19 January 1999 GST/HST Interpretation HQR00001354 - Meal Plan at a Public College

XXXXX:

Thank you for your letter of September 24, 1998, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. Your client is a public college in XXXXX that has a signed agreement with a food provider. The agreement specifies that "the client requires food services and refreshment services to be provided to its students, faculty staff, and visitors at each site".

2. The agreement does not specify that a meal plan has to be offered, although it is your understanding that the food provider does offer one. However, you are uncertain that the meal plan meets the requirements of section 13, of Part III of Schedule V of the Excise Tax Act (ETA).

Interpretation Requested

Is it necessary to stipulate in the agreement that the food provider must provide meals under a meal plan in accordance with section 13, of Part III of Schedule V, in order to exempt the supply between the college and the food provider under section 14 of Part III of Schedule V?

Does the percentage of meal plan revenue relative to total meals sold have an effect on the tax status, e.g. meal plan revenue is less than 10%?

Interpretation Given

The supply of food services and refreshment services by a food provider to a public college will be exempt under section 14 of Part III of Schedule V where the contract is to provide food or beverages to students under a meal plan referred to in section 13 of Part III of Schedule V (except where the food or beverages are provided for a reception, conference or other special occasion). Section 13 exempts the supply of meals to students under a meal plan offered at a public college where the amount paid for the plan is sufficient to provide a student with at least 10 meals per week for the period of the plan, which must not be less than one month. The cost per meal must be based on the average cost of a meal at the educational institution.

In other words, section 14 exempts catering services supplied under a contract to a public college where the supply of a meal plan to the student is an exempt supply. Therefore, the contract must stipulate and the substance of the contract must be to provide food or beverages to students who are under a meal plan. A contract for food or beverages to a public college which does not meet these requirements would be taxable.

You also asked whether the percentage of meal plan revenue relative to total meals sold would have an effect on the tax status. One would have to determine whether it is a single or a multiple supply. If the analysis determines that it is a single supply of food services and the services comprise a mixture of exempt services (i.e. meal plan) and taxable services, the entire supply would be taxable. On the other hand, if it can be established that the supply is a multiple supply then the portion that relates to the meal plan would be exempt while the portion that relates to the supply of non- meal plan would be taxable. Please refer to Policy Statement P-077R: Single and Multiple Supplies and Policy Statement P-159R[:] Meaning of the Phrase "Reasonably Regarded as Incidental" for further information on this issue.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-1175.

Yours truly,

Don Gagnon
Educational Services and Indians Unit
Public Services Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate