23 October 2002 External T.I. 2002-0159475 - INDIAN BUSINESS INCOME FROM TELEHEALTH

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Whether business income from medical services provided by Indian off-reserve to reserve patients by video conferencing is taxable.

Position: Yes.

Reasons: Revenue-generating activity takes place off reserve.

2002-015947
XXXXXXXXXX R. Shields
(613) 948-5273
October 23, 2002

Dear XXXXXXXXXX:

Re: Status Indian exemption from taxation

This is in response to your letter of August 3, 2002 addressed to the XXXXXXXXXX Tax Services Office inquiring about whether income earned while practicing addiction medicine via telehealth will be exempt from taxation. Your letter has been forwarded to the Income Tax Rulings Directorate for reply.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra- adrc.gc.ca/tax/technical/incometax/menu-e.html.

Paragraph 81(1)(a) of the Income Tax Act (the "Act") and section 87 of the Indian Act provide a tax exemption for an Indian's personal property situated on reserve. The courts have previously determined that, for purposes of section 87 of the Indian Act, the reference to personal property includes income. In Williams v. The Queen (92 DTC 6320), the Supreme Court of Canada reconsidered the approach to use in determining whether income is situated on a reserve. The proper approach in determining the situs of personal property is to evaluate the various connecting factors that tie the property to one location or another.

Our position with respect to the factors connecting business income to a reserve, and the weight given to each factor, is based on the Federal Court of Appeal case of Southwind v. The Queen (98 DTC 6084). In reaching its decision, the Federal Court of Appeal used the location where the services were performed as the primary connecting factor and the location of the sole customer of the Indian was also an important connecting factor.

Your letter indicates that the telehealth service in question is performed in a downtown XXXXXXXXXX office and rendered to clients who are situated on a reserve. In our view, the location of the actual revenue-generating activity is the most significant factor. Since the revenue-generating activity is located in XXXXXXXXXX, the income earned from providing telehealth services would in our opinion be taxable. The method of payment would not be a factor of significant weight in determining whether the income is tax-exempt.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch