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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 108217
Business Number: [...]
March 3, 2011
Dear [Client]:
Subject:
GST/HST RULING
Supplies of Wigs Made to Individuals
Thank you for your facsimile transmission of August 13, 2008, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of wigs, some of which are also referred to as 'cranial hair prostheses'. We apologize for the delay in providing this response.
[...]
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 you provided, we understand the facts to be as follows:
1. You own a hair styling studio that is operated under the business name [...] [(the Business)]. You are also in the business of supplying breast prostheses, post-mastectomy bras, and cranial hair prostheses.
2. You are registered for GST/HST purposes as a sole proprietor of this business under Business Number [...].
3. Your customers purchase cranial hair prostheses for medical reasons, e.g., after hair loss resulting from chemotherapy treatments. Your customers present a written order from a physician when they purchase the cranial hair prostheses.
4. Your suppliers of cranial hair prostheses include [...].
5. The Web Sites of your suppliers indicate that they are in the professional beauty industry. They market cranial hair prostheses and other hair pieces and add-ons to the general public. The cranial hair prostheses are available through wig boutiques, salons, specialty shops and online vendors. The same cranial hair prosthesis that is marketed to individuals experiencing medical related hair loss may also be marketed to the general public.
6. Although a cranial hair prosthesis may be made to meet any specific needs of the wearer such as in terms of colour, length, volume, and thickness, a customized cranial hair prosthesis that an individual purchases for medical reasons is not markedly different than one customized for other reasons, such as a fashion accessory.
7. Our additional research indicates that some cranial hair prostheses are considered to be of a "medical quality" in that they are designed to fit the shape of a head that has little or no hair and the materials used in the construction are designed not to irritate a sensitive scalp. However, these customized cranial hair prostheses are higher priced and their cost is often beyond the scope of an individual's budget. Many individuals who choose to purchase a cranial hair prosthesis because of medical reasons often opt for a less expensive product that may be described as "fashion quality".
8. We also understand that to sell a medical device in Canada, manufacturers must meet the regulatory requirements as defined in the Medical Devices Regulations. Manufacturers of cranial hair prostheses and other hair pieces are not regulated under these Regulations. (http://www.hc-sc.gc.ca/).
Ruling Requested
You would like to know whether the supply of cranial hair prosthesis by [the Business] to its customers is subject to the GST/HST.
Ruling Given
Based on the facts set out above, we rule that supplies of cranial hair prostheses by [the Business] are not zero-rated under the GST/HST. Accordingly, where the supplies are made in Ontario they are subject to the HST at the rate of 13%.
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
The general rule in section 165 is that every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5%, 12%, 13%, or 15% (depending on the place of supply) on the value of the consideration for the supply unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.
Pursuant to Part II of Schedule VI, certain supplies of medical and assistive devices are zero-rated. If a particular medical device is not included in Part II of Schedule VI, then the supply of that medical device falls under the general rule in section 165. However, please note that pursuant to section 1.2 of Part II of Schedule VI, medical and assistive devices provided for cosmetic purposes and not for medical or reconstructive purposes are not zero-rated.
We considered two sections within Part II of Schedule VI that might be relevant to the supply of cranial hair prostheses: sections 25 and 36. However, as explained below, we concluded that neither of these sections would apply to zero-rate supplies of cranial hair prostheses.
Section 25 of Part II of Schedule VI
Section 25 zero-rates a supply of a medical or surgical prosthesis, or an ileostomy, colostomy or urinary appliance or similar article that is designed to be worn by an individual. For GST/HST purposes, a medical or surgical prosthesis worn by an individual is an artificial device that replaces a missing body part, corrects a physical deformity or malfunction, or supports a weak or deformed part of the body.
The term 'prosthesis' is qualified by the phrase 'medical or surgical'. Based on our research, such a prosthesis would be of the type that falls within the study or practice of medicine. The term 'medical' is commonly understood as relating to the science, study or practice of medicine, or requiring treatment by medicine. Further, 'prosthetics' is a branch of medicine or surgery that deals with the production and application of artificial body parts. As indicated in the Facts set out above, manufacturers must meet the regulatory requirements as defined in the Medical Devices Regulations in order to sell a medical device in Canada. (http://www.hc-sc.gc.ca/)
Based on our review of the Web Sites of the suppliers you advised manufacture and supply the cranial hair prostheses in question, it is our view that these products would more aptly fall within the realm of 'barber and hairdressing' or associated cosmetic, beauty and personal care services rather than the medical device industry. Cranial hair prostheses (wigs) and other hair pieces and add-ons are manufactured and sold in the professional beauty industry. Although some suppliers may market their products to individuals experiencing medical related hair loss, these same products are marketed to the general public and are available through wig boutiques, salons, speciality shops and online vendors. We also understand that manufacturers of cranial hair prostheses and other hair pieces are not regulated under the Medical Devices Regulations.
Section 36 of Part II of Schedule VI
Section 36 zero-rates a supply of clothing that is specially designed for use by an individual with a disability when the clothing is supplied on the written order of a medical practitioner for use by a consumer named in the order.
For purposes of section 36, it is the type of clothing, such as burn garments, that must be examined to determine whether this section would apply to a particular type of clothing. Thus the expression "specially designed" attaches to the type or category of clothing. Clothing that is custom made for a particular individual is not equated with clothing that is specially designed for an individual with a disability.
Our findings indicate that wigs generally are considered to be fashion accessories or costume accessories. We recognize that these products may be categorized as clothing for other purposes. However, it is our understanding that cranial hair prostheses generally are not a type of product that is specially designed for use by an individual with a disability. Further, the same cranial hair prosthesis that may be used by an individual for medical reasons is also marketed to the general public. Accordingly, the supply of a hair cranial prosthesis will not be zero-rated notwithstanding that an individual presents an order from a physician when making the purchase.
If you require clarification with respect to any of the issues discussed in this letter, please do not hesitate to contact me at 613-952-6761. 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,
Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
Email this Content