Docket: 2006-2168(GST)G
BETWEEN:
DOMAINE DE LA VOLIÈRE INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal
heard on February 12, 2008, at Montreal, Quebec.
Before: The Honourable Justice Paul Bédard
Appearances:
|
Counsel for the Appellant:
|
Martin Fortier
|
|
Counsel for the Respondent:
|
Mario Laprise
|
____________________________________________________________________
JUDGMENT
The appeal is allowed with costs, and the
assessment respecting the GST on the services provided to school boards by the appellant,
which did not collect any GST on those services, is vacated, in accordance with
the attached Reasons for Judgment.
Signed at Ottawa, Canada, this
7th day of October 2008.
"Paul Bédard"
on this 26th day of May 2009.
Erich Klein, Revisor
Date: 20081007
Docket: 2006-2168(GST)G
BETWEEN:
DOMAINE DE LA VOLIÈRE INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
The issue is
essentially whether the appellant was required to charge the goods and services
tax (GST) on the services it provided to school boards and/or schools from
February 1, 2001, to January 31, 2005 (the "relevant period"), or if
those services were exempt supplies of child care services pursuant to section
1 of Part IV of Schedule V to the Excise Tax Act (the "Act").
[2]
The appellant, a for-profit
corporation, was operating, during the relevant period, a recreational
accommodation centre also referred to by the appellant as an accommodation and
leisure centre (Exhibit I-1, page 12). For that activity, the appellant has 55
acres of land (a large part of which is wooded) on which there are four
cottages, four condominiums, a big tent and a reception office. The appellant
also has a private lake (with a sandy beach), picnic tables, a heated pool,
canoes, pedal boats, swings and areas set up for activities such as archery,
volleyball, pétanque, soccer, and baseball. The wooded area has a number of
trails developed specifically for nature interpretation, bird watching, hebertism,
cycling, snowshoeing, cross-country skiing, and snowmobiling. Finally, for the
winter season, the Appellant builds a skating rink and illuminated ice slides.
[3]
The appellant's main
activities during the relevant period were as follows:
(i)
providing accommodations
(renting condos and cottages), which activity accounted for approximately 45%
of the appellant's sales;
(ii)
providing outdoor
activity days for schools and day-care centres, which activity accounted for
approximately 45% of the appellant's sales;
(iii)
holding summer day
camps, which activity accounted for approximately 10% of the appellant's sales.
[4]
The case at bar concerns
the supply of outdoor activity days by the appellant to schools and day-care
centres. The appellant did not charge GST to the recipients of this supply
during the relevant period because the appellant considered that this service consisted
primarily in providing care and supervision to children 14 years of age or
under for periods of normally less than 24 hours per day, and that the service
was therefore an exempt supply of child care services pursuant to section 1 of
Part IV of Schedule V to the Act.
[5]
With respect to the
supply or service that is the subject of the case at bar, the evidence revealed
the following:
(i)
this supply was made almost
exclusively to school boards and/or schools during the school year;
(ii)
from their arrival on
the bus (at around 9:00 a.m.) until their departure (at around 2:30 p.m.), the pupils
from these school boards and/or schools were entirely in the keeping of the appellant's
counsellors, who saw to it that the pupils participated in as many recreational
and/or educational activities as possible during the day; the pupils were all
14 years of age or under;
(iii)
the teachers
accompanying their pupils on the bus had no part at all in looking after them
during the time they were in the keeping of the appellant's counsellors; the
evidence showed that the appellant placed at the teachers' disposal a cottage where
they could entertain themselves or work.
[6]
The evidence also
revealed that the supply of summer day camp services resembled in all regards
the supply of outdoor activity days made by the appellant to schools during the
school year: from their arrival (at around 9:00 a.m.) until their departure
(at around 4:00 p.m.), the children, aged 14 years and under, were entirely in
the keeping of the appellant's counsellors, who saw to it that they
participated in as many sports and/or educational activities as possible during
the day, which activities were in all respects similar to the activities the
pupils participated in where the recipient of the service was the school and/or
school board. In fact, in both cases, the services provided by the appellant
were the same; the ultimate beneficiaries were children 14 years of age and
under, the difference being that in the case of the supply of summer day camp
services, the recipients were parents, whereas in the case of the supply of
outdoor activity days, the recipient of the supply or service was a school
board and/or school.
Respondent's Position
[7]
Counsel for the respondent
submitted essentially that, in order to decide whether or not this activity
constitutes a child care service in a particular case, the Court must use the
test enunciated by Mr. Justice Rip (as he then was) in Bailey. According to
counsel for the respondent, Rip J. determined, in Bailey, supra, that
the fundamental issue is to determine the primary reason for which a child is
registered for an activity. In other words, counsel for the respondent submitted
that the Court must answer the following question in the case at bar: Did the
recipients of the service, in this case essentially school boards and/or
schools, use the appellant's services primarily to have the appellant watch
over their pupils or protect them, in which case the service is an-exempt
supply, or primarily to have the appellant entertain and/or educate the pupils,
in which case it is a taxable supply. Counsel for the respondent argued that
the outdoor activity days were simply extracurricular activities (like museum
outings, trips to zoos or botanical gardens, downhill skiing days, etc.) that
the schools organized for their pupils during the school year and that were chiefly
intended to provide occasional rest days for pupils while having them
participate in recreational-educational activities outside the school setting; the
object was not the provision of care. Counsel for the respondent submitted
that the appellant's supervision service which the pupils at these schools
benefited from was, in this context, merely incidental to the entertainment
service primarily sought by the schools.
Appellant's Position
[8]
In my opinion, the
first question that must be answered in our analysis is as follows: Is it the
test enunciated by Rip J. (as he then was) that should be used for GST
purposes? In other words, is it up to the service provider (in light of its
obligation to collect GST from its client if a taxable service is provided to
that client) to determine for each client the main reason this client is using
the supplier's services? If the answer is affirmative, it may be that for one
client the supplier must collect GST, whereas for another it may not be required
to do so, even if the service provided to both clients is identical. If this
were the case, the result would be nonsensical. If the service provided is
identical in both cases, the supplier's obligation with respect to collecting
GST must, in my opinion, also be identical in both situations.
[9]
In my opinion, it is
not necessary here to determine the main reason the school boards used the appellant's
services. Rather, what must be determined is whether, intrinsically, in light
of the evidence submitted with respect to the services provided to the school
boards, those services consisted primarily in providing care or
supervision to pupils or in providing them with educational and/or sporting
activities. This approach does not mean, however, that the main reason the
school boards used the appellant's services should not be looked at. Indeed, establishing
the main reason for using the services may, in some cases, light the way in the
determination of the services primarily provided by the supplier. In the
present case, the evidence very clearly shows that the appellant provided two
kinds of services to the school boards, in that the pupils were both cared for
and entertained (and/or educated) by the appellant. The question that must be
asked, then, is this: Was the appellant's supervision service merely incidental
to its entertainment and/or educational services from which the pupils benefited?
Or was it the other way round? In the present case, the evidence shows that
from their arrival (at around 9:00 a.m.) until their departure (at around 4:00
p.m.), the pupils, aged 14 years and under, were entirely in the keeping of the
appellant's many counsellors. During that time, the children were not under
the care and supervision of teachers, as the teachers were entertaining
themselves or working in cottages made available to them by the appellant. It
is clear the appellant was responsible for watching over the children for a
period of least seven hours during which the teachers were not watching them.
The counsellors provided first aid to the children and ensured their comfort.
The period during which the pupils were committed to the care and keeping of
the appellant was too long for one not to conclude that the predominant element
of the service provided consisted of the care of the children during that
period. The fact that the appellant offered pupils the opportunity to
participate in many recreational and/or educational activities was completely
foreseeable and reasonable since it had to look after them for a long period of
time. It is expected that anyone responsible for the care of children 14 years
of age or under during a 7-hour period would arrange activities for them, and
it would be unreasonable to argue that the above-mentioned provision of Part IV
of Schedule V to the Act applies solely to situations where the only service
offered is the care of children and where no activities are arranged for them.
That could not have been the intention of Parliament. Consequently, the
services provided to the school boards for which no GST was charged met the
conditions set out in section 1 of Part IV of Schedule V to the Act, and, as these
services were exempt supplies, it was appropriate that GST was not charged on them.
[10]
Accordingly, the appeal
is allowed with costs, and the assessment respecting the GST on the services
provided to school boards by the appellant, which did not collect any GST on those
services, is vacated.
Signed at Ottawa, Canada, this 7th day of October 2008.
"Paul Bédard"
on this 26th day of May 2009.
Erich Klein, Revisor
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