11849-1 (LFR)
11849-6 XXXXX
XXXXX
November 9, 1995
Dear Mr. XXXXX
This is in response to two separate requests received from your office regarding the XXXXX and its entitlement to tax relief on its purchase of certain services rendered in respect of automobile accidents.
In her June 22, 1994 letter to us, XXXXX of your office asked for our opinion regarding two enquiries received from XXXXX. The first is with respect to XXXXX payment of damages to the XXXXX on behalf an insured and the second relates to XXXXX payment of XXXXX emergency services supplied to it by the City of XXXXX[.]
XXXXX of your office wrote to us on October 27, 1994 regarding an enquiry received from XXXXX of the City of XXXXX concerning its supply of fire suppression/rescue services to XXXXX[.] Mr. XXXXX suggested to us that because the circumstances of this case are similar to XXXXX enquiry regarding XXXXX, he would base his response to Mr. XXXXX on our reply to XXXXX[.] As such, he asked that this particular case not be activated by this unit for reply.
Although the status of XXXXX acquisition of XXXXX emergency services and fire suppression/rescue services will be afforded the same tax treatment, in reviewing the information provided, we noted that the circumstances surrounding XXXXX acquisition of these services, although similar, are not exactly the same. That is, XXXXX pays for the City's supply of XXXXX emergency services regardless of whether the person to whom these services are rendered is properly insured. In the case of fire suppression/rescue services, XXXXX pays for these services only where the person is insured.
Our comments with respect to the three issues outlined above are as follows:
1) Damages
The first case submitted by XXXXX deals with damages.
XXXXX wrote to the Department on May 10, 1994 requesting our opinion as to whether the payment for the repair of an overpass structure to the XXXXX, on behalf of an insured, should be net of GST. The particulars of this case are as follows.
An overpass structure owned by the province is damaged by a person insured with XXXXX[.] The province repaired the overpass structure using its own material and labour. It then billed the insured for its costs in repairing the overpass structure. GST was charged. The insured is liable to pay the bill and is a GST registrant. XXXXX paid the bill on behalf of the insured. XXXXX has questioned whether GST should have applied. It is XXXXX view that the province (i.e. XXXXX did not supply a service to the insured. Rather, the province is simply recovering its costs in repairing the damaged overpass structure.
Comments
As you may be aware, a policy regarding the tax treatment of payments made in respect of damages is still outstanding. As such, we are unable to provide you with a response in this regard. The General Application Division expects to have this policy before the Policy Review Committee for consideration by the end of November 1995.
2) XXXXX
The second case submitted by XXXXX is in respect of the supply of emergency services to individuals involved in car accidents where such services are paid for by XXXXX wrote to the Department on May 5, 1994 regarding this issue. From the information provided, it is our understanding that the XXXXX may be required in performing an emergency service. This service is performed by the City of XXXXX Fire Department (City). XXXXX is billed for the service and pays for it even if the individual has inadequate insurance coverage under their insurance policy. In his letter, Mr. XXXXX indicated that XXXXX pays for this service under its master claim files. (During their telephone conversation of September 29, 1995, XXXXX indicated to Lynn Renner of this office that the payment for this service is made by XXXXX under either its master claim file or the individual claim file.)
In his May 5, 1994 letter to the Department, XXXXX states that "While such an expenditure is not to reduce losses paid (i.e.: such as towing, legal, etc.) these expenditures are paid even if the person for whom these services are rendered is not properly insured. At present we are debating whether these payments should be coded as an expense or as losses paid."
He also quoted subsection 26(3) of Part II of the Automobile Accident Insurance Act (Act) as authority under which XXXXX pays for ambulance services (including XXXXX services).
On September 28, 1995, XXXXX indicated in his facsimile transmission (copy attached) to Lynn Renner that Part II was replaced by Part VIII (Personal Injury Protection Plan) for claims occurring after December 31, 1994. He further stated that paragraph 50(2)(a) of Part VII of the Regulations which applies to the Personal Injury Protection Plan deals more explicitly with ambulance costs.
Section 50 of Part VII of the Regulations states that
"(2) The maximum amount the insurer shall reimburse a victim for the following expenses is:
(a) in the case of ambulance costs, the amount billed ..."
In another letter dated May 10, 1994 XXXXX stated that it is XXXXX opinion that the XXXXX services should be exempt from GST as they are:
1) Classified as emergency services together with ambulance services. Ambulance Services are discussed in GST Memorandum 300-4-2 ...
and/or
2) An expense of XXXXX and, as a Crown corporation, we enjoy an "exemption certificate" status. Payment for XXXXX services should not be considered as part of losses paid as such expenses may be paid even if a loss is not paid."
Comments
Ambulance Services
Section 4 of Part II of Schedule V to the Excise Tax Act (ETA) exempts "A supply of an ambulance service made by a person who carries on the business of supplying ambulance services." An "ambulance service" is not defined in the ETA. Consultation with the Health Care, Goods and Services Sectors has confirmed that emergency services performed by the City, including its use of the XXXXX in carrying out this service, is not an "ambulance service" for purposes of the exempting provision of section 4 of Part II of Schedule V to the ETA. It is also their view that the City does not carry on the business of supplying ambulance services. Accordingly, the supply of emergency services by the City is not exempt pursuant to the above-mentioned section of the ETA.
Reciprocal Taxation Agreement
As the supply in question is not an "ambulance service", we looked to the Reciprocal Taxation Agreement (RTA) between Canada and XXXXX to establish whether XXXXX [c]ould purchase the supply of emergency services from the City tax free.
Under the RTA between Canada and XXXXX entities listed on XXXXX to the RTA are entitled to tax relief on their purchases with the use of "exemption certificates".
XXXXX to the XXXXX RTA identifies the XXXXX as XXXXX Government Insurance, excluding payments for claims".
Therefore, in order to be relieved from paying GST on the City's supply of emergency services to XXXXX the payments made cannot be "payments for claims". That is, the payments made by XXXXX to the City must be administrative expenses of XXXXX[.]
It is our opinion that XXXXX is not required to pay GST on its acquisition of emergency services from the City. Please refer to our comments regarding XXXXX acquisition of fire suppression/rescue services.
3) Fire Suppression/Rescue Services
XXXXX wrote to the Department on October 5, 1994 seeking an opinion regarding the tax status of the City's supply of fire suppression/rescue services to XXXXX his case was referred to Headquarters, for information only, on October 27, 1994.
In his letter, XXXXX stated that the City occasionally provides fire suppression/rescue services, outside City limits, as a result of an automobile accident. The service is not provided under an agreement for this service to another municipality.
The billing process is as follows:
If the service is provided outside of the City's limits, the City bills the XXXXX if the services are provided to a vehicle registered in XXXXX[.]
If XXXXX refuses liability, the City re-invoices the registered owner of the vehicle.
If the services are provided to an out-of-province vehicle, the City bills the registered owner of the vehicle.
The City is charging GST on all of its billings for this service.
XXXXX September 28, 1995 facsimile transmission, as referred to earlier, also contains an extract from Part III of the Act which deals with fire department charges to XXXXX[.] Under the heading "Comprehensive Insurance and Insurance Money", subsections 38(1) and (2) of that Part reads:
"38(1) Subject to this Act, an owner's certificate shall further insure the person named therein in the amounts herein after specified against direct and accidental loss or damage to the vehicle designated therein, including its equipment, occurring in Canada ..."
"38(2) Where loss or damage arises from a peril against which insurance is provided for by subsection (1) the insurer shall, in addition to any other amount payable under this Part, pay to or on behalf of the insured any general average, salvage and fire department charges ..."
Comments
On October 3, 1995, members of the XXXXX XXXXX met with Special Sector representatives to discuss various outstanding GST issues. XXXXX was in attendance. At that time, we were advised by XXXXX [t]hat "rescue services", as referred to by the City and "emergency services", as referred to by XXXXX, are the same supply.
As Mr. XXXXX did not receive a reply to his October 5, 1994 enquiry, we were asked to address his question at this meeting.
In preparation for this meeting, Ms XXXXX of the Department of Finance was contacted to ascertain whether Finance had anything on its files pertaining to the history of the RTAs and what constitutes "administrative" for purposes of the government insurance companies included in the RTAs. We were advised that they did not.
A search of our files revealed that a definition of "administrative", as put forward by XXXXX in April 1991, was accepted by Revenue Canada. This definition related to the entitlement to tax relief by the XXXXX on its purchase of towing and storage services. XXXXX is listed in the RTA between Canada and XXXXX as the XXXXX (Administration)". In our May 31, 1991 reply to XXXXX, we state that the payment of towing and storage services are part of XXXXX method of controlling damages and, to this extent, are administrative costs and therefore can be purchased without payment of GST.
The treatment of these expenses was also relayed by the Department to XXXXX
The Specialty Tax Section of the Financial Institutions and Corporate Reorganizations Division (FI) was consulted by Government Sector representatives on the issue of whether or not the payment of fire suppression/rescue services by XXXXX could be viewed as "administrative".
The particulars of the case were described to representatives of FI. Based upon our discussions with FI, it is our opinion that the payments made by XXXXX for fire suppression/rescue services carried out by the City are not "payments for claims". Rather, the payment of these costs is an input to a claim - part of the claims cost, or a consequence of the claim. It is not the actual direct payment for claim, such as payment for repair services; payment for labour; payment for parts; etc. The payment for this service by XXXXX is not made under a settlement of an insurance claim. It is possible that the claim may not yet have been filed at the time the service is supplied to XXXXX by the City.
Because the RTA between Canada and XXXXX is so precise in its wording, that is it refers to "payments for claims" as opposed to a more broad application such "payments in respect of claims", the payment for these services by XXXXX to the City falls within the RTA relieving provisions.
Based upon the above, it is our opinion that XXXXX payment to the City for its supply of fire suppression/rescue/emergency services are not "payments for claims", and therefore can be purchased by XXXXX tax free.
Please note that Mr. XXXXX was advised during the XXXXX meeting that the City was not required to charge XXXXX for the supply of its fire suppression/rescue services. It was also indicated to Mr. XXXXX that a written response would be forthcoming from your office to his upon your receipt of our comments.
Should you wish to discuss this further, please call me at (613) 954-7947 or Lynn Renner, Policy Officer, at (613) 952-9262.
Yours truly,
Darlene Wladyka
Senior Policy Officer
Governmental Sector
GST Rulings and Interpretations
| c.c.: |
Roy Osudar
Enikö Vermes
Lynn Renner (Doc. 591) |
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