CRA finds that a fee-sharing arrangement that gave a small share of revenues generated by him to a contract dentist was GST/HST exempt

A professional dentistry corporation (“PC”) agrees with a dentist acting as independent contractor (Mr. D) that all patients treated at PC’s clinic by Mr. D are patients of PC, that PC will do all the invoicing, and that PC will pay to Mr. D 40% of the revenues generated from treatments performed by him (net of specified expenses including the payroll of contributing dental hygienists).

In finding that the 60% retained by the Recipient was not consideration for a taxable supply made by it, CRA stated

The terms of the contract clearly established that during the term of the contract, all patients treated by the [Mr. D] were patients of [PC] and that, consequently, all invoicing was to be done by [PC]. The contract terms did not include any clause for the supply of property or administrative services. Thus, the contract terms do not permit a conclusion that the portion of the net revenues retained by [PC] represented consideration for a supply.

We instead consider that the underlying character of the terms of the contract entailed a division amongst the parties of the [exempt] fees paid for health services rendered to patients.

Neal Armstrong. Summary of 20 February 2019 Interpretation 175346 F under ETA – s. 123(1) – supply.