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: 194819
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Para-municipal supplies
Thank you for your fax of October 30, 2018, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies between the […](“County”) and the […](“Commission”).
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:
1. The County is a municipal district that was incorporated under The County Act and continued under the Municipal Government Act. The County is a municipality as defined under paragraph (a) of the definition of "municipality" in subsection 123(1) and is registered for GST/HST purposes.
2. The County is located in […] Alberta, […] and has jurisdiction over the rural areas within its boundaries. The […][Hamlets] are unincorporated areas that are part of the County. The County’s boundaries envelope the […][town] and the […][village], but their jurisdictions do not overlap.
3. The Commission was established by the Province of Alberta under […] Alberta Regulation […], pursuant to section 602.02 of Part 15.1 of the Municipal Government Act.
4. According to Alberta Regulation […] (with amendments up to and including Alberta Regulation […]), the Commission is authorized to provide solid waste management services. The County, […][and other municipalities] are member municipalities of the Commission […]. Unless otherwise approved by the Minister, the Commission may not operate for the purposes of making a profit, or distribute any of its surpluses to its member municipalities.
5. Under the provisions of Part 15.1 of the Municipal Government Act, the Commission is a corporation, governed by a Board of Directors. The Board may not delegate the power to adopt budgets or to approve financial statements. The Commission may provide its services within the boundaries of its members, and outside the boundaries of its members with the approval of the Minister and the municipal authority within whose boundaries the services are to be provided, and in the case of a province or territory adjoining Alberta, the authority from that province or territory.
6. The Commission was determined to be a municipality as a special purpose provincially established organization pursuant to paragraph (b) of the definition of "municipality" in subsection 123(1) with an effective date of [mm/dd/yyyy].
7. The Commission is not registered for GST/HST purposes.
8. The Commission supplies garbage collection and disposal services, and disposal of non-landfill materials, to the County. The Commission does not charge the GST.
9. The Commission purchases gravel from the County. The Commission also hires the County to dig the cells in the ground for disposal of garbage, clean trees from potential landfill sites, and to reclaim the pits after they are filled to capacity. The County uses its own heavy equipment to provide these services. The County invoices the Commission for the gravel and the services provided.
RULING REQUESTED
You would like to know if the County’s supplies to the Commission are exempt under section 28 of Part VI of Schedule V.
RULING GIVEN
Based on the facts set out above, we rule that the County’s supplies to the Commission are not exempt under section 28 of Part VI of Schedule V.
EXPLANATION
Generally, every recipient of a taxable supply (other than a zero-rated supply) made in Canada is required to pay GST/HST on the value of the consideration for the supply pursuant to subsections 165(1) and 165(2). An exempt supply is not subject to GST/HST and is included in Schedule V.
Section 28 of Part VI of Schedule V exempts the following:
A supply between
(a) a municipal body and any of its para-municipal organizations,
(b) a para-municipal organization of a municipal body and any other para-municipal organization of the municipal body,
(c) a regional municipality and any of its local municipalities or any para-municipal organization of any of those local municipalities,
(d) a para-municipal organization of a regional municipality and any local municipality of the regional municipality or any para-municipal organization of the local municipality, or
(e) a regional municipality or any of its para-municipal organizations and any other organization (other than a government) the designated activities of which include the provision of water or municipal services within an area over which the regional municipality has jurisdiction,
but not including
(f) a supply of electricity, gas, steam or telecommunication services made by a municipal body or a para-municipal organization, or a branch or division thereof, that acts as a public utility, or
(g) any supply made or received by
(i) a provincially established designated body,
(ii) a para-municipal organization designated under section 259 of the Act or section 22 or 23, or
(iii) another organization referred to in paragraph (e),
otherwise than in the course of the designated activities of the body or organization, as the case may be.
Section 1 of Part VI of Schedule V defines several terms for the purposes of Part VI of Schedule V. The following definitions are relevant in this case:
“local municipality” of a regional municipality means a municipality that has jurisdiction over an area that is within the area over which the regional municipality has jurisdiction;
“municipal body” means a municipality or a provincially established designated body.
“para-municipal organization” of a municipal body means an organization (other than a government) that is owned or controlled by the municipal body and that
(a) where the municipal body is a municipality,
(i) is designated under section 259 of the Act, or under section 22 or 23, to be a municipality for the purposes of that section, or
(ii) is established by the municipal body and determined, under paragraph (b) of the definition "municipality" in subsection 123(1) of the Act, to be a municipality for the purposes of Part IX of the Act, or
(b) where the municipal body is a provincially established designated body, is determined under that paragraph to be a municipality for the purposes of that Part,
and for the purposes of this definition, an organization is owned or controlled by a municipal body if
(c) all or substantially all of the shares of the organization are owned by the municipal body or all or substantially all of the assets held by the organization are owned by the municipal body or are assets the disposition of which is controlled by the municipal body so that, in the event of a winding-up or liquidation of the organization, those assets are vested in the municipal body, or
(d) the organization is required to submit to the municipal body the periodic operating and, where applicable, capital budget of the organization for approval and a majority of the members of the governing body of the organization are appointed by the municipal body;
“provincially-established designated body” means a body that is established by Her Majesty in right of a province and designated, under section 259 of the Act, to be a municipality for the purposes of that section.
Subsection 123(1) defines “municipality” to mean:
(a) an incorporated city, town, village, metropolitan authority, township, district, county or rural municipality or other incorporated municipal body however designated, and
(b) such other local authority as the Minister may determine to be a municipality for the purposes of this Part;
“Regional municipality” is not defined in the ETA. However, the CRA has taken the position in GST/HST Technical Interpretation Bulletin B-046, Administrative Guidelines for Municipalities, that a regional municipality is a regional, county, metropolitan or other entity which operates at a level of authority between the provincial and municipal levels and shares jurisdiction with one or more municipalities.
Since the County is a municipality under paragraph (a) of the definition "municipality" in subsection 123(1), and the Commission is a municipality under paragraph (b) of the definition "municipality" in subsection 123(1), both entities are “municipal bodies” pursuant to the definition noted above. Although the County and the Commission were both established by the Province of Alberta, neither entity is a “para-municipal organization” of the Province, as the Province itself is not a “municipal body”. Finally, neither entity is a “para-municipal organization” of the other, as neither entity established the other, and neither entity owns or controls the other. Therefore, paragraphs 28(a), (b) and (d) of Part VI of Schedule V do not apply.
Paragraph 28(c) of Part VI of Schedule V could only apply if one entity were a regional municipality and the other entity were a local municipality of that regional municipality.
The Commission is authorized to provide solid waste management services under Alberta Regulation […] throughout an area that includes the area over which the County has municipal jurisdiction. Although the County’s jurisdiction falls within the area in which the Commission provides solid waste management services, the Commission does not serve as a level of authority between the Province and the County in the manner of a regional municipality, and it does not share jurisdiction with the County in the sense intended for purposes of the definition of “local municipality”, as it is responsible solely for the disposal of solid waste and has no powers of government.
The County has municipal jurisdiction over a broad area that envelopes the [town] and the [village]. However, its jurisdiction does not overlap with that of the town and village. Moreover, it does not serve as a level of authority between the Province and the town and village. Therefore, the County is not a regional municipality with respect to the town or village. With respect to the Commission, although the County is a member of the Commission, it does not serve as a level of authority between the Province and Commission in the manner of a regional municipality, and it does not share jurisdiction with the Commission in the sense intended for purposes of the definition of “local authority”, as noted above.
Therefore, neither the Commission nor the County is a “regional municipality” or a “local municipality” of the other for purposes of section 28 of Part VI of Schedule V. Accordingly, supplies between the County and the Commission are not exempt under paragraph 28(c) of Part VI of Schedule V.
Finally, since neither entity is a para-municipal organization of the other, paragraph 28(e) of Part VI of Schedule V could only apply if one of the entities were designated to be a municipality under subsection 259(1) in respect of provision of water or municipal services. Since neither the County nor the Commission has been so designated, paragraph 28(e) does not apply.
Accordingly, supplies between the County and the Commission are not exempt under section 28 of Part VI of Schedule V.
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 905-984-2332. 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
Municipal Sectors Unit
Legislative Policy and Regulatory Affairs Branch Division
Excise and GST/HST Rulings Directorate
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