20 March 2008 GST/HST Interpretation 86233 - Tour Packages

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

We are writing in response to the letter dated XXXXX, from XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to sales of used books by XXXXX (the College). We apologize for the delay in providing our response.

All legislative references are to the Excise Tax Act (ETA) and the regulations there under, unless otherwise specified.

Effective January 1, 2008, the rate of the GST has been reduced from 6% to 5% and the rate of HST from 14% to 13%. The new rates apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, GST/HST Rate Reduction in 2008 on the Canada Revenue Agency (CRA) Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/ README.html.

Statement of Facts

We understand:

1. The College is a board-governed public college XXXXX.

2. The College receives government funding to assist it in providing programs of instruction in XXXXX.

3. The College meets the definition of a "public college" under subsection 123(1).

4. The College is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act and, as it is also is a public college, it meets the definition of a "public institution" in subsection 123(1).

5. The College operates a bookstore that carries on the business of selling new and used books. The bookstore is located on the main campus in XXXXX.

6. The College purchases the used books from its student population at the end of each semester. The used books are marked up from cost and put into the bookstore's inventory for resale. New books are also marked up from cost for sale through the bookstore.

7. The College is a GST/HST registrant and has been charging the GST on supplies of both new and used books sold to customers at its bookstore.

Ruling Requested

You would like to know whether the College is required to collect the GST/HST on supplies of used books sold to customers at its bookstore.

Ruling Given

Based on the facts set out above, we rule that the College is not required to collect the GST/HST on supplies of used books sold to customers at its bookstore as they are exempt supplies under section 2 of Part VI of Schedule V.

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

Generally, supplies of property and services that are made in Canada are taxable supplies subject to the GST or the HST where the supplies are made in a province that is participating in the HST (i.e., Nova Scotia, New Brunswick, Newfoundland and Labrador) unless the supply is a zero-rated supply or an exempt supply. Zero-rated supplies are taxable at the rate of 0% and are listed in Schedule VI. Exempt supplies are listed in Schedule V and are not subject to the GST/HST.

In particular, section 2 of Part VI of Schedule V exempts a supply made by a public institution of any personal property or a service but not including a supply described in any of the paragraphs (a) to (o) of that section. However, where a supply is excluded from exemption under any of those paragraphs, other provisions in Schedule V may apply to exempt the supply made by the public institution.

In part, paragraph 2(e) of Part VI of Schedule V excludes from exemption a supply of tangible property that was acquired, manufactured or produced by a public institution for the purpose of making a supply of the property except where the property was donated to the institution or used by another person before the institution acquired the property.

Therefore, where the College acquires used or donated books for resale to its customers at the bookstore, then the supplies of these books are exempt supplies under section 2 of Part VI of Schedule V and are not subject to the GST/HST.

However, where the College acquires new books for sale through its bookstore and the books were not donated to the College, then these books will be excluded from exemption under paragraph 2(e) of Part VI of Schedule V. Further, as there are no other exemptions in Schedule V that would apply where the College sells these new books for more than their direct cost, they are taxable supplies subject to the GST/HST.

Additional Information

Please note, that any amounts a person collects as or on account of GST/HST, including tax collected in error, are deemed to be held in trust for the Crown and must be included in determining the person's net tax for the reporting period in which the tax became collectible or collected.

However, under subsection 232(1), where a particular person has charged to, or collected from, another person an amount as or on account of tax in excess of the tax that was required to be collected (e.g., tax collected in error on an exempt supply), the particular person may, within two years after the day the amount was so charged or collected:

•   adjust the amount of tax charged where the excess amount was charged but not collected; and

•   where the excess amount was collected, refund or credit the excess amount to that other person.

Thus, the College has the option to adjust, refund or credit the tax charged or collected in error on the sale of a used book to a customer within two years after the day it charged or collected the tax in error. Where the College chooses to refund or credit the excess amount of tax it must, according to subsection 232(3), issue a credit note within a reasonable time to its customer(unless the customer first issues a debit note to the College) containing the prescribed information as set out in the enclosed Credit Note and Debit Note Information (GST/HST) Regulations.

The College may deduct the amount of the tax adjustment, refund or credit in determining its net tax for the reporting period in which the credit note is issued to the customer (or the debit note is received by the College), to the extent that the amount has been included in determining the net tax for that reporting period or a preceding reporting period of the College.

Alternatively, the College may choose not to adjust, refund, or credit an amount of tax charged or collected in error on an exempt supply of a used book to a customer. In this situation, a customer who has paid the tax in error may recover this amount by filing a general rebate application with the CRA within two years after the day the amount was paid or remitted by the customer. More information on this rebate can be found in the guide RC4033, General Application for GST/HST Rebates, available on the CRA Web site.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9592. 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,

Nadine Kennedy
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2008/03/13 — RITS 94585 — Requirement for Direct Sellers to Apply to Use The Alternative Collection Method for GST/HST