Importation (Excise Levies and Additional Duties) Regulations in circumstances where the terms and conditions of the regulations have been met are non-taxable importations pursuant to subparagraph 3(i)(i) of the Non-Taxable Imported Goods (GST/HST) Regulations.

Similarly, goods described in item 38 of the schedule to the Temporary Importation (Excise Levies and Additional Duties) Regulations when a non-resident imports the goods in circumstances where the terms and conditions of the regulations have been met are non-taxable importations pursuant to subparagraph 3(i)(ii) of the Non-Taxable Imported Goods (GST/HST) Regulations.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-9891. 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,

Kevin Smith
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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 181174
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of GST/HST to packages of fresh produce

Thank you for your letter of December 8, 2016, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of freshly packaged produce.

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

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

STATEMENT OF FACTS

In review of your submission and the supplemental pictures provided, we understand the following:

1. […] (the Company) is a GST/HST registrant under Business Number […].

2. The Company is a […] grocery retailer […].

3. The Company carries five varieties of fresh cut produce (the Products), packaged for sale […].

4. The five varieties of fresh cut packaged produce are as follows:

1) Fresh cut carrots :

The carrots are cut and cleaned and packaged into a […] oz. plastic container […] to allow for the insertion of a small plastic container of vegetable dip.

2) Fresh cut carrots with fresh cut celery:

The carrots and celery are cut and cleaned and packaged into a […] oz. plastic container […] to allow for the insertion of a small plastic container of vegetable dip.

3) Large fresh cut carrots with fresh cut celery:

The carrots and celery are cut and cleaned and packaged into a […] oz. plastic container […]. The container measures […]. The container does not hold any dip. The carrots are placed on one side of the container with the celery placed on the other side of the container. The vegetables are tightly packed on top of each other and there is no separation between the carrots and celery.

4) A mix of three or more cut and cleaned vegetables (carrot, celery, broccoli, tomatoes, and cauliflower) packaged in a […] oz. plastic container […]. The container measures […] and contains a small container of vegetable dip in addition to the cut vegetables. The vegetables are placed in their own clusters without any separation between them.

5) A mix of four or more cut and cleaned vegetables (e.g. cauliflower, broccoli, radish, cucumber, carrot) packaged in a […] oz. plastic container […]. The container measures […]. The container may, or may not, contain a smaller container of vegetable dip. The vegetables are placed in the container in clusters without any separation between the vegetables.

5. The vegetables are generally cut and cleaned in lengths or chunks that would be larger than that used in salads. The exception to this would be when slices of radish or cucumber are included in the vegetable mix. These slices are the diameter of vegetables commonly used in salads.

6. The Products, with or without dip, were designed as quick, healthy lunches and snacks.

7. The Company produces other mixed vegetable products where the containers are made of a more rigid plastic and the containers are formed with separate compartments for each vegetable. The Company treats these supplies as being other arrangements of prepared foods and excludes them from zero-rating.

8. The containers of the fresh cut produce are put together in approximately […][less than one minute]. The produce is not arranged for visual effect. Rather, the produce is placed in a clear plastic container so that the prospective consumer can see the variety and quality of produce prior to selecting the container they desire. Where a dip is contained in the Products, it has no specific location to be placed and can be found underneath the contained vegetables, to the side of them, or on top of them. There is no consistency in the location of the dips held in the product containers. The container is designed functionally to allow for the holding and conveyance of produce (and in some cases produce and dip).

9. The quantity of produce held in the containers is intended to serve as a healthy lunch or snack for one individual.

10. The Company’s other mixed vegetable containers are arranged for visual effect with a specific area in which the vegetable dip is placed. These products require […][several] minutes to prepare. The intention with these products is that the produce will be made available, or served, from these containers.

RULING REQUESTED

You would like to know if the Products are zero-rated basic groceries.

RULING GIVEN

Based on the facts set out above, we rule that the Products are zero-rated basic groceries under section 1 of Part III of Schedule VI.

EXPLANATION

Generally, in accordance with section 165 of the ETA, 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 zero-rates supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages) unless an exclusion set out in paragraphs 1(a) through 1(r) applies.

Paragraph (o.1) excludes salads not canned or vacuum sealed from zero-rating and paragraph (o.3) excludes platters of cheese, cold cuts, fruit or vegetables and other arrangements of prepared food from zero-rating. Based on our understanding of facts, it is our opinion that the Products at hand would require additional preparation in order to become a salad and the Products are not prepared in a manner to give a visual effect. Further, the container is a device for the purpose of holding and conveying the fresh produce and is not an apparatus from which the elements are to be served (in a manner similar to catering). The Products are not excluded from zero-rating by any of the paragraphs (a) through (r).

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5123. 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,

David Nichol
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

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

[Addressee]

Case Number: 167830
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
GST applicability to payment made under a Design and Construction Energy Guarantee

Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to payments made under the Design and Construction Energy Guarantee. We apologize for the delay in responding to your request.

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

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

STATEMENT OF FACTS

We understand

• […] (Project Co.) has […][an Agreement] with […][the Joint Venture] for construction of […][the Asset]
• Under […] of the Agreement, the Joint Venture provides a Design and Construction Energy Guarantee (Guarantee). In accordance with the Guarantee, the Joint Venture has paid the Project Co. $[X].
• Project Co. believes that the $[X] payment should have GST applied, and as such, has invoiced the Joint Venture $[X] plus 5% GST.

RULING REQUESTED

You would like to know if GST should be applied (i.e. refunded) to the initial $[X] payment described above, as well as any future payments made under the Agreement.

RULING GIVEN

Based on the facts set out above, we rule that it is at the Joint Venture’s discretion whether to refund the GST paid on the amount of the consideration refunded under the Guarantee.

EXPLANATION

[…][Relevant Terms of the Agreement between the Parties]

The Joint Venture […] has made an initial payment of $[X] to the Project Co.

The tax originally paid pursuant to the Agreement was properly payable at that time.

Consequently, a refund or credit to the Project Co, as provided for under the Guarantee would be regarded as a subsequent reduction in consideration pursuant to subsection 232(2).

Subsection 232(2) states that

[w]here a particular person has charged to, or collected from, another person tax under Division II calculated on the consideration or a part thereof for a supply and, for any reason, the consideration or part is subsequently reduced, the particular person may, in or within four years after the end of the reporting period of the particular person in which the consideration was so reduced,

(a) where tax calculated on the consideration or part was charged but not collected, adjust the amount of tax charged by subtracting the portion of the tax that was calculated on the amount by which the consideration or part was so reduced; and
(b) where the tax calculated on the consideration or part was collected, refund or credit to that other person the portion of the tax that was calculated on the amount by which the consideration or part was so reduced.

Note that the legislation uses the word “may”. As such, it is at the discretion of the Joint Venture (the particular person) whether to refund the GST on the reduction in consideration.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613.670.9882. 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,

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

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

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

[Addressee]

Case Number: 172004

Dear [Client]:

Subject:	GST/HST RULING
		Application of the GST/HST to contributions [made by an employers’ Organization] to the […] Trust Fund [pursuant to a collective agreement]

Thank you for your letter of August 7, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to contributions remitted to […] (the Trust Fund”) by […][the employers’ Organization (the Organization)].

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

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

STATEMENT OF FACTS

1. According to their website, [the Organization] is described as follows: […]

2. […][Relevant provincial legislation (the Legislation) affecting the Employer’s obligations to the Organization](Footnote 1) contains the following provisions:

i. Paragraph […]: “collective agreement” means an agreement in writing between an employer or an employers’ organization and a bargaining agent containing terms or conditions of employment, and may include one or more documents containing one or more agreements.

ii. Paragraph […]: “employers’ organization” means an organization of employers that acts on behalf of an employer or employers and has as one of its objects the regulation of relations between employers and employees, whether or not the organization is a registered employers’ organization.

iii. Paragraph […]: “registered employers’ organization” means an employers’ organization registered by the Board (Footnote 2) as an agent for collective bargaining in a part of the construction industry.

iv. Subsection […]: An employer has the right

		* to be a member of an employers’ organization and to participate in its lawful activities, 
		* to bargain collectively with the employer’s employees, and 
		* to conduct collective bargaining through an employers’ organization. 

v. Subsection […]: The provisions of a collective agreement are binding on

		* the bargaining agent and every employee in the unit on whose behalf it was bargaining collectively;
		* the employer, where the employer acted on the employer’s own behalf;
		* the employers’ organization and each employer on whose behalf it was bargaining  collectively, where the employers’ organization acted on behalf of employers.

vi. Subsection […]: A registered employers’ organization may require an employer who is bound by a collective agreement entered into by the registered employers’ organization or on whose behalf the registered employers’ organization bargains collectively to pay dues to the registered employers’ organization if the dues

		* are uniformly required to be paid by all members to the registered employers’ organization, and 
		* are reasonably related to the services performed by the registered employers’ organization in respect of its duties under this Act. 

vii. Subsection […]: If an employer fails to pay the dues required under subsection (1), the dues are a debt payable by the employer to the registered employers’ organization and may be collected by civil action.

viii. Subsection […]: This section does not restrict the ability of a registered employers’ organization to establish and collect dues from its members in addition to the dues referred to in subsection (1).

ix. Subsection […]: On the issuance of a registration certificate, the employers’ organization named in it becomes a registered employers’ organization and has exclusive authority to bargain collectively with the group of trade unions named in the registration certificate on behalf of

		* all employers actually or customarily engaged in the part of the construction industry set out in the registration certificate with whom any of the trade unions in the group of trade unions has established, or subsequently establishes, the right of collective bargaining, and 

		* any other employer actually or customarily engaged in the construction industry who is party to an agreement, notwithstanding anything in that agreement, that provides that the employer shall comply with any of the terms of a collective agreement entered into by any of the trade unions in the group of trade unions in respect of work in the part of the construction industry set out in the registration certificate, but only while that agreement to comply remains in force. 

x. Subsection […]: Subsection […] applies to employers only to the extent of their collective bargaining obligations with a trade union.

xi. Subsection […]: When a registered employers’ organization and a group of trade unions enter into a collective agreement, the collective agreement is binding on

		* the employers referred to in section […], 
		* the employees of the employers referred to in […], 
		* the registered employers’ organization insofar as the terms and conditions of the collective agreement apply to it, and 
		* the group of trade unions and each trade union within the group.

3. During [the negotiation of] […] the collective agreements […] between [the Organization] and the […] unions of […][X], it was agreed that for each hour worked by employees pursuant to the collective agreements, amounts will be contributed by each employer to support workforce development initiatives.

4. […][Example of the Employer’s obligations to the Organization under an agreement](Footnote 3) […];

* In satisfaction of the Employers' obligations to [the Organization] under section […] of [the Legislation] and in satisfaction of the Employers' obligations under this Collective Agreement, the Employer shall pay to [the Organization] the contribution rates for [Organization-]sponsored initiatives, and the hourly dues levied by [the Organization] pursuant to [the Legislation] and pursuant to this Collective Agreement.

…

* In addition to the contributions stipulated above, the Employer shall contribute to [the Organization] amounts set by [the Organization], and amended from time to time by notice to the Employer, for […][other programs and initiatives]. These amounts may be applicable to specific work carried out under this Collective Agreement, as stipulated in the notices to the Employer.

* All costs relating to the administration of the fund(s) shall be borne by the Association.

5. […](the ‘Funding Agreement’) between [X] and [the Organization] states:

* Commencing on the effective date of […][the relevant yyyy] collective agreements between [the Organization] […] and the [X] […] Unions that participated in […] Bargaining, employers will contribute […] per hour worked to the […] Trust. [The Organization] will collect these funds, along with [Organization] dues and fees, and contributions for […][other programs].

* When the […] in each of the collective agreements results in a wage increase, the first increase will be reduced by […]. Thereafter, when employers remit the […] per hour, […] will be on behalf of the employer and […] will be on behalf of the employee.

* The contributions for workforce development initiatives will then be forwarded to […][the Trust Fund]. Funds will also be collected and forwarded to the Trust by the other registered employers’ organizations that participated in the […] Bargaining. Other employers […] may also become participants.

6. […][Information about specific initiatives].

7. […][Information about specific initiatives].

RULING REQUESTED

You would like to know whether […][the employers] are required to pay GST on the contributions they remit to the Trust Fund, which the trustees would collect and forward to the CRA.

RULING GIVEN

Based on the facts set out above, we rule that the contributions to the Trust Fund made by [the employers], through [the Organization] pursuant to the collective agreements are not consideration for a supply and therefore are not subject to GST/HST.

EXPLANATION

Where a person makes a payment to another person, it must be determined whether that payment is consideration for a supply of property or services made by the other person. Generally, payments will not be regarded as consideration for a supply where the payments are not directly linked to any supply of property or service.

In this case the payment of amounts is an industry development fee set by [the Organization] which is authorized [under the Legislation] to do so […]. Contractors/employers are required to pay the amounts to [the Organization], who then provides it to the Trust Fund in accordance with the Funding Agreement.

There is no direct link between the contributions made by the contractors to the Trust Fund and a supply made by the Trust Fund to the contractors. The payment of amounts as an industry development fee set by [the Organization] are therefore not consideration for a supply and therefore not subject to GST/HST.

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-9891. 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,

Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 […]
2 […]
3 […]

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: 173378
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of GST/HST to […][the Product]

Thank you for your fax of October 14, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of […]ml bottles of […] (the Product). We apologize for the delay in replying.

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

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

STATEMENT OF FACTS

1. You have purchased a manufacturer’s case pack […] of the Product.

2. The Product was purchased from your current supplier […]. You were charged tax on the purchase of the Product. The supplier has offered to refund you the tax charged on the Product should the supply of the Product be zero-rated.

3. You resell the Product to retailers in pre-packed packages of [#]. However, retailers may re-sell the Product in single […]ml bottles.

4. You describe the Product as […] that is non-carbonated and non-fruit flavoured.

5. […].

6. Although the Product is sold in […]ml bottles, it is not marketed as a single serving.

7. It is your opinion that the Product sold in […]ml bottles should be considered as more than a single serving, or as an ingredient.

8. […][Information on usage of the product].

9. The Product is available in [#] varieties […].

10.[…].

11. The product label clearly indicates that the only content in the bottle is […]. Furthermore, the label suggests that consumers […], serve at room temperature, and store away from direct sunlight or heat.

12. You have confirmed that each of the bottles of the Product comes with a dropper which can be used to add drops of the Product to […][X].

13. Based on information provided […], it is our understanding that a […]ml bottle of the Product can retail for upwards of $[…].

14. It is your view that an average consumer would not purchase the Product simply to quench thirst. The Product is strictly purchased as an addition to [X]. A […]ml bottle of the Product would not be purchased at such a high price simply to consume as a single serving.

RULING REQUESTED

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

RULING GIVEN

Based on the facts set out above, we rule that the supply of the Product is a zero-rated supply pursuant to 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.

EXPLANATION

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

Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies excluded from zero-rating by way of 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.

The Product is sold in bottles of […]ml, which is less than the amount typically found in […] bottles consumed to quench thirst. […]. A dropper is also included with the Product, further evidencing the fact that the purpose of the Product is that it be added to [X].

[…]. Although the content of the Product is […], the fact that the advertising, marketing, and labelling of the Product clearly instruct the consumer to add it to [X] […], it is our opinion that this Product may be considered an ingredient, and therefore, a zero-rated supply under section 1 of Part III of Schedule VI.

Amounts paid as GST/HST in error

Where an amount has been paid as GST/HST in error, you may request a refund or credit of the amount from the supplier, pursuant to section 232. Paragraph 232(1)(b) provides that where a supplier has collected from the recipient an amount as or on account 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, you may request a rebate of the amount paid as tax 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” on our web site. Among other criteria, to qualify for a rebate under this section, you must file the rebate claim within two years from the day the amount was initially paid to the supplier.

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 905-721-5218. 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, CPA, CGA
Basic Groceries and Recapture of Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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

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

[Addressee]

Case Number: 176138
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Law enforcement services

This letter refers to your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to amounts charged by […][Municipality A] to […][Municipality C].

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

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

STATEMENT OF FACTS

We understand that:

1. [Municipality A], […][Municipality B], and [Municipality C] are located in […][Province X], Canada and are all registered for GST/HST purposes.

2. In [mm/yyyy], [Municipality A] ran a job posting in a local newspaper that stated that [Municipality A] was seeking to hire a […] (Officer), in conjunction with two other […][nearby] municipalities, to provide services as described in the job posting and the position description. The Officer would be required to use his/her knowledge of by-laws, policies, and regulations, while using communication skills to seek compliance with municipal by-laws by members of the public. The position description stated that the Officer would be responsible for enforcing municipal by-laws and providing public information to ensure the protection of residents, property, and employees.

3. On [mm/dd/yyyy], [Municipality A] passed By-law […][#A1] being a by-law to enter into a Service Agreement for the shared services of an Officer with [Municipality C] and [Municipality B]. [Municipality B] subsequently withdrew from this Service Agreement, and By-law [#A1] was later repealed by By-law […][#A3] (see #6 below).

4. On [mm/dd/yyyy], [Municipality A] passed By-law […][#A2] being a by-law to appoint an Officer for [Municipality A]. This by-law permitted [Municipality A] to delegate certain legislative and quasi-judicial powers to the Officer.

5. On [mm/dd/yyyy], [Municipality C] passed By-law […][#C1] to authorize the Service Agreement with [Municipality A] and also passed By-law […][#C2] to appoint an Officer.

6. On [mm/dd/yyyy], [Municipality A] passed By-law [#A3] being a by-law to enter into a (new) Service Agreement for the shared services of an Officer with [Municipality C], and to repeal By-law [#A1].

7. The recitals to the Service Agreement provide that [Municipality A] has hired the Officer to provide services described in the job description, [Municipality A] agrees to share the services of the Officer with [Municipality C], and both [Municipality A] and [Municipality C] agree that the Officer is an employee of [Municipality A].

8. Under the terms of the Service Agreement, the parties agree that:

• [Municipality C] will use the Officer for [#] hours per week;
• [Municipality C] will pay [Municipality A] the hourly rate at which [Municipality A] is remunerating the Officer, plus a […] premium to cover the costs of benefits and vacation time, plus GST/HST;
• [Municipality C] will pay [Municipality A] for any mileage incurred by the Officer while working in [Municipality C];
• [Municipality A] will invoice [Municipality C] on a monthly basis for each hour worked by the Officer, to a maximum of [#] hours per year;
• in the event of prosecution, each party is responsible for legal costs arising in their own area; and
• [Municipality C] will maintain insurance to cover the Officer and his/her related performance or non-performance, for the entire term of the agreement.

9. On [mm/dd/yyyy], the following additional information was provided:

• The Officer is solely an employee of [Municipality A] and [Municipality A] issues a T4 slip.
• The Officer has to be officially appointed by [Municipality C] and is under [Municipality C]’s control and direction while working within its boundaries.
• When undertaking any duties under the appointment by [Municipality C], notices are issued in the name of [Municipality C] using its computer systems, and all related receipts or collections by the Officer accrue to [Municipality C] only. Likewise, when undertaking any duties under the appointment of [Municipality A], notices are issued in the name of [Municipality A] using its computer systems, and all related receipts or collections by the Officer, accrue to [Municipality A].
• Amounts invoiced to [Municipality C] by [Municipality A] are treated as revenue in [Municipality A]’s books and records.

10. [Municipality A] has invoiced [Municipality C] for the Officer’s hours and expenses, plus GST/HST. [Municipality C] is of the opinion that [Municipality A] is making a supply of a law enforcement service that falls within paragraph 20(g) of Part VI of Schedule V, and is therefore exempt.

RULING REQUESTED

You would like to know if amounts invoiced by [Municipality A] to [Municipality C] are subject to GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that the amounts invoiced to [Municipality C] are consideration for a taxable supply and are subject to GST/HST.

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

EXPLANATION

Generally, section 165 provides that every recipient of a taxable supply made in Canada (other than a zero-rated supply) shall pay to Her Majesty in right of Canada tax in respect of the supply calculated on the value of the consideration for the supply.

In accordance with subsection 123(1), “taxable supply” means a supply that is made in the course of a commercial activity. This same subsection defines “commercial activity” to include a business carried on by the person except to the extent to which the business involves the making of exempt supplies.

Section 20 of Part VI of Schedule V to the ETA sets out a number of supplies involving regulatory functions that are exempt when made by a municipality or a government, or by a board, commission or other body established by a municipality or a government. Paragraph 20(g) of Part VI of Schedule V exempts the supply of a law enforcement or fire protection service made by a government, municipality or board, commission, or other body established by a government or municipality to a government or municipality or a board, commission or other body established by a municipality or government.

As a transactional tax, the application of GST/HST is determined on a supply-by-supply basis. Each supply must be evaluated independently in order to determine whether a particular exemption may apply. In determining the nature of a particular supply, a distinction must be made between the activities that comprise a particular supply and the supply itself. While the residents of [Municipality C] may view the activities of the Officer as the supply of law enforcement services by [Municipality C] to its residents, this does not translate to a supply of a law enforcement service by [Municipality A] to [Municipality C]. In other words, the end use of the Officer by [Municipality C] does not define the nature of the supply being made by [Municipality A]. Whether the supply of the Officer to [Municipality C] is a law enforcement service that falls within paragraph 20(g) of Part VI of Schedule V depends on an analysis of the facts surrounding the supply, which include the terms and conditions of the Service Agreement and the context in which the supply is being made, including the degree of [Municipality A]’s responsibility to the residents of [Municipality C].

Under the Service Agreement, [Municipality A]’s responsibility is to share the services of the Officer with [Municipality C] so that [Municipality C] may fulfil its own needs in order to provide for the health, safety, and well-being of its residents. The Service Agreement does not provide the Officer with a responsibility for the provision of law enforcement services to the residents of [Municipality C], nor does it result in an obligation on [Municipality A]’s part to provide law enforcement activities to the residents of [Municipality C]. In fact, before the Officer can carry out his or her functions, the Officer must be appointed by [Municipality C] as a duly authorized law enforcement officer. Once appointed, the Officer performs his or her functions under the control and the direction of [Municipality C]. All notices are issued in the name of [Municipality C] using its equipment, all receipts or collections accrue to [Municipality C], and insurance is maintained by [Municipality C] to cover the Officer and his or her related performance, or non-performance, of services within that jurisdiction.

In our view, [Municipality A] has not made an exempt supply of law enforcement services as described in paragraph 20(g) of Part VI of Schedule V, but rather a supply of personnel or human resources. [Municipality A] does not have any obligation to provide law enforcement services to the residents of [Municipality C]. Instead, [Municipality A] has an obligation to supply an Officer who has certain qualifications, and whose actions are an input to what may be a supply of law enforcement services made by [Municipality C] to its residents. As no other exemption would apply to [Municipality A]’s supply to [Municipality C], it is a taxable supply. Therefore, the salaries and related costs recovered by [Municipality A] from [Municipality C] are consideration for a taxable supply and are subject to GST/HST.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5201. 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,

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

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

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

[Addressee]

Case Number: 176875
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
[Whether a] Qualifying Non-Profit Organization - […][Organization A]

Thank you for your letter of March 31, 2016, concerning […] ([…][Organization A’s]) eligibility for public service bodies’ rebates. We apologize for the delay in providing our response.

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

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

STATEMENT OF FACTS

We understand

1. [Organization A] was created under […] ([…][Act X]), pursuant to Order in Council […] dated [mm/dd/yyyy] (OIC), as a corporation without share capital.

2. Pursuant to […] of the OIC, [Organization A] […][describes the purpose of Organization A]

3. […][definition of term in OIC]

4. […][definition of term in OIC]

5. […]

6. […] the OIC states “The sole member in [Organization A] shall be […].”

7. […].

8. […].

9. [Organization A] is not a government as defined in subsection 123(1) of the ETA.

10. [Organization A] is not a specified crown agent as defined in subsection 123(1) of the ETA.

11. [Organization A] has an office in […], Ontario, and is therefore resident in Ontario. Based on the information provided, [Organization A] is not resident in any other province.

12. [Organization A] is not a selected public service body.

13. [Organization A] is not registered for GST/HST purposes.

14. […][Describes the activities of Organization A].

15. You have advised that [Organization A] is funded through government appropriations, and that this funding is not consideration for a supply.

16. You provided us with [Organization A’s] financial statements for the year ended [mm/dd/yyyy]. [Organization A’s] Statement of Operations contains amounts of money identified as government funding. [Organization A] had no other sources of revenue in the year ended [mm/dd/yyyy].

17. […][Describes Organization A’s government funding].

18. [Organization A’s] financial statements for the year ended [mm/dd/yyyy] are available on its website […]. [Organization A’s] Statement of Operations for the year ended [mm/dd/yyyy], contain amounts of money identified as government funding. [Organization A] also earned revenue from interest and foreign exchange gain in the year ended [mm/dd/yyyy].

19. […][Describes Organization A’s government funding].

RULING REQUESTED

You would like us to confirm the following

1. Pursuant to subsection 259(2) of the ETA, [Organization A] is a “qualifying non-profit organization” for its fiscal years ended [mm/dd/yyyy], and [mm/dd/yyyy].

2. As a “qualifying non-profit organization”, [Organization A] is entitled to claim a PSB rebate equal to the specified percentage of the non-creditable tax charged in respect of properties or services (other than prescribed properties or services).

3. The specified percentages of the PSB rebate that [Organization A] was entitled to claim on the non-creditable tax charged in respect of properties or services (other than prescribed properties or services) are 50% of the GST (or the federal part of the Ontario HST) and 82% of the provincial component of the Ontario HST.

RULING GIVEN

Based on the facts set out above, we rule that

1. [Organization A] was a qualifying non-profit organization for the fiscal years ended [mm/dd/yyyy], and [mm/dd/yyyy].

2. As a qualifying non-profit organization, [Organization A] is entitled to claim a PSB rebate under subsection 259(3).

3. [Organization A’s] PSB rebates of the GST and the federal part of the HST are equal to 50% of the non-creditable GST charged or the federal non-creditable HST charged in respect of property or a service (other than a prescribed property or service) for the claim periods in its fiscal years ended [mm/dd/yyyy], and [mm/dd/yyyy].

4. [Organization A’s] PSB rebates of the provincial part of the HST are equal to 82% of the provincial non-creditable HST charged in respect of property or a service (other than a prescribed property or service) for the claim periods in its fiscal years ended [mm/dd/yyyy], and [mm/dd/yyyy], regardless of in which province the HST was paid or payable.

EXPLANATION

Qualifying non-profit organization

Pursuant to subsection 259(2), “a person is a qualifying non-profit organization at any time in a fiscal year of the person if, at that time, the person is a non-profit organization and the percentage of government funding of the person for the year is at least 40%.”

Therefore, to be a qualifying non-profit organization [Organization A] must satisfy two conditions:

• It must be a “non-profit organization”; and
• Its percentage of government funding must be at least 40%.

A “non-profit organization” is defined in subsection 123(1) as “a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada.”

[…]

[…]

In your letter, you referred to the definition of “non-profit organization” in subsection 259(1). As [Organization A] is not a “government”, it is not excluded from the definition of “non-profit organization” in subsection 123(1). As such, there is no need to consider the extended definition of “non-profit organization” in subsection 259(1).

It is a question of fact whether, at any particular time, a person meets the definition of a non-profit organization for ETA purposes. In particular, whether [Organization A] meets the criterion of operating solely for a purpose other than profit must be determined on an ongoing basis. [Organization A] met the definition of “non-profit organization” in the fiscal years ended [mm/dd/yyyy], and [mm/dd/yyyy].

Pursuant to subsection 259(1), the “percentage of government funding” of a person for a fiscal year of the person means the percentage determined in prescribed manner. The prescribed manner for determining the “percentage of government funding” is set out in section 3 of the Public Service Body Rebate (GST/HST) Regulations. The percentage of government funding of a person for a fiscal year is the greater of the percentage determined under paragraph 3(1)(a) and the percentage determined under paragraph 3(1)(b).

[Organization A’s] percentage of government funding is at least 40% for the fiscal years ended [mm/dd/yyyy], and [mm/dd/yyyy]. Therefore, [Organization A] was a qualifying non-profit organization for these years.

In addition, we have determined that [Organization A’s] percentage of government funding for the fiscal year ended [mm/dd/yyyy], is at least 40%, based on its two immediately preceding years pursuant to paragraph 3(1)(b) of the Public Service Body Rebate (GST/HST) Regulations. Therefore, [Organization A] would be a qualifying non-profit organization for the fiscal year ended [mm/dd/yyyy] if it in fact continued to meet the definition of “non-profit organization”.

Public service bodies’ rebate

Pursuant to subsection 259(3), and subject to certain exclusions that do not apply in this case, a person that is a qualifying non-profit organization on the last day of a claim period of the person or of the person's fiscal year that includes that claim period is entitled to a public service bodies’ (PSB) rebate.

As a qualifying non-profit organization that is not a selected public service body (Footnote 1), [Organization A’s] PSB rebates of the GST and the federal part of the HST are calculated under paragraph 259(3)(a). Under paragraph 259(3)(a), a PSB rebate of the GST and the federal part of the HST is equal to the specified percentage of the non-creditable GST charged or the federal non-creditable HST charged in respect of property or a service (other than a prescribed property or service) for the claim period.

In the case of a qualifying non-profit organization, “specified percentage” is defined in subsection 259(1) as 50%.

The non-creditable tax charged in respect of property or a service for a claim period is defined in subsection 259(1) and is generally equal to the total GST/HST that became payable during a claim period or that was paid during a claim period without having become payable, minus the following amounts:

• any input tax credits the PSB claimed or is entitled to claim for any of that GST/HST;
• any rebate, refund, or remission of any of that GST/HST that it is reasonable to expect the PSB received or is entitled to receive under any other section of the ETA or under any other Act of Parliament;
• any amount of that GST/HST that is refunded, credited, or adjusted in the PSB's favour and for which it has either received a credit note from the supplier or has issued a debit note to the supplier.

For more information on non-creditable tax charged, see GST/HST Memorandum 13.5, Non-creditable Tax Charged.

As a qualifying non-profit organization (that is not a selected public service body) resident only in Ontario, [Organization A’s] PSB rebates of the provincial part of the HST are calculated under paragraph 259(3)(b). As such, [Organization A’s] PSB rebates of the provincial part of the HST are equal to the specified provincial percentage of the provincial non-creditable HST charged in respect of property or a service (other than a prescribed property or service) for the claim period, regardless of in which province the HST was paid or payable.

Pursuant to paragraph (f) of the definition of “specified provincial percentage” in subsection 259(1) and section 5 of the Public Service Body (GST/HST) Regulations, the “specified provincial percentage” of a qualifying non-profit organization resident in Ontario is 82%.

For more information on how to calculate [Organization A] PSB rebate, see GST/HST Info Sheet GI-184, Public Service Bodies' Rebate for Qualifying Non-profit Organizations Resident Only in Ontario.

ADDITIONAL INFORMATION

[…][Discusses certain purchases made by Organization A]

Where a supplier has charged or collected an excess amount as or on account of tax on supplies that qualify for zero-rating, the supplier may refund or credit the excess amount to the recipient in accordance with section 232. If the supplier refunds or credits the amounts collected as GST/HST, it must do so within two years after the day the amount was charged or collected and it must provide the recipient with a credit note (unless the recipient issues a debit note) containing prescribed information.

Alternatively, persons who have paid an amount as GST/HST on supplies that qualify for zero-rating may make an application to the Canada Revenue Agency (CRA) for a rebate of tax paid in error under section 261 using Form GST189, General Application for Rebate of GST/HST. The time limit to apply for this rebate is within two years after the day the amount was paid.

For more information, refer to GST/HST Memorandum 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act and Guide RC4033, General Application for GST/HST Rebates.

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. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7942. 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,

Heather Reardon
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Footnotes:

1. "Selected public service body" means a school authority, university or public college that is established and operated otherwise than for profit; a hospital authority; a municipality; a facility operator; or an external supplier.

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: 179677
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
[…][XYZ] Stone Crushers

Thank you for your facsimile dated September 11, 2016, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to stone crushers.

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

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

STATEMENT OF FACTS

We understand that:

1. […] (the Company) is registered for GST/HST purposes.

2. The Company is making supplies of a new product line, […][XYZ] Stone Crushers, in Canada. According to [XYZ]’s website (Footnote 1) and your submission, the [XYZ] stone crusher is available in various models with various working widths which are suitable for farm or non-farm use. The model numbers […][Models A] and […][Model B] are promoted as suitable for farm and non-farm use. […][Models C] and […][Model D] are designed to also grind stumps and wood in both farm and non-farm use. […][Models E] and […][Model F] are promoted for non-farm use only.

3. A stone crusher is attached behind a tractor and when pulled over an area crushes the stones on that surface using a system of hammers and anvils and discards the crushed stones immediately back onto the ground. It does not remove the stones or the resulting crushed material.

RULING REQUESTED

You would like to know the GST/HST status of the supply of a [XYZ] Stone Crusher.

RULING GIVEN

Based on the facts set out above, we rule that the supply of a [XYZ] Stone Crusher is a taxable supply that does not qualify for zero-rating under Part IV of Schedule VI.

EXPLANATION

Part IV of Schedule VI sets out the agricultural and fishing goods which are zero-rated for the purposes of GST/HST. Pursuant to section 10 of Part IV of Schedule VI, the supply of prescribed property is a zero-rated supply. The Schedule to the Agriculture and Fishing Property (GST/HST) Regulations (the Regulations) identifies those items that are prescribed property for the purposes of section 10. When property is listed in the Regulations and supplied by way of sale, the supply is a zero-rated supply.

The Regulations include mechanical rock or stone pickers as well as rock or root rakes and rock or root wind-rowers. The stone crusher is not included in the Regulations and, as such, there is no provision within Part IV of Schedule VI to zero-rate the sale of a stone crusher. As a result, the stone crusher is subject to the GST/HST.

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

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

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

FOOTNOTES

1 […]

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

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

[Addressee]

Case Number: 126881
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Eligibility to claim an 83% public service bodies’ rebate

Thank you for your letters of [mm/dd/yyyy], with attachments, concerning […] (the Corporation) [and its] eligibility to claim the 83% public service bodies’ (PSB) rebate of the goods and services tax (GST) and the federal part of the harmonized sales tax (HST), and an 87% PSB rebate of the provincial part of the HST under section 259 of the Excise Tax Act (ETA) in respect of its activities. We apologize for the delay in our response.

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

All legislative references are to the ETA unless otherwise specified.

STATEMENT OF FACTS

We understand the facts to be:

1. The Corporation is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act, and is a charity for purposes of the ETA. […]

2. […][Information about the Corporation]

3. […]

4. The Corporation operates […][X] […]

5. […]

6. […]

7. […]

8. […]

9. Individuals wishing to apply for admission to […][X] must contact their regional Community Care Access Centre (CCAC). CCACs are local organizations that were established by the MOHLTC and perform the function of assessing the needs of people to determine the type of care and services required, and admission to long-term care facilities. The CCAC determines eligibility and if granted, an individual can choose from a list of Long-Term Care Homes, […].

10. The MOHLTC website, since updated, provided information on care services, long-term care homes and support services, such as:

“Residential care services provide a place for seniors to live, and offer different types and levels of support. In Ontario, there are three main types of residential care: supportive housing, retirement homes and long-term care homes”.

“Long-Term Care Homes are designed for people who need access to 24-hour nursing care, supervision or higher levels of personal care. These homes are also known as nursing homes, municipal homes for the aged, or charitable homes. Residents pay for accommodation charges and the care is funded by the Ministry of Health and Long-Term Care.”

“Long-Term Care Homes are places where seniors can live and receive support services. They are often the right choice for seniors who need help with the activities of daily living, access to 24-hour nursing care or supervision in a secure setting.”

“In general, Long-Term Care Homes offer higher levels of personal care and support than those typically offered by either retirement homes or supportive housing.”

“The requirements in the LTCHA ensure that residents of these homes receive safe, consistent, and high-quality resident-centred care in settings where residents feel at home, are treated with respect, and have the supports and services they need for their health and well-being.”

“All Long-Term Care Homes offer 24-hour supervision and nursing care.”

“Homes must prepare a "plan of care" for each resident, outlining the care requirements and levels of service offered. This plan must be reviewed at least every three months and adapted as the needs of the resident change.”

11. In-house employees providing health care services at [X] include Registered Nurses (RNs), Registered Practical Nurses (RPNs), and health care aides. Visiting health care providers include doctors, physiotherapists, […].

Residents receive medical treatments and care from qualified medical staff, such as doctors and nurses. […][Residents of X include] frail, sick and dependent […][individuals] who have been assessed by the local CCAC through a standardized process as deemed in need of nursing care and medical attention. The multidisciplinary care teams consist of medical doctors, RNs, RPNs, personal support workers and other paramedical professionals such as physiotherapists, dietician, pharmacist, consulting geriatrician and psychiatrist, dentist and other specialists on referral basis.

12. Health care services provided at [X] generally include:

• 24-hour nursing services and assistance with daily living

• daily physician’s services and visit for each resident

• […][other health care services]

• […]

13. Medically necessary health care services that residents receive at [X] include the provision of medication and its regular monitoring. An annual examination is provided to residents. […][Some other health care services are also provided at X]

Physician services are provided on an ongoing, continual basis in that physicians regularly visit and provide 24-hour on-call services. All residents of [X] have a physician on-call at all times.

On site procedures that physicians perform include physical examinations, ordering of x-rays, and request of blood work for diagnosis.

14. Medical services provided by physicians for the residents, and work that physicians perform […] include the following:

• all residents, upon admission are assigned to a designated physician as their attending family doctor;
• the attending physician will look after the residents’ on-going medical concerns/illness, treatment, medication prescription, providing physician orders for care, specialist referrals;
• the physicians provide weekly rounds to residents and medical attentions to individuals needing medical consultation and/or treatment;
• 24-hours, 7-day on-call roster for urgent/immediate medical consultation and direction;
• […]

15. The Corporation’s […] Manual describes the applicable roles and responsibilities of the […] Attending Physicians [at X]:

[…][Description of the roles and responsibilities of the Attending Physicians] […]

16. […][As] required by the MOHLTC Program Manual [the Corporation has an agreement with the physicians attending at [X]]. The agreement, […], indicates in part that the physician shall:

[…][Description of the Corporation’s agreement with the physicians attending at [X]]

17. The Corporation’s […] Manual describes the roles and responsibilities of the Medical Director [at X]:

[…][Description of the roles and responsibilities of the Medical Director]

18. […], there are [#] physicians serving [X] […]. Although residents are assigned a physician, they can meet with other physicians on an as-needed basis.

19. Each patient has a patient chart/resident file. As well, each physician has a Doctor’s Communication book that is maintained by the nursing staff that the physicians review regularly. The book is also for others as well (e.g., dieticians). The Doctor’s Communication book contains a list of issues pertaining to residents (e.g., behavioural, dietary, physical) requiring the attention of the physician during the next visit to the Facility. A typical entry in the Doctor’s Communication book is a request that the physician assess a resident regarding a rash or other medical issue.

20. Care plans are completed by Attending Physicians, as well as by nursing staff, dietician, and physiotherapist (multi-disciplinary). The care plan includes a series of services, actions, operations or events determined by the Attending Physician to be medically necessary to maintain a resident’s health – all staff can go to the care plan and update. Resident care plan entries include those regarding the resident’s medical history, medications and other health care aspects (e.g., physiotherapy, lab work), the resident’s dietary, behavioural, and social needs and the resident’s requirements regarding the activities of daily living.

21. Residents who take medication are required to have their medication adjusted frequently. Each medication adjustment must be ordered by a physician.

Residents that are insulin dependent have their blood work reviewed a few times a week and each test is reviewed and signed by a physician. Blood must be checked regularly. The physician orders the blood test and a lab will come to do the blood work. The results go to nurses, who inform the physician, who determines changes to resident medication. Nurses can’t make such changes of orders on their own.

22. In regard to nursing staff, the Corporation has […] nurses […]. These numbers include full-time, part-time, and casual. There is always at least 1 RN on duty at all times […].

Nurses contact the on-call physicians regularly regarding changes in medication, test results, orders, and glucose scans for residents under their care. Nursing staff spend significant time for phone consultations with Attending Physicians to discuss change in orders, etc.

23. […][Information about nursing services provided at X]

24. In addition to 7-day, 24-hour nursing services, [X] constantly […][provides] special programs to allow residents to enjoy a high quality of life.

25. To deal with residents with medically unstable conditions, unmanageable symptoms and who are seeking or requiring medical interventions, [X] […][has] palliative care […]

26. […][Information about Agreements for other programs and services provided at X]

27. […][Information about Reports on Staffing levels]

28. The Corporation is funded by the MOHLTC […].

[…][More details about funding]

[…]

29. The Corporation is resident only in the Province of Ontario.

RULING REQUESTED

You would like to know whether the Corporation is entitled to claim an 83% PSB rebate of the GST and the federal part of the HST and, as a person resident in Ontario, an 87% rebate of the provincial part of the HST, as a facility operator.

RULING GIVEN

Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies […].

As such, the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by it in the course of operating [X] for use in making facility supplies, or in the course of making facility supplies.

In addition, as the Corporation is resident only in Ontario, it is also eligible for an 87% PSB rebate of the provincial part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use, or supply the property or service in the course of its activities engaged in Ontario in the course of operating [X] for use in making facility supplies, or in the course of making facility 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 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. We understand that the Corporation has filed a Notice of Objection on an assessment and we are copying this response to the Appeals Branch.

EXPLANATION

To be eligible for an 83% PSB rebate of the GST and the federal part of the HST, and in the case of a person resident in Ontario, an 87% PSB rebate of the provincial part of the HST (hereafter these two rebates will be referred to as the “83% (and 87%) PSB rebate”), paid or payable on its purchases and expenses related to the making of facility supplies, the person must be a “hospital authority”, a “facility operator” or an “external supplier”.

Hospital Authority

A “hospital authority” is defined in subsection 123(1) as “an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority” for GST/HST purposes.

The Corporation does not operate a public hospital and is not designated as a hospital authority, and as such it is not a “hospital authority”.

Therefore, to determine whether there is eligibility for the 83% (and 87%) PSB rebate, it is necessary to determine whether the Corporation is a “facility operator” or an “external supplier”.

Facility Operator

A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.

As the Corporation is a charity, it meets the first requirement of the definition. In order to meet the second requirement, the Corporation must operate a “qualifying facility”.

Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a qualifying facility, for a fiscal year, or any part of a fiscal year, of the operator of the facility or part.

A facility or part of a facility will be considered a qualifying facility if:

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;

(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and

(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The requirements contained in (a) to (c) above must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.

Facility Supply

Subsection 259(1) defines the term “facility supply” as

“an exempt supply (other than a prescribed supply) of property or a service in respect of which

(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,

(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practise of medicine,

(B) a midwife acting in the course of the practise of midwifery,

(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that

(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and

(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

A “physician” is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.

The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the public hospital or qualifying facility must be an exempt supply (other than a prescribed supply). Exempt supplies are listed in Schedule V to the ETA.

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (p) of that section. As the Corporation is a charity, the supplies it makes to the residents would generally be exempt under section 1 of Part V.1 of Schedule V.

Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the institutional health care service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V. This section may also apply to exempt supplies of services that the Corporation makes.

Paragraph (a), subparagraphs (a)(i) and (a)(ii), and clause (a)(ii)(A) of the definition of “facility supply” further require that the exempt supply of property be made available, or the exempt supply of a service be rendered, at a public hospital or qualifying facility and be part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).

In circumstances where chronic care requires the individual to stay overnight at the public hospital or qualifying facility, the definition of “facility supply” in subsection 259(1) provides that the process must require, or reasonably be expected to require, the additional elements referred to in clauses (a)(iii)(A) to (D) of the definition of “facility supply”. That is, a registered nurse must be at the public hospital or qualifying facility at all times when the individual is there; a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, must be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is there; the individual must be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care; and it must not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services.

The decision of the Tax Court of Canada in Elim Housing Society v The Queen (2013-148(GST)G) addressed the question as to whether Elim Housing Society (Elim) was a facility operator operating a qualifying facility. In this decision, the judge made the determination that Elim was entitled to claim the 83% PSB rebate as a facility operator operating a qualifying facility based on the presence of the following elements which indicated Elim to be making facility supplies:

• all of the residents of Elim’s facility had conditions that required “complex care” as that term was defined in a policy manual of the B.C. Ministry of Health Services;
• the residents were extremely dependent on care either by reason of mental or physical impairment, or both;
• residents were under the care of a physician, who was either associated with the facility or had a pre-existing relationship with the resident;
• a tailored care plan was created for each resident, documented and implemented:

• detailed records were kept on the implementation of the care plans,
• medication reviews were required every six months, and
• inter-disciplinary meetings were held annually;

• physicians visited residents frequently (e.g., roughly on a bi-weekly basis);
• physicians were at, or on-call to attend, the facility at all times;
• physicians provided substantial medical care (e.g., addressed medical concerns, participated in medication reviews, attended interdisciplinary meetings);
• registered nurses were at the facility at all times, and nurses were in regular communication with physicians for prescription or advice;
• the facility received funding for 2.8 hours of care per resident per day (the calculation was based on scheduled staffing hours); and
• the care provided was of a different type than ordinary assistance with activities of daily living that a more robust individual might require.

After comparing the services and the care provided by the Corporation at [X] to its residents with the elements described in Elim, we are of the view that facility supplies are provided at [X] by the Corporation.

As mentioned above, subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility to be considered a qualifying facility for all or part of a fiscal year. The first criterion that must be met, under paragraph 259(2.1)(a), is that the exempt supplies made at the qualifying facility must be facility supplies. The exempt supplies that are facility supplies made by the Corporation would meet this first criterion.

Qualifying Funding

The second criterion that must be met under paragraph 259(2.1)(b) for a facility to be a “qualifying facility” is that an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part.

Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning

“a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

The Province of Ontario (through the MOHLTC) is the main source of funds for the operation of [X], […][More details about funding].

This criterion is thus satisfied.

Accreditation, licence or other authorization

The third criterion that must be met under paragraph 259(2.1)(c) for a facility, or part of a facility, other than a public hospital, to be a qualifying facility for a fiscal year, or any part of a fiscal year of the operator of the facility, or part, is that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

[…]. The Corporation is [appropriately licensed by the MOHLTC pursuant to the Long Term Care Homes Act, 2007], [and is] therefore, […][authorized to operate a long-term care home].

Thus the third criterion that must be met under paragraph 259(2.1)(c) […] is satisfied.

Overall summary

To summarize, […][X] […][meets] all of the requirements of paragraphs (a) to (c) of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259. Accordingly, the Corporation is entitled to an 83% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Corporation in the course of operating [X] for use in making facility supplies, or in the course of making facility supplies.

In addition, as the Corporation is resident only in Ontario, it is also eligible for an 87% PSB rebate of the provincial part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use, or supply the property or service in the course of activities engaged in Ontario in the course of operating [X] for use in making facility supplies, or in the course of making facility supplies.

For supplies that the Corporation makes which are not facility supplies, the 83% (and 87%) PSB rebate may still be available if the supplies are “ancillary supplies” or “home medical supplies”.

As the Corporation is a facility operator, it is not an external supplier, since the definition of “external supplier” in subsection 259(1) excludes a facility operator.

ADDITIONAL INFORMATION

As there is no indication that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.

Ancillary supplies

Subsection 259(1) defines an “ancillary supply” to mean

“a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or

(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.”

Home medical supply

Subsection 259(1) defines a “home medical supply” to mean

“an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

Subsection 259(1) defines “medical funding” of a supplier in respect of a supply to be

“an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or
(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

Calculation of the PSB rebate

The rules in section 259 of the ETA provide that the PSB rebate is calculated and claimed on a claim period by claim period basis. The claim periods of a GST/HST registrant are the same as the reporting periods for its GST/HST returns (i.e., annually, quarterly or monthly). A PSB that is not a GST/HST registrant has two claim periods per fiscal year – the first six months and the last six months of its fiscal year.

A PSB claims its rebate on a property-by-property or service-by-service basis. It is the intended consumption, use or supply of a particular property or service at the relevant time that determines the PSB rebate entitlement for the non-creditable GST or HST paid on that property or service, not the overall activities of the PSB. Generally, the relevant time will be the time the supply was made to, or the property was imported or brought into Ontario by, the Corporation.

The Corporation’s entitlement to an 83% (and 87%) PSB rebate may be limited and require apportionment where the tax paid or payable is for activities that do not qualify for the rebate, unless subsection 259(14) applies.

Subsection 259(14) provides that:

“For the purposes of this section, if a person incurs all or substantially all of the tax that is included in determining the amount of the non-creditable tax charged in respect of property or a service for a claim period of the person acting in the person's capacity as a hospital authority, a facility operator or an external supplier, the person is deemed to have incurred all of the tax that is included in determining that amount in the course of fulfilling the person's responsibilities as a hospital authority, a facility operator or an external supplier, as the case may be.”

The CRA defines “all or substantially all” to mean 90% or more. Generally, subsection 259(14) means that where the Corporation incurs 90% or more of the GST/HST for a property or a service acquired in its capacity as a facility operator (e.g., for use in making facility supplies), all of that GST/HST is deemed to have been incurred in that capacity. As such, the Corporation could claim a PSB rebate for that property or service at the rate of 83% for the GST and the federal part of the HST and, as a resident only in Ontario, at 87% for the provincial part of the HST. For example, if the Corporation incurs GST/HST on its utilities, and the Corporation determines it incurs 93% of the GST/HST in its activities as a facility operator for making facility supplies, the Corporation may claim 100% of the GST/HST it pays on the utilities using the 83% (and 87%) PSB rebate rates.

Please note that the wording of subsection 259(14) requires an allocation to be performed for each property or service identified in the claim period.

Rebate for purchases that do not qualify for 83% rebate

As a charity for purposes of the GST/HST, the Corporation is eligible to claim a 50% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating [X] for use in making facility supplies, or in the course of making facility supplies.

As the Corporation is only resident in Ontario, it is also eligible for an 82% PSB rebate of the provincial part of the HST paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating [X] for use in making facility supplies, or in the course of making facility supplies.

For more information on the calculation of the rebate, please refer to the GST/HST guide, RC4034, GST/HST Public Service Bodies' Rebate. This guide is available on our website.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7935. 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,

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

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

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

[Addressee]

Case Number: 142842
Business Number: […]

Dear [Client]

Subject: GST/HST RULING
Whether the Global Adjustment is considered as part of the consideration payable for the supply of electricity and therefore subject to the RITC requirement

Thank you for your [correspondence] of [mm-dd-yyyy], as well as subsequent correspondence, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the Global Adjustment (GA). […]. We apologize for the delay in responding to your request.

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

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

STATEMENT OF FACTS

We understand from the information provided that

• [The] […][(Corp)] is a corporation located in the province of Ontario.
• The Corp is registered for GST/HST purposes under the Business Number indicated above.
• The Corp is considered a large business pursuant to section 236.01, and section 27 of the New Harmonized Value-Added Tax System Regulations, No.2 (the Regulations).
• The Corp purchases electricity from a retailer. The invoice for the electricity is issued by your local distribution company and shows supplies of electricity made by the retailer of the electricity and the supply of distribution services including the Global Adjustment charges made by the local distribution company, both which occur simultaneously.

RULING REQUESTED

You would like to know whether the GA is part of the consideration payable for the energy and consequently, subject to recapture under section 236.01.

RULING GIVEN

Based on the facts set out above, we rule that the GA is part of the consideration payable for the energy and is therefore subject to recapture under section 236.01.

EXPLANATION

The GA, originally introduced in 2005 as the Provincial Benefit, is a volumetric charge based on the customer’s energy consumption (in kWh). It can be a credit or a charge to the customer.

According to the Independent Electricity System Operator (IESO), the GA

• is calculated based on the difference between the Hourly Ontario Electricity Price (HOEP) and:

• Regulated rates paid to Ontario Power Generation (OPG) nuclear and baseload hydroelectric generating stations
• Contracted rates with the OPA such as new gas-fired facilities, renewable facilities (wind and solar farms), and nuclear refurbishments
• Contracted rates administered by the Ontario Electricity Financial Corporation paid to existing generators.

• includes the cost of delivering conservation programs in the province and the payments made to participants under contracts with the Ontario Power Authority (OPA) for demand response programs.
• varies from month to month, responding to changes in both the HOEP and contract terms. Generally speaking, when the HOEP is lower, then the GA is higher in order to cover the additional costs mentioned above. The GA also changes when new projects come into service, contract payments take effect or as a result of changes in demand.

The Ontario Energy Board (OEB) describes the GA as the differences between the market price of electricity and the regulated or contract prices paid to generators for the electricity they produce. It also includes the cost of OPA conservation and demand management programs as well as well as any OEB-approved costs incurred by utilities to achieve their mandatory conservation and demand reduction targets.

The GA acts as a price guarantor for the generators. If the HOEP is lower than the guaranteed prices to the generators, the GA makes up the difference.

A report on the GA by Aegent Energy Advisors (a consulting company that works exclusively for energy buyers to optimize their gas and electricity procurement by ensuring adequate supply, reducing risk and managing cost) in February 2010, commented that the GA is an Ontario electricity market mechanism used to transfer costs between the market at large and customers. Costs arise from the difference between electricity prices paid by consumers and those paid to certain generators, plus expenditures on conservation and demand management. The large majority of GA costs arise from contracts with generators. A good portion of these contracts are at fixed prices, or they have elements that behave as fixed-price arrangements. Directionally then, when spot prices are low, the GA is high and vice versa. The extent to which there is a perfect offset between the two price components is an indication of the percentage of total market supply that falls under these contracts. The remainder of the GA costs is for conservation and demand management. These costs are largely unaffected by spot prices and so they are generally additive.

Summary of Related Legislation and Regulations

The legislative authority for the GA is section 25.33 of the Ontario Electricity Act, 1998, Section 26.33 of that Act requires IESO, distributors, and retailers to “make all adjustments” in accordance with the regulations under that Act. The GA is one of these adjustments. The purpose of section 25.33 is to ensure that, over time, the payments by market participants and customers reflect amounts paid to generators, distributors, the OPA, and OEFC under the IESO market rules or s. 78.1 - 78.5 of the Ontario Energy Board Act (OEBA), 1998. As part of its mandate, the OPA contracts with electricity generators for clean electricity resources.

The IESO is required to make payments to generators in respect of the electricity they supply into the system (section 78.1 of the OEBA) as well as to the OEFC (78.2 of the OEBA) and the OPA in respect of the contracts these bodies have with generators for the production of electricity (78.3 and 78.4 of the EBA) and to distributors in respect of conservation and demand management programs (78.5 of the OEBA).

Ontario Regulations 429/04 Adjustments under Section 25.33 of the Act, adopted under the authority of the Electricity Act, 1998 sets out the calculations and means of recovery of the required adjustments. Pursuant to this Regulation, the IESO is required to calculate and charge market participants the GA payable for each month.

The Regulations set out how the different adjustment, including the GA, are collected from or credited to consumers/market participants by distributors, retailers or the IESO, and ultimately remitted to or paid to IESO.

Each section of the Regulations that sets out the adjustment made by an entity which invoices electricity user contains a provision requiring them to reflect the GA amounts on invoices. The amounts that a distributor charges to customers must include an amount equal to the GA that the distributor is required to pay the IESO. The GA only appears on the invoices to most residential consumers where the residential consumer enters a contract with an electricity retailer for the acquisition of electricity.

Consideration, Price Adjustment, or Tax

We will now consider whether the GA is consideration for the supply of electricity, a price adjustment for the supply of electricity, or a tax, fee, or duty.

Is the GA Consideration?

The issue is whether the GA is part of the consideration for the supply of energy (which includes ancillary services) or whether it represents a separate supply. Section 123 defines consideration to include any amount that is payable for a supply by operation of law. Also, pursuant to section 154, certain taxes, duties or fees imposed under an Act of Parliament, provincial levies, and other amounts that are collectible by the supplier under an Act of the legislature of a province may be deemed to be consideration.

Is there a single supply of electricity or a supply of electricity and a supply of GA? According to Policy Statement P-077R2 Single and Multiple Supplies, CRA will, in determining whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies, use the following principles to determine whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies.

• Every supply should be regarded as distinct and independent.
• A supply that is a single supply from an economic point of view should not be artificially split.
• There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply.

A buyer could not purchase electricity without, or independently from, the GA; thus, both elements are highly interconnected and interdependent. The true nature of the transaction for which consideration was paid was the supply of the electricity, which, in the fact situation here, cannot be made without the GA. The supply of the GA to the customers cannot stand by itself or be omitted from the overall supply of the electricity. In other words, the fact situation of this case would make it impossible to purchase each of the supplies or elements separately and still end up with a useful service.

Where there is a supply of electricity from a generator, and a supply of distribution from a distributor that is shown separately on the invoice, how does the GA fit in? Is the GA a third supply or is it part of one of the other supplies? As above, you cannot purchase electricity without the GA and it is not possible or realistic to purchase the GA by itself. CRA accepts that the distribution services are a separate supply where the generation and distribution services are performed by different parties and are shown as separate line items when invoiced. As such there is a single supply of electricity and the GA along with a separate supply of distribution services.

Only the supply of electricity is considered specified energy.

The GA reflects economic reality in that it can be positive or negative, and therefore it can reduce (and in the past actually has reduced) the overall amount payable by electricity consumers. It is difficult to imagine a separate supply of the GA when it is negative.

In Miller v The Queen, 2005 TCC 419 (Miller), the court found that the Debt Retirement Charge (DRC) that is included in most Ontario electricity invoices and used by the Ontario Electricity Financial Corporation to pay down the debt of the former Ontario Hydro is a provincial levy and therefore is to be included in consideration pursuant to section 154 of the ETA. It went on to say that had it not found it to be a provincial levy it would have no difficulty finding that it was consideration as defined in section 123.

In paragraph 33 the court said, “It is also unnecessary to review section 123 of the Excise Tax Act, though, had I not concluded that the DRC is a provincial levy, I would have had no difficulty in finding it was caught by the definition of "consideration" in section 123. It is too closely linked to the supply of electricity to find otherwise. The DRC must be paid to consume the supply of electricity.”

The GA must be paid to consume the supply of electricity too. The GA is more closely related to the supply of electricity than the DRC as it is made up mostly of the difference in the spot price of electricity and the rates paid to various regulated and non-regulated generators, while the DRC is based on the debt of the former Ontario Hydro being allocated to current electricity customers based on current usage. As such, if tested it is reasonable to expect the court to conclude that the GA would be caught by the definition of consideration.

It is payable by every consumer, regardless as to whether:

• the consumer is under a RPP, is billed by a local distribution company (LDC) or the IESO, or has a contract with an electricity retailer or a generator;
• it is shown as a separate line item on a bill or not (e.g., it is not shown as a separate line item on bills to customers under the RPP, but it is factored into the rate paid by those consumers for electricity).

Pursuant to section 26 of the New Harmonized Value-Added Tax System Regulations, No. 2, (Regulations) electricity is specified energy. According to section 28 of the Regulations, specified energy that is acquired in, or brought into, a specified province by a large business is specified property or service. Assuming the customer is a large business as defined in section 236.01, the provincial portion of the HST on the consideration for the GA is subject to recapture under section 236.01.

Residential customers and small businesses that purchase their electricity on a RPP pay a price that has the GA embedded in it. There is no issue that the total amount paid is considered to be consideration for the supply of electricity. The GA should be treated the same way when shown separately on an invoice.

For the reasons above, the GA, whether embedded or a separate line item, is consideration for the supply of electricity.

Is the GA a Price Adjustment?

Section 232 of the ETA deals with price adjustment and is included, in part, below.

232. (1) Refund or adjustment of tax — Where a particular person has charged to, or collected from, another person an amount as or on account of tax under Division II in excess of the tax under that Division that was collectible by the particular person from the other person, the particular person may, within two years after the day the amount was so charged or collected,

(a) where the excess amount was charged but not collected, adjust the amount of tax charged; and

(b) where the excess amount was collected, refund or credit the excess amount to that other person.

(2) Adjustment — Where a particular person has charged to, or collected from, another person tax under Division II calculated on the consideration or a part thereof for a supply and, for any reason, the consideration or part is subsequently reduced, the particular person may, in or within four years after the end of the reporting period of the particular person in which the consideration was so reduced,

(a) where tax calculated on the consideration or part was charged but not collected, adjust the amount of tax charged by subtracting the portion of the tax that was calculated on the amount by which the consideration or part was so reduced; and

(b) where the tax calculated on the consideration or part was collected, refund or credit to that other person the portion of the tax that was calculated on the amount by which the consideration or part was so reduced.

(3) …

(4) …

Subsection 232(1) refers to reducing the excess amount of tax charged, which either means that consideration and/or tax were overcharged or that they were reduced after the fact.

While the GA can be either positive or negative, history shows that in most cases, it is a positive amount that has not been charged.

A positive GA cannot be considered a price adjustment under subsection 232(2) because the wording refers to “… the consideration or part is subsequently reduced …”.

As such, the GA is not considered to be a price adjustment for purposes of section 232.

Is the GA a Provincial Levy under Section 154?

Subsection 154(1) and (2) read as follows

154. (1) Meaning of "provincial levy" — In this section, "provincial levy" means a tax, duty or fee imposed under an Act of the legislature of a province in respect of the supply, consumption or use of property or a service.

(2) Levies included in consideration — For the purposes of this Part, the consideration for a supply of property or a service includes

(a) any tax, duty or fee imposed under an Act of Parliament that is payable by the recipient, or payable or collectible by the supplier, in respect of that supply or in respect of the production, importation, consumption or use of the property or service, other than tax under this Part that is payable by the recipient;

(b) any provincial levy that is payable by the recipient, or payable or collectible by the supplier, in respect of that supply or in respect of the consumption or use of the property or service, other than a prescribed provincial levy that is payable by the recipient; and

(c) any other amount that is collectible by the supplier under an Act of the legislature of a province and that is equal to, or is collectible on account of or in lieu of, a provincial levy, except where the amount is payable by the recipient and the provincial levy is a prescribed provincial levy.

Emphasis added.

We’ll address the following individually.

1) Is the GA a tax? (154(1))

2) Is the GA a duty or fee? (154(1))

3) Is the GA imposed under an act of the legislature of a province? (154(1))

4) Is the GA in respect of the supply, consumption or use of property or service? (154(1))

5) Is the GA a provincial levy? (154(1))

6) Is the GA a prescribed provincial levy? (154(2)(b))

1) Is the GA a Tax? (154(1))

We will examine the criteria by which the DRC in Miller was determined to be a tax for purposes of section 154 in order to determine if these criteria apply to the GA.

The DRC is payable under section 85(4) of the Electricity Act, 1998. It is a charge payable by the consumer to pay part of the debt of Ontario Hydro, which was dissolved and replaced by Hydro One.

In Miller the court found that the DRC that is included in most Ontario electricity invoices and used by the Ontario Electricity Financial Corporation to pay down the debt of the former Ontario Hydro is a provincial levy and therefore is to be included in consideration pursuant to section 154 of the ETA. It went on to say that had it not found it to be a provincial levy it would have no difficulty finding that it was consideration as defined in section 123.

In examining whether the DRC was a tax, for purposes of section 154, the court, following the Supreme Court, examined the following criteria at paragraph 24 of the judgement.

“The section 154 issue therefore becomes just the one question 2 is the DRC a tax, fee or duty? The Respondent relies upon the Supreme Court of Canada cases of Lawson v. British Columbia (Interior Tree Fruit & Vegetable Committee of Direction 6 and Eurig Estate v. Ontario (A.G.) 7 to set the criteria for a tax. The Respondent lists the essential elements of a tax as:

• enforceable by law;
• imposed under the authority of legislature;
• binding without requiring individual consent;
• imposed by a public body;
• made for a public purpose.

The Respondent argues the DRC meets all these criteria. I agree.”

How does the GA compare to DRC using these criteria?

Q. Is the GA enforceable by law?

A. Yes, pursuant to 25.33 of the Electricity Act, 1998, and the regulations adopted under its authority.

Q. Is the GA imposed under the authority of legislature?

A. Yes, the law under which the adjustment is charged and enforced is a law of the legislature of Ontario.

Q. Is the GA binding without requiring individual consent?

A. Yes, the charge is mandatory and does not require consent.

Q. Is the GA imposed by a public body?

A. In the Supreme Court case, Lawson v. British Columbia (Interior Tree Fruit & Vegetable Committee of Direction)(Footnote 1), the public body which was a Committee created by provincial legislation. To determine that the Committee was a public body, the Supreme Court invoked the following motives:

“This Committee, of which the chairman is appointed by the Lieutenant-Governor in Council, and which is invested with wide powers of regulation and control over the fruit and vegetable industry within a great extent of territory, constituted by, and acting in every way under, the authority of the statute, exercising compulsory powers as well as inquisitorial powers of a most exceptional character, is assuredly a public authority. “

At paragraph 10, the court said,

[…] The levy is also made for a public purpose. When such compulsory, not to say dictatorial, powers are vested in such a body by the legislature, the purposes for which they are given are conclusively presumed to be public purposes. Indeed, when one considers the number of people affected by the orders of this Committee, and the extent of the territory over which it executes its orders and directions, it becomes evident that, in point of their potential effect upon the population of the territory and of the interest of the population in the Committee's activities, the operations of the Committee, as contemplated by the statute, greatly surpass in public importance many municipal schemes, the levies for the support of which nobody could dispute, would come under the head of taxation.

In Miller, at paragraph 29, the court said:

A levy imposed by a public authority on electricity consumption, something that affects all Ontarians can likewise be "for purposes" conclusively presumed to be "public purposes". The fact that the monies raised from the levy do not fall into the Consolidated Revenue Fund does not remove them from the public purpose.

Comparatively, the IESO has extended powers, in that it regulates the whole market of electricity in Ontario. Also, the IESO is governed by an independent board whose directors are appointed by the government of Ontario, and the directors appoint the chief executive officer, pursuant to sections 7 and 8 of the Electricity Act, 1998(Footnote 2). Thus, the IESO qualifies as a public body for purposes of determining whether the amount imposed is a tax.

Q. Is the GA made for a public purpose?

A. Paragraphs 28 and 29 of Miller read as follows,

[28] The Supreme Court of Canada in Lawson dealt with a levy imposed by the province of British Columbia pursuant to the Produce Marketing Act. 8 In finding such levy constituted a tax the Court stated at paragraph 10:

[…] The levy is also made for a public purpose. When such compulsory, not to say dictatorial, powers are vested in such a body by the legislature, the purposes for which they are given are conclusively presumed to be public purposes. Indeed, when one considers the number of people affected by the orders of this Committee, and the extent of the territory over which it executes its orders and directions, it becomes evident that, in point of their potential effect upon the population of the territory and of the interest of the population in the Committee's activities, the operations of the Committee, as contemplated by the statute, greatly surpass in public importance many municipal schemes, the levies for the support of which nobody could dispute, would come under the head of taxation.

[29] A levy imposed by a public authority on electricity consumption, something that affects all Ontarians can likewise be "for purposes" conclusively presumed to be "public purposes". The fact that the monies raised from the levy do not fall into the Consolidated Revenue Fund does not remove them from the public purpose. Hamlyn J. in Kempe v. R. 9 adopted similar reasoning. This was a case involving the nature of a German church tax. He wrote at paragraph 10:
The enforceable church tax levied against the Appellant was imposed under the authority of the German legislature. German constitutional law sanctions the tax and the German legislature (a public body) grants the Lutheran Church the right to impose a church tax on its members. The constitutional approval and the legislative action together are conclusively presumed to be for public purposes.

[30] Apart from circumstances justifying such a conclusive presumption, I step back and look at the history of what the DRC is intended to cover, that is the Ontario Hydro debt incurred to provide electricity to Ontarians, and I find a common sense answer is that this is indeed for a public purpose. Mr. Miller has directed me to no case that suggests a levy is only for a public purpose if it falls into the Consolidated Revenue Fund. I conclude that the DRC is a tax for purposes of section 154 of the Excise Tax Act.

[31] I note the British Columbia Superior Court dealt with a similar issue in Edmonds v. Actton Super-Save Gas Stations Ltd. 10 It took a slightly different approach but also found that GST was applicable to a charge on electricity imposed under the Transit Act 11 of British Columbia. The Court stated at paragraph 36:

However, in my view, the plaintiff has not addressed the correct issue. In my view it is not relevant as to why the provincial government decided to impose a transit levy or indeed how the revenues raised by that levy may ultimately be used. The language of s. 154 is concerned with whether a tax such as the transit levy is imposed in respect of the supply of the property or service and in my view the fatal flaw in the plaintiff's submission is the overlooking of the key word 'imposed".

The GA exists to ensure that generators receive compensation according to their regulated or contracts prices despite the market price of electricity. It also provides the financial resources for OPA conservation and demand management programs as well as any OEB-approved costs incurred by utilities to achieve their mandatory conservation and demand reduction targets all of which are for public purposes.

The GA is for a public purpose.

The GA meets all the requirements of the above test to be considered a tax.

2) Is the GA a Duty or Fee? (154(1))

If the GA is to be deemed to be part of the consideration for the supply of electricity pursuant to section 154 the GA must be a tax, duty or fee imposed by an act of the legislature of a province in respect of the electricity.

We previously determined that the GA was imposed by an act of the legislature of a province.

Black’s Law dictionary (Black’s) defines “fee” as follows: “A charge for labour or service, esp. professional services”. Thus, the Ga would not be a fee, as electricity is considered to be tangible personal property. Black’s was not useful for a definition of the term duty, as it generally described it as an obligation of any kind. The Termium database defined duty as a tax imposed in certain circumstance, such as at importation for example. It appears that a duty, in the context of section 154, would be a kind of tax which is called duty in given contexts.

3) Is the GA a Charge “in respect of the supply of electricity”? (154(1))

For an amount under section 154 to be deemed to be part of the consideration of a given supply, the amount must be “in respect of that supply or in respect of the production, importation, consumption or use of the property or service”. The calculation of the GA is provided for by Ontario Regulation 429/04. As noted previously, the GA is made up of differences between the market price of electricity and the regulated or contract prices paid to generators for the electricity they produce, the costs of OPA conservation and demand management programs, as well as well as any OEB-approved costs incurred by utilities to achieve their mandatory conservation and demand reduction targets.The particular GA charged to a particular consumer is proportional to the electricity consumed by that consumer.

The Supreme Court of Canada stated in Nowegijick v. R/ (1983) SCR 29, an income tax case, that the words "in respect of" are, in my opinion, words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters.”

It is thus clear that GA is a charge in respect of a supply (of electricity).

4) Is the GA imposed under an Act of the legislature of Ontario? (154(1))

In order to know if section 154 applies to the GA, it has to be determined whether it is a “provincial levy” defined at subsection 154(1) as “a tax, duty or fee imposed under an Act of the legislature of a province in respect of the supply, consumption or use of property or a service.”

The GA is imposed under section 25.33 of the Electricity Act, 1998, and the Regulations adopted under its authority. That act is an act of the Ontario provincial legislature. This condition is met.

5) Is the GA a provincial levy? (154(1))

The GA meets the requirements in subsection 154(1) as it is a tax, it is imposed by an Act of a legislature of a province, and it is in respect of a supply (of electricity). The GA is therefore a provincial levy.

6) Is the GA a prescribed provincial levy? (154(2)(b))

The GA is not prescribed under the Taxes, Duties and Fees (GST/HST) Regulations. As such, it is not a prescribed provincial levy.

Given the above analysis, we find that the GA is not a tax, duty or fee imposed under an Act of Parliament and is therefore not included in the consideration of the supply pursuant to paragraph 154 (2)(a).

However, we also find that the GA is a tax under provincial legislation. Its meets the definition of provincial levy in subsection 154(1) as it is a tax imposed by an Act of the legislature of a province in respect of a supply of property or service. The GA is therefore included in the consideration for the supply of electricity pursuant to paragraph 154(2)(b).

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-9882. 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,

Doug Campbell
General Operation Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

1 This case is quoted in the passage of the Miller judgment quoted above in this document. It is in the Lawson judgment that we find the criteria for determining what a tax is. We note that whether the Committee was an agent of the Crown was not a criterion to make the decision.

2 The directors are appointed by the Minister, pursuant to section 7, and “Minister” is defined in the Act as “the Minister of Energy or such other member of the Executive Council as may be assigned the administration of this Act under the Executive Council Act.

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: 155289r
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Specially designed training to assist individuals with autism

Thank you for your letter dated January 2, 2016 and our telephone conversation on September 9, 2016, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to specially designed training to assist individuals with autism.

You received a GST/HST interpretation letter […] providing general information on the application of the GST/HST to training services specially designed to assist an individual with a disorder or disability. After reviewing the information in the letter and GST/HST Info Sheet, GI-113, Specially Designed Training to Assist Individuals with Autism, you have provided a detailed description of your services along with sample invoices and are requesting a ruling as to whether your services are exempt supplies under section 14 of Part II of Schedule V.

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

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

STATEMENT OF FACTS

We understand the following from your letter and our telephone conversation:

1. You are […] working in the field of Applied Behaviour Analysis (ABA). You are a Board Certified Assistant Behaviour Analyst (BCaBA) through the Behavior Analyst Certification Board […]

2. You design, plan and monitor the effectiveness of home-based ABA programs that are specifically and individually designed for a child with autism. This usually includes conducting an assessment with families to determine their goals and priorities for treatment, conducting skill assessments with the child to determine their current level of functioning or conducting functional behaviour assessments if problem behaviour is a concern, providing parent training, providing initial training to Behaviour Interventionists (BIs) who are hired to implement programming with children, and to monitor and evaluate progress on-going.

3. The […] (Ministry) provides funding for Early Intensive Behavioural Intervention/Applied Behaviour Analysis programs. Your clients use the […][funding] to acquire your services. You invoice the Ministry directly for your services which then pays you using the funds that are allotted to the individual. You will also bill the client directly if that is their preference or if the [funding] for that individual have been exhausted, although you stated that this rarely occurs.

4. Your current professional role and responsibilities conform with all three conditions outlined in GST/HST Info Sheet GI-113, Specially Designed Training to Assist Individuals with Autism, however your responsibilities also include providing additional services to paraprofessionals in a case-specific and individualized manner as part of an individual child’s intervention program. While parents and caregivers receive on-going training and support, in order to best support a child with challenging behaviour or skill deficits across environments, it is necessary to collaborate with other service providers so that support for the child is comprehensive. These service providers may include community service agencies such as […][associations] that provide speech-language, occupational therapy, and physiotherapy services for young children with autism, schools that the child may attend, and BIs, babysitters, or other caregivers that may work with a child in a home environment. You estimate approximately […]% of your time is spent collaborating with other service providers to ensure that the child’s individual intervention program is comprehensive and effective.

5. When collaborating with other professionals such as schools and community organizations, no direct training is provided. Information gathered from these professionals is used to inform home program development and is a necessary and ethically mandated component of providing behaviour analytic services. Occasionally, suggestions for behaviour management or skill acquisition procedures for a specific child may be provided in a collaborative manner with other professionals, such as at school Individualized Education Plan (IEP) meetings. This would only occur at the request of a parent, if necessary, to advocate for the child but you are only hired by the parents and only paid through government funds.

6. BIs are paraprofessionals who work directly with children with autism at home in implementing behaviour analytic programming on a daily or weekly basis. BIs are supervised by a […] professional (such as you) and may initially receive 3-9 hours of direct 1:1 training in a child’s behaviour support plan and strategies before beginning to work independently with a child. However, subsequent visits where you ([…]) overlap with BIs include a mixture of connecting with and providing support to parents/caregivers, assessing student progress through data monitoring and direct observation of the child, trouble-shooting or directly assessing skills with the child, and providing suggestions to staff and parents on how to manage certain situations or child behaviours that may arise.

7. All programming, training and support that may be given to service providers or BIs are individualized to a particular child, and receiving training on one child with autism does not provide staff with the skills to work independently with other children or to design programs themselves. Therefore, these services provided are specifically within the context of your role in order to support that individual child. On-going guidance from a trained and certified behaviour analyst is a mandatory requirement for accessing [funding].

8. Clients (parents) of an autistic child are referred to you by psychologists at the clinic you work at or they find your name in […]. Typically, a medical doctor or psychologist will diagnose a particular child as having autism and advise the parents […] to look for a behavioral consultant/analyst who can provide services to assist the client and child in coping with the effects of the disorder.

9. You enter into a […] (Agreement) with your client which describes the initial and on-going services and defines your respective roles and responsibilities. The Agreement provides that your role is to provide behaviour analytic services under the supervision of a qualified Board Certified Behaviour Analyst (BCBA) and may include both on-site (direct) and off-site (indirect services). Your case work may include but is not limited to:

* Initial intake and assessment to identify target behaviours for change

* Development of behaviour support plans for targeted behaviours and skill acquisition programs based on current research

* Conducting functional assessments, including preference assessments, interviews, observation, and data collection

* Training significant others, such as the family or behaviour interventionists, and developing training procedures and documents as needed

* Monitoring progress of programs, analysis of data collection, and modifying programs based on data and client need

* Programming for maintenance and generalization of skills

* Collaboration and meetings with home or school teams, or other professionals

* Report writing, documentation and research, as needed or requested.

10. […][Services and billing information]

11. The Agreement also provides that the role of your supervisor (BCBA) is to provide you with resources and supervision, as well as to evaluate your performance and the progress of your clients. […][Information about fees]. Any direct consultation (e.g. attending team meetings) by the supervisor will be billed by the supervisor to the Ministry or the client. Your supervisor is responsible for overseeing your performance, however, she is not responsible for your program as a whole. In the event that you are no longer providing the client with behaviour consultation services, the supervisor will not be responsible for the program.

12. The consideration for your services is not covered under the […][provincial health plan].

13. […]

14. […]

RULING REQUESTED

You would like to know if supplies of your services described above are exempt from the GST/HST under section 14 of Part II of Schedule V.

RULING GIVEN

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

1. Supplies of your services of designing a training plan that is to be given to a particular individual with autism or to another individual who provides personal care or supervision to the particular individual otherwise than in a professional capacity, as they are described above, made after February 11, 2014 are exempt from GST/HST under section 14 of Part II of Schedule V where one of the following circumstances applies:

a) a person acting in the capacity of a practitioner, medical practitioner, social worker or registered nurse, and in the course of a professional-client relationship between the person and the particular individual, has certified in writing that the training plan will be an appropriate means to assist the particular individual in coping with the effects of the disorder or disability or to alleviate or eliminate those effects,

b) you are paid an amount for the service of designing the training plan by a government or organization administering a government program targeted at assisting individuals with a disorder or disability, or

c) you receive evidence satisfactory to the Minister of National Revenue that, for the purpose of acquiring the service of designing a training plan, an amount has been paid or is payable to a person by a government or organization administering a government program targeted at assisting individuals with a disorder or disability.

2. Supplies of your services of designing a training plan made prior to February 12, 2014 were not exempt from GST/HST.

EXPLANATION

Generally, supplies of property and services made in Canada are subject to GST/HST, pursuant to section 165, unless they are specifically exempt under Schedule V. Part II of Schedule V sets out the health care services that are exempt from GST/HST.

Effective for supplies made after February 11, 2014, section 14 of Part II of Schedule V exempts:

A supply (other than a zero-rated supply or a prescribed supply) of a training service, or of a service of designing a training plan, if

(a) the training is specially designed to assist individuals with a disorder or disability in coping with the effects of the disorder or disability or to alleviate or eliminate those effects and is given or, in the case of a service of designing a training plan, is to be given to a particular individual with the disorder or disability or to another individual who provides personal care or supervision to the particular individual otherwise than in a professional capacity; and

(b) one of the following circumstances exists:

(i)  a person acting in the capacity of a practitioner, medical practitioner, social worker or registered nurse, and in the course of a professional-client relationship between the person and the particular individual, has certified in writing that the training is or, in the case of a service of designing a training plan, will be an appropriate means to assist the particular individual in coping with the effects of the disorder or disability or to alleviate or eliminate those effects,

(ii)  a prescribed person, or a member of a prescribed class of persons, has, subject to prescribed circumstances or conditions, certified in writing that the training is or, in the case of a service of designing a training plan, will be an appropriate means to assist the particular individual in coping with the effects of the disorder or disability or to alleviate or eliminate those effects, or

(iii) the supplier

(A) is a government,

(B) is paid an amount to make the supply by a government or organization administering a government program targeted at assisting individuals with a disorder or disability, or

(C) receives evidence satisfactory to the Minister that, for the purpose of the acquisition of the service, an amount has been paid or is payable to a person by a government or organization administering a government program targeted at assisting individuals with a disorder or disability.

Under section 15 of Part II of Schedule V, a training service or a service of designing a training plan is not included in section 14 if the training is similar to training ordinarily given to individuals who do not have a disorder or disability, or given to individuals who do not provide personal care or supervision to an individual with a disorder or disability. This is also effective for supplies made after February 11, 2014. Section 15 of Part II of Schedule V is not applicable in this case since the training involved is training specially designed to be given to individuals who have a disorder or disability.

In addition, under section 1.1 of Part II of Schedule V, a cosmetic service supply and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in Part II of Schedule V (Footnote 1). A cosmetic service supply is defined in section 1 of Part II of Schedule V to mean a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes. This section does not apply to the services you provide.

Where a supplier provides a combination of service elements to its clients it is important to determine if the supplier has made a single supply or multiple supplies. This [is] especially important where some of the service elements may be taxable and some may be exempt.

As explained below, before February 12, 2014 only supplies of training services were exempt from the GST/HST. Supplies of a service of designing a training plan were taxable before February 12, 2014. As you provide an element of training services, it is important to properly characterize the supplies you make to be able to apply the ETA provisions to your situation.

Whether a person is making a single supply or multiple supplies is a question of fact. The common law principles of single supply and multiple supplies are described in GST/HST Policy Statement P-077R2, Single and Multiple Supplies.  The characterization of a transaction as a single supply or multiple supplies considers the interrelationships among the various elements of the agreement, the purpose of an agreement, the needs of the client, and the economic reality of the transaction. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply. Where the essential elements are part of a single composite supply, that single supply cannot be artificially split into separate supplies.

In addition, an important question to consider is what has been supplied for the payment made. Policy Statement P-077R2 also explains that the way in which the consideration for a transaction is set out does not in itself determine whether there are one or more supplies. A single consideration does not automatically mean that there is one supply.  Equally, separately identified consideration for certain elements do not necessarily mean that there are two or more supplies. Thus, one cannot rely solely on the breakdown of charges in an agreement or on an invoice to conclude that a supplier is making multiple supplies of different property and/or services.

Based on the facts set out above, we conclude that you are making a single supply of a service of designing a training plan.

To arrive at this conclusion, we considered information obtained from your letters, our telephone conversation, and the Agreement you enter into with your clients. Your main activity is to design, plan and monitor the effectiveness of home-based applied behaviour analysis programs that are specifically and individually designed for an individual child with autism. There are numerous work elements, such as training or instruction, included as part of this overall supply of services, however, we do not consider that these individual tasks or elements carry sufficient weight on their own to warrant being considered separate supplies. Your work revolves around the effectiveness of the training plan (e.g., assessment, observation, evaluation, modification of the plan). The dominant aspect of your work revolves around the status of the designed plan. The various work elements are integral components of designing the training plan that are all intertwined, interdependent, and inextricably bound up with each other. Therefore, we conclude that the characterization of your supply is of a service of designing a training plan.

The training plans you design are for training that is specially designed to assist individuals with autism in coping with its effects or to alleviate or eliminate those effects. The training is to be given to a particular individual with autism or to another individual who provides personal care or supervision to the particular individual otherwise than in a professional capacity (e.g., parents/guardians). Therefore, the criterion in paragraph 14(a) of Part II of Schedule V is met.

Where a person acting in the capacity of a practitioner (e.g. psychologist), medical practitioner, social worker or registered nurse has certified in writing that the service of designing a training plan is an appropriate means to assist the particular child with autism in coping with the effects of the disorder or disability or to alleviate or eliminate those effects, the criterion of subparagraph 14(b)(i) of Part II of Schedule V is met.

Where you are paid by the Ministry for your services of designing a training plan with [funding] under the Early Intensive Behavioural Intervention/Applied Behaviour Analysis programs, the criterion of clause 14(b)(iii)(B) of Part II of Schedule V is met. Where the [funding] [is] exhausted (e.g., due to the approved limit being exceeded) for a particular individual, provided an amount of funding is paid for part of your services of designing a training plan for that particular individual, the criterion of clause 14(b)(iii)(B) of Part II of Schedule V is met.

Note that should the Ministry provide funding directly to your client in order to pay for your services, you are required to maintain satisfactory documentary evidence to that effect in order to substantiate that the criterion in clause 14(b)(iii)(C) has been met.

Based on the facts as described above, the criteria under section 14 of Part II of Schedule V (as it currently reads) are satisfied and supplies of your services of designing a training plan made after February 11, 2014 are exempt under section 14 of Part II of Schedule V.

However, prior to February 12, 2014, there was no exemption in the ETA for supplies of services of designing a training plan. Under section 14 of Part II of Schedule V, only supplies of training services were exempt. Therefore, supplies of your services of designing a training plan prior to February 12, 2014 were not exempt under section 14 of Part II of Schedule V. As no other exempting provision applied, supplies of your services of designing a training plan made prior to February 12, 2014 were taxable supplies.

[…].

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

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-572-2636. 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,

Maria Forte-Long
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 Section 1.1 is not applicable to section 9 of Part II of Schedule V which exempts supplies of properties and services covered by provincial health insurance plans.

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: 157873

December 21, 2016

Dear [Client]:

Subject:	GST/HST RULING
		[…][Automobile dealer] and various sales contracts

We are writing in response to your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to various sales contracts entered into by […] (the Dealer). We apologize for the delay in responding to the enquiry.

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

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

DOCUMENTS RECEIVED

The documents provided include sales contracts with customers, such as conditional sales contracts, installment sales contracts, credit agreements or finance contracts with installments; these will be collectively referred to as “contracts”, and a specific agreement will be referred to as a “Contract”.

Specifically, we received the following documents:

a.) your incoming letter;

b.) […] (Lender 1) documents:

i. ) […] (the Lender 1 Dealer Agreement), […], and
ii. ) […] (the Lender 1 Contract);

c.) […] (Lender 2) documents:

i. ) […] (the Lender 2 Dealer Agreement), and
ii. ) […] (the Lender 2 Contract);

d.) […] (Lender 3) documents:

i. ) […] (the Lender 3 Dealer Agreement), and
ii. ) […] (the Lender 3 Contract);

e.) […] (Lender 4) documents:

i. ) […] (the Lender 4 Dealer Agreement),
ii. ) […] (the Lender 4 Contract), and
iii. ) […][another contract] with similar terms as the Lender 4 Contract, and therefore not referenced in the balance of this response;

f.) […] (the Lender 5 Contract);

g.) […] (the Lender 6 Contract);

h.) […] (the Lender 7 Contract); and,

i.) […] (the Lender 8 Contract).

STATEMENT OF FACTS

Based on your incoming letter and the various contracts and agreements listed above, our understanding of the pertinent facts is set out below. References to a “Customer” or a “Lender” pertain to a specific customer or lender referenced in one of the aforementioned contracts, whereas references to a “customer” or a “lender” pertain to customers or lenders generally that the Dealer may transact with, including under the various agreements collectively.

Key Provisions

The Dealer has entered into a number of Dealer agreements with various lenders. The Dealer has also entered into various contracts with customers for the purchase of motor vehicles that require financing. The key provisions in these transactions, based on the documentation we received, are:

* the contract is intended to be assigned to a lender;
* upon assignment, the lender is receiving an assignment of a flow of payments provided under the contract (e.g., all amounts due now and over time);
* upon assignment, the Dealer is to receive a payment based on the amount to be financed by a customer under the contract; and
* the Dealer receives a fee in respect of the assignment of the contract.

Hereafter the term “fee” includes a fee, referral fee, dealer reserve, or commission paid to the Dealer related to the assignment of a contract to a lender. References to a “Fee” pertain to a fee payable to the Dealer under one of the aforementioned contracts, whereas references to a “fee” pertains to a customer or lender generally that the Dealer may transact with, including under various contracts collectively.

A summary of the key provisions in the various agreements is set out in Appendix A. The key provisions in the various agreements are set out in Appendix B.

RULING REQUESTED

You have requested a ruling with respect to the GST/HST treatment applied to a Fee received by the Dealer from the Lenders.

As noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretation Services, the Canada Revenue Agency (CRA) will not issue a ruling where all of the pertinent facts cannot be established.

Based on the incoming documentation received, we do not have information regarding Fees agreed to between the Dealer and Lender 2. Also, we did not receive samples of the Dealer Agreements between the Dealer and Lender 5, Lender 6, Lender 7, and Lender 8 and the documentation we did receive with respect to those lenders is silent on any Fee paid by the Lender to the Dealer.

As a result, we are unable to rule on Fees received by the Dealer from Lender 2, Lender 5, Lender 6, Lender 7 or Lender 8 from the assignment of the specific Contracts. In lieu of a ruling, we have provided an interpretation following the ruling with general information regarding the GST/HST implications of the assignment of a contract.

RULING GIVEN

Based on the facts set out above, we rule that the assignment of the Dealer’s rights to the Lender under
i. ) the Lender 1 Contract,
ii. ) the Lender 2 Contract,
iii. ) the Lender 3 Contract,
iv. ) the Lender 4 Contract,
v. ) the Lender 5 Contract,
vi. ) the Lender 6 Contract,
vii. ) the Lender 7 Contract, or
viii.) the Lender 8 Contract

is a financial service under paragraph (d) of the definition of “financial service” as defined in subsection 123(1), and is an exempt supply under section 1 of Part VII of Schedule V.

We further rule that a Fee received by the Dealer from
* Lender 1 for the assignment of rights under the Lender 1 Contract,
* Lender 3 for the assignment of rights under the Lender 3 Contract, or
* Lender 4 for the assignment of rights under the Lender 4 Contract

forms part of the consideration received for the assignment of the specific Contract, and therefore would not be subject to GST/HST as the assignment is an exempt supply.

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 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

Supplies of financial services are exempt under Part VII of Schedule V unless they are specifically zero-rated under Part IX of Schedule VI. 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.

A financial service includes, under paragraph (d) of the definition, the issue, granting, allotment, acceptance, endorsement, renewal, processing, variation, transfer of ownership or repayment of a financial instrument. A “financial instrument” is defined in subsection 123(1) and includes a “debt security” which, in turn, is defined under that provision to include a right to be paid money (e.g., under a loan).

The Dealer has entered into various Contracts with Customers (as summarized in Appendix A and as described in Appendix B) for the sale of motor vehicles. Under these Contracts, the Dealer is entitled to receive a stream of payments from the Customer. The CRA considers each of these specific Contracts to be a “debt security” and a “financial instrument” as each one represents a right to be paid money. When the Dealer’s rights under each of these Contracts are assigned by the Dealer to Lenders 1 through 8, the Lender is acquiring from the Dealer the right to receive the stream of payments from the Customer under the Contract. The assignment of these rights is a financial service under paragraph (d) of the definition of “financial service”. As such, the assignment of these rights is a supply of a financial service that is exempt from GST/HST.

The Fee received by the Dealer from Lenders 1, 3 and 4, under the Contracts described in Appendix B forms part of the consideration received for the exempt supply, that is the assignment of the Contract and is, therefore, not subject to GST/HST.

INTERPRETATION GIVEN

As previously noted under “Ruling Requested”, we were not provided with information regarding Fees paid to the Dealer by Lender 2, Lender 5, Lender 6, Lender 7 or Lender 8 for the assignment of Contracts to these Lenders. As a result, we were unable to rule on the tax status of any such Fees paid to the Dealer by Lender 2, Lender 5, Lender 6, Lender 7 and Lender 8. In lieu of a ruling on this issue, we provide the following general comments.

The terms “conditional sales contract”, “installment sales contract”, “credit agreement” and “finance contract with installments” are not defined in the ETA.

The CRA considers a conditional sale to take place when the seller transfers possession of goods to a customer, but ownership passes only after certain conditions are met, such as when the purchase price has been paid in full. In this type of sale, the customer agrees to make payments for the goods over a defined period of time. The customer takes possession of the goods, but the seller keeps title or ownership of the goods until the customer has met the specified conditions. Where a seller, for example the Dealer, enters into a conditional sales contract with a customer where the customer is purchasing a motor vehicle, the supply of the motor vehicle to the customer under the conditional sales contract is generally a taxable supply.

Conditional sales contracts and assignments of those contracts provide a financing mechanism to the customer. An installment sales contract, a credit agreement and a finance contract with installments are similar to a conditional sales contract that entitles the Dealer to receive a stream of payments from the customer. The CRA considers such a contract to be a “debt security” and a “financial instrument” as it represents a right to be paid money. When such a contract is assigned to a third party, the third party is acquiring the right to receive the stream of payments from the customer. The assignment of these rights is an exempt supply of a financial service and is therefore not subject to GST/HST.

A fee received by the Dealer from a lender for the assignment of a conditional sales contract, installment sales contract, credit agreement, or finance contract with installments forms part of the consideration received for the assignment of the contract, and therefore would not be subject to the GST/HST as the assignment of the contract is an exempt supply.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 604-658-8526. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Marjorie Stevens
Financial Services Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate