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
Case Number: 187784
Business Number: […]
July 11, 2018
Dear [Client]:
Subject: GST/HST RULING
Municipal transit services
Thank you for your [correspondence], and our telephone conversations concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of municipal transit services.
You have also requested that […] (the Cooperative) be designated a municipality for the purpose of claiming the public service bodies (PSB) rebate for municipalities. This request will be addressed in a separate letter (case number […]).
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 Cooperative was incorporated […] as a non-profit Co-operative […]. You have stated that the Cooperative is a non-profit organization as it was established and is operated solely for a purpose other than profit and no part of the Cooperative’s income is payable or available for the personal benefit of its members.
2. You stated that the Cooperative has not registered for GST/HST purposes as it has been below the $50,000 small supplier threshold for PSBs and has never charged, collected or remitted the GST/HST on any of its supplies.
3. The Cooperative is not a “registered charity” for purposes of the Income Tax Act and therefore is not a “charity” for purposes of the ETA.
4. The Cooperative has previously filed PSB rebates as a qualifying non-profit organization for purposes of the ETA.
5. The Cooperative’s […] objectives for which the Cooperative was established are to carry on, on a co-operative basis, pre-booked rural public door-to-door service to residents […].
6. The Cooperative provides community public transportation services within the […](Municipality) […][information about the Cooperative’s services]
7. The Cooperative is governed by a volunteer board of directors who set the fare rates based on distance.
8. The Cooperative provides pre-booked (at least the day before) daily transportation services to various clients, including clients going to work locally. […][Information about the Cooperative’s clientele]
9. The Cooperative also offers a contract or charter service to residents where it provides a driver and vehicle for events, usually weddings, for four hours to drive guests home. […][Information about the Cooperative’s revenues].
10. […][Information about the Cooperative’s passengers].
11. Fares charged directly to the public are paid in cash to the driver or by electronic bank transfer to the Cooperative. Invoices are sent to insurance companies for individuals who have coverage for transportation to medical appointments. The Cooperative does not sell monthly passes or permits.
12. The Cooperative receives funding […] from the province […]. […][Information on the Cooperative’s costs]
13. The Cooperative also receives grants from […], the municipal department that provides public transit service for the Municipality, […]
14. The Cooperative receives grants from the Municipality for providing community-based services in rural communities within the Municipality to subsidize regular vehicle operation and maintenance costs. […].
15. The Cooperative also received a grant […] for providing transportation services to seniors or persons with disabilities […].
16. The Cooperative has [#] members and charges membership fees […]. The only benefit of membership is that members get to attend the annual general meeting and vote for the Cooperative’s board of directors and any changes to the Cooperative’s by-laws. […][Information about the membership annual fees].
17. The Cooperative rents commercial office space from a third party. The Cooperative shares space in the office with a […][X] organization that pays $[…] per month to the Cooperative to cover a portion of the rent and additional costs payable by the Cooperative. There is no formal agreement between the Cooperative and the [X] organization nor is the [X] organization named in the rental agreement between the Cooperative and the third party renter.
18. […]
RULING REQUESTED
You would like to know if the Cooperative’s transportation services are municipal transit services for GST/HST purposes and if supplies of these services are exempt from the HST.
RULING GIVEN
Based on the facts set out above, we rule that:
1. The Cooperative’s daily transportation services are municipal transit services as defined under section 1 of Part VI of Schedule V. Therefore, supplies of these services are exempt under paragraph 24(a) of Part VI of Schedule V.
2. The Cooperative`s contract and charter services are not municipal transit services as defined under section 1 of Part I of Schedule V. Therefore, supplies of these services are not exempt supplies under paragraph 24(a) of Part VI of Schedule V. Since no other exemption applies, these supplies are taxable for GST/HST purposes.
EXPLANATION
Ruling 1
Section 24 of Part VI of Schedule V exempts, in part, a supply (other than a supply made to a transit authority) of a municipal transit service.
Under section 1 of Part VI of Schedule V, “municipal transit service” is defined to mean a public passenger transportation service (other than a charter service or a service that is part of a tour), or a right that exclusively entitles an individual to use the service, that is supplied by a transit authority.
“Transit authority” is also defined in section 1 and includes a non-profit organization that receives funding from a government, municipality or school authority to support the supply of public passenger transportation services where all or substantially all (90% or more) of the supplies made by the organization are supplies of public passenger transportation services provided within a particular municipality and its environs, or rights entitling individuals to use the services.
As defined in subsection 123(1), a “non-profit organization” is 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.
It is a question of fact whether, at any particular time, the Cooperative meets the definition of a non-profit organization for ETA purposes. In particular, whether the Cooperative meets the criterion of operating solely for a purpose other than profit must be determined on an ongoing basis. For more information, see Policy Statement P-215, Determination of whether an entity is a Non-Profit Organization for purpose of the Excise Tax Act (‘ETA’).
Based on the information you have provided, the Cooperative met the definition of a non-profit organization for the fiscal years [yyyy] through to [yyyy].
As a result, the Cooperative was a transit authority for fiscal years [yyyy] to [yyyy], as it was a non-profit organization that received funding from the Province and the Municipality to support the supply of public passenger transportation services, and all or substantially all of the its supplies were supplies of public passenger transportation services provided within the Municipality and its environs. The Cooperative will remain a transit authority so long as it continues to meet these requirements.
Accordingly, the Cooperative’s supplies of daily transportation services are exempt supplies of municipal transit services under paragraph 24(a) of Part VI of Schedule V.
Ruling 2
The Cooperative’s supplies of contract and charter services are not municipal transit services, as charter services or services that are part of a tour are excluded from the definition of municipal transit services under section 1 of Part VI of Schedule V. Therefore, paragraph 24(a) of Part VI of Schedule V does not exempt the Cooperative’s supplies of contract and charter services. As no other exemption applies, the Cooperative’s supplies of contract and charter services are GST/HST taxable supplies.
Generally, GST/HST registrants must charge and collect the GST/HST on all taxable (other than zero-rated) supplies of property and services they make in Canada. For GST/HST purposes, a registrant is a person who is registered or required to be registered for the GST/HST. A person who is a “small supplier” (generally, a person who falls below a specific taxable revenue threshold) is not required to be registered for the GST/HST and is therefore not a registrant (unless the person decides to register voluntarily). A person who is not a GST/HST registrant is generally not required to collect the GST/HST.
Based on information provided […], the Cooperative has recently ceased to be a small supplier. Therefore, it is required to be registered for the GST/HST and to collect the GST/HST on its taxable supplies, including its supplies of contract and charter services. You will have to determine the date on which the Cooperative was required to be registered for the GST/HST and register it accordingly.
General information on GST/HST registration and the small supplier threshold can be found in GST/HST Guide RC4081, GST/HST Information for Non-Profit Organizations, under the heading, “Should You Register?” More detailed information can be found in GST/HST Memoranda 2.1, Required Registration and 2.2, Small Suppliers. You may also visit Register for a GST/HST account at Canada.ca.
We recognize that the Cooperative has other sources of revenue from supplies, i.e., membership fees and revenue from shared office space. To assist you in determining the application of the GST/HST to those supplies, refer to GST/HST Guide RC4081, GST/HST Information for Non-Profit Organizations.
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
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Email this Content