24 July 1998 GST/HST Ruling HQR0001077 - Dance Lessons

                                                                        GST/HST Rulings and Interpretations
  Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5

                                                                        July 24, 1998

Dear XXXXX

Thank you for your letter of August 15, 1997, concerning the application of the Goods and Services Tax (GST) to dance lessons.

Our understanding of the facts is based on the information in you letter and telephone conversations of November 27, December 2 and 4, 1997, January 6 and 14, 1998, and February 13, 1997, with XXXXX Technical Interpretation and Services office, and is as follows:

Statement of Facts

1) You operate a sole proprietorship under the trade name of XXXXX. Your business is a seasonal business operating 10 months of the year (i.e., September to June). XXXXX seventh XXXXX[.]

2) You are a member of the XXXXX which is located in XXXXX[.]

3) You provide dance lessons, which include ballet, tap, and jazz, to students ages 3 to 18. You charge a yearly fee for the lessons which is broken down into monthly payments.

4) The dance lessons are provided as follows: an introductory class (for children of age 3), a pre-primary class (for children of ages 4 to 5), a primary class (for children of ages 6 to 7), grades 1 to 5 (for children of ages 8 to 13), an elementary program (for children of at least age 14), an associate program (for children of least of age 16), a membership program, and a fellowship program. You have no pamphlets describing any of the lessons you provide.

5) There are currently XXXXX students enrolled in your dance lessons. You have XXXXX students enrolled in the grades XXXXX students in the elementary program, and x students who have just completed the associate program. There are no students presently enrolled in the grade XXXXX, membership, or fellowship programs.

6) Students are required to pass exams in order to move to the next class. The exams are not administered to students under the age of six. All exams are administered by a member of the XXXXX[.]

7) Certificates are issued to the students for competitions or exams. All certificates are issued from XXXXX by the XXXXX and signed by XXXXX[.]

8) The associate program which is XXXXX in length, leads to a student becoming a teacher of dance by becoming a member of the XXXXX[.] To qualify for this program, a student must be at least 16 years old and must have completed the elementary program. This program consists of taking various classes including observation classes where a student learns how to teach dance. At the end of the program, a student is required to pass an exam administered by the XXXXX[.] If the student is successful they receive a certificate from the XXXXX attesting that they are an associate of the XXXXX and thus able to teach dance. As indicated above, only XXXXX students have currently attained this certificate.

9) You compare the completion of the associate program to receiving a bachelor's degree, the completion of the membership program to receiving of a masters degree, and the completion of the fellowship program to becoming a professor.

10) You have XXXXX students who have informed you that their dance lessons will be approved for credit by their school, however, you have not received confirmation of this from their schools.

11) You have never been certified by the Minister of Employment and Immigration for purposes of subsection 118.5(1) of the Income Tax Act.

12) In 1993 you called the XXXXX Tax Services Office to enquire whether you were required to collect GST on the fees for the dance lessons. You indicated that you were advised at that time that since the lessons were provided primarily to children ages 14 years and under, that you were not obligated to register for GST. You subsequently discussed this with your accountant who called the XXXXX Tax Services Office who confirmed the information provided to you, quoting section 12 of Part VI of Schedule V to the Excise Tax Act (the Act).

13) During the summer of 1997, you were informed by officials at the Summerside Tax Centre that you are required to be registered for GST and to charge GST on your dance lessons. You have been assigned Business Number XXXXX with a registration date backdated to XXXXX, 1994. As a result, you started charging GST on your dance lessons as of the current season beginning XXXXX 1997.

Ruling Requested

You request confirmation that the dance instruction is subject to the GST and that you are required to collect and remit GST on the provision of the dance instruction.

Ruling Given

Based on the facts set out above, we rule that

(1) the dance lessons you provide are taxable for GST purposes at the rate of 7%;

(2) as a registrant, you are required to collect and remit GST on the supply of the dance lessons; and

(3) as a registrant you are entitled to claim input tax credits for the GST you paid or owe on the purchases and operating expense in relation to providing these taxable dance lessons.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

In general, there are no provisions in the Excise Tax Act (the ETA) to exempt a supply of dance instruction made by a private, for-profit dance school. Specifically, neither section 12 of Part VI, nor the educational services provisions in Part III of Schedule V apply to the supply of instruction provided by you.

Section 12 of Part VI of Schedule V exempts a supply of instruction in dance provided as part of a program by a "public sector body" primarily to children 14 years of age or under, underprivileged individuals, or individuals with a disability. A "public sector body" means a government, a non-profit organization, a municipality, a school authority, a hospital authority, a public college or a university. XXXXX is not a public sector body, and consequently supplies of instruction provided by you are not exempted by section 12.

Generally, the exemption for educational services in Part III of Schedule V are in respect of a supply of instruction made by a university, public college, school authority, or a vocational school. Pursuant to the definitions in the ETA, XXXXX is neither a university, public college, school authority, nor vocational school. Supplies of instruction provided by you would not be exempt in the same manner as these organizations.

However, there is one area, where a supply of instruction provided by you may be exempt from tax. Specifically, pursuant to section 9 of Part III of Schedule V, if you provide instruction in a course that is approved for credit by, or follows a curriculum designated by, a school authority, then the supply of the instruction to the student who is eligible for the credit, or who may count the course as part of their school curriculum, is exempt. However, in this particular case, you have been unable to confirm that the students will receive a credit towards their graduation diploma. Therefore, the supply of the instruction to the students will continue to be taxable.

In accordance with subsection 221(1) of the ETA, every person who makes a taxable supply is required to collect tax, payable by the recipient of the supply. If the person acquires or imports property or services to be used in the course of making taxable supplies, and has paid tax or is required to pay tax on the acquisition or importation of the property or services, the person may claim an input tax credit for the tax paid or payable on the property and services (i.e., the person is entitled to a credit of the tax paid or payable).

Should you have any further questions or require clarification on the information provided in this letter, please do not hesitate to contact me at (613) 954-4206. With respect to any concerns about your registration, please contact your local Revenue Canada office.

Yours truly,

Dwayne Moore
Educational Services and Indians Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

c.c:       D. Moore
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