23 September 1997 GST/HST Interpretation HQR0000808 - Taxable Status of Room and Board

                                                                        25 McArthur Road
Place Vanier, 10th Floor, Tower C
Ottawa, ON
 XXXXX                                                                                K1A 0L5

Dear XXXXX

This letter is in response to correspondence of August 15, 1997 from XXXXX Tax Services Office concerning the application of the Goods and Services Tax (GST) to the transactions described below.

Interpretation Requested

The XXXXX Regional office has recently received x letters on the topic of room and board and each has illustrated unique aspects for consideration. In one case, optional room and/or board were offered on a long term basis at a "retreat" where other supplies were being made. In another, the value of the global fee for room and board to senior citizens was quite high XXXXX . This scenario raised the question as to at what point, and under what circumstances, would board be considered incidental to the room.

Pursuant to my conversation with XXXXX on September 11, 1997, it will not be necessary to address the aforementioned situations as these were examples brought to our attention to alert us of the variety of situations and possible tax implications that need to be addressed by our policies and administrative applications of the GST.

In regards to the specific case in question, a response to XXXXX , the situation exists where her client provides room and board to between 4 and 6 able-bodied elderly individuals in a home the client has leased for this purpose. Laundry services in respect of towels and bed linens are provided, however, residents are required to launder their own personal clothing off premises. An all inclusive fee for these supplies is paid monthly by the residents but those in larger rooms are charged a slightly higher rate than the rest. Approximately 25% of the client's expenses related to board with the balance attributable to accommodation. The business is classified as "Family Home Care" by the local municipality but, as there is neither a registered nurse on staff nor nursing or personal care services offered, the operation is not licensed by the Ministry of Health of the Province of British Columbia. The correspondent wished to know the GST status of her client's supplies.

Interpretation Given

It is the Department`s position that XXXXX application of the GST in case XXXXX follows the intention of the legislation. We are in agreement that the correspondent's client does not provide "homemaker services" as defined within the Excise Tax Act (the Act) and that the laundry services being provided to the tenants in this case are incidental to the supply of real property by way of lease, licence or similar arrangement.

Paragraph 6(a) of Part [I] of Schedule V to the Act exempts the supply of a residential complex or a residential unit in a residential complex by way of lease, licence or similar arrangement for occupancy as a place of residence by an individual where continuous occupancy is given for at least one month.

Further to this, section 6.2 of the Act exempts meal plans that are supplied together with an exempt residential rental accommodation. XXXXX letter states that the client meets the criteria for this section. To qualify for the exemption, the meals must be provided to tenants by the person who is supplying the exempt residential rental accommodations to the tenants. There must also be at least 10 meals per week sold for a single price determined before any meals are provided under the plan to the recipient and the meals must be served in the tenant's place of residence

Section 138 of the Act applies where a supply is considered incidental to another supply and is therefore, treated as part of that other supply. This rule does not apply where a separately identifiable charge is made for the incidental supply. The supplies must be made for a single consideration where the fees are not billed as different or separate supplies. In this regard, please note that the last sentence in the second paragraph on page XXXXX letter should be clarified as it may be misconstrued by the reader when it states "the total consideration attributable to the accommodation and laundry service will not be subject to GST, regardless of whether the laundry service is separately identified on an invoice to the residents".

The application of section 138 of the Act is appropriate in respect of the laundry services for the case at hand as the laundry services supplied are incidental to the primary supply of accommodations. Since the laundry services are restricted to that of bed linen and towels and are not billed separately from the basic rent, and are included with the basic rent for a single consideration, consequently, the tax status of the "incidental" supply becomes the same as that of the primary supply. As the supply of accommodations is exempt from the GST, the supply of the related laundry services would also be exempt from the GST.

When determining whether one good or service is incidental to another, we must first determine whether a single or multiple supply is being made. Policy Paper P-077 entitled Single and Multiple Supplies reviews guidelines in this respect. In Policy Paper P-077 the issue or analysis of a single supply vs. a separate ("multiple") supply is a question of fact. We must examine the degree to which the various elements are interconnected and the extent of their interdependence and whether each is an integral part or component of a composite whole. Once a determination has been made that separate or multiple supplies are being provided, then we must further determine whether these supplies may reasonably be regarded as incidental to one another. We may look to and Policy Paper P-159 entitled Meaning of the Phrase "Reasonably Regarded as Incidental" and P-060 entitled Meaning of the Phrase "Where a Particular Property or Service is Supplied Together With Any Other Property or Service" for further clarification of the application of section 138 of the Act. Policy Paper P-159 is a useful reference in its discussion of the provision of a property or service that may be regarded as incidental to the provision of a particular property or service where that property or service is something that is insignificant or of little importance. Policy Paper P-060 is to be used to determine whether section 138 of the Act may be used to make a determination in the context of the transaction in question.

These guidelines would assist in the determination of whether board would be considered incidental to room in a situation where section 6.2 of Part [I] of Schedule V to the Act may not apply. A supply that plays an important role by itself in the context of a particular transaction may not reasonably be regarded as incidental to a particular supply.

A supply of laundry services is generally a taxable supply pursuant to section 165(1) and 123(1) of the Act. However, as the supply of laundry services in this case is limited to that of bed linen and towels and is provided together with the supply of long term residential accommodations for a single fee, the laundry services may be deemed to form part of the supply of accommodation. As the supply of accommodations is exempt from the GST pursuant to paragraph 6(a) of Part [I] of Schedule V to the Act, the total consideration attributable to the accommodation and laundry services will not be subject to the GST.

Should you require any further information concerning this matter, please contact me at (613) 952-9214.

Yours truly,

Doris Rist
A/Rulings Officer
Financial Institutions and Real Property
GST/HST Rulings and Interpretations

 XXXXX

Legal References: ETA

Reference: ETA sec. 138, sched/6, V/1/6.2; P-077, P-159, P-160; HQR0000303, HQR0000495, FILE 2000, A1219A; QA2e.104, 3i.62, 2e.163, 6a.182, 6d.39

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