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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 134234
Business Number: […]
October 24, 2012
Dear [Client]:
Subject: GST/HST RULING
The application of GST/HST to cost-of-repair estimates
Thank you for your faxes of April 7, 2011, and June 24, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to cost-of-repair estimates. We apologize for the length of time it has taken to respond to your query.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on the information provided in your faxes, we understand that […](your company) is a general contractor serving the insurance restoration industry. As part of its business activities, your company inspects damaged buildings (fire, water, wind or other related damages) to provide an insurance company with a report stating the cause of the damage and an estimate of the cost to repair the damage. In the sample estimate that your company submitted to us, the estimate names the person from your company doing the inspection, the site being inspected, and sets out details of labour and material required to repair water damage to a home. The estimate includes charges for overhead, profit and applicable GST/HST. Where you do not receive the contract to proceed with the repairs, your company submits an invoice to the insurance company for an on-location inspection and appraisal fee. The fee in this sample case is $[…].
RULING REQUESTED
You would like to know if you are to charge GST/HST for this on-site inspection and appraisal service.
RULING GIVEN
Based on the facts set out above, we rule that your company’s supply of this on-site inspection and appraisal service is not a taxable supply. It is an exempt supply to which GST/HST does not apply.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
For the services supplied by your company to an insurer (or an insurance adjuster) to be exempt, the service must satisfy one of the exempting provisions set out in the ETA. In this particular situation – the service of supplying an on-site inspection and appraisal concerning a property insurance claim – the service would be exempt under the definition of financial service in subsection 123(1) if it complied with paragraph (j.1) of that definition and was not excluded by paragraph (r).
In other words, your company’s service would be exempt if the following conditions were met:
* the service is provided to an insurer or a person who supplies a service which is referred to in paragraph (j) (i.e., a provincially licensed adjuster who provides a service of investigating and recommending the compensation in satisfying an insurance claim that is not in the nature of accident and sickness or life insurance);
* the service is not provided by an accountant, actuary, lawyer or notary in the course of a professional practice; and
* your company inspects the property and provides an appraisal of the damage caused to the property.
Since your company’s estimate is an estimate of the cost of repairing damaged property where your company inspected the damaged premises to prepare your estimate and since you are supplying it to an insurance company, your company’s estimate of the cost of repairing the water-damaged property is an exempt supply and you do not charge GST/HST for this service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394. 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,
Doris McMullan
Insurance and ITC Allocations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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