31 July 2002 GST/HST Ruling 36711 - Child and Personal Care Services

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of services that your company provides to children in group home facilities. We apologize for the delay in responding to your request.

Statement of Facts

On the basis of the agreement submitted and our telephone conversation on XXXXX XXXXX, our understanding of the facts is as follows:

XXXXX owns and operates XXXXX residential group homes for children between the ages of XXXXX. The XXXXX XXXXX places children into residential group homes such as XXXXX.

Full time and part time employees hired by XXXXX are responsible for the daily care including lodging and supervision of the children in the XXXXX homes. There is a maximum of XXXXX children in care amongst the XXXXX homes.

XXXXX invoices the XXXXX on a monthly basis for the services of caring, supervising and providing a place of residence for the children. The amount invoiced is calculated on a per diem rate and is based on the number of children being cared for during the month. The XXXXX establishes the rate to be charged for the care services provided.

XXXXX does not supply a service of placing children in foster homes.

Ruling Requested

You requested a ruling on the application of the GST to the services provided by XXXXX for the care and supervision of children within its' residential group homes.

Ruling Given

Based on the facts set out above, we rule that the services of care and supervision of children provided by XXXXX in the residential group homes it owns and operates are exempt of the GST under section 2 of Part IV of Schedule V to the Excise Tax Act (ETA).

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 our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Section 2 of Part IV of Schedule V to the ETA provides that the following supply is exempt of tax:

"A supply of a service of providing care, supervision and a place of residence to children, underprivileged individuals or individuals with a disability in an establishment operated by the supplier for the purpose of providing such service."

In order for the service to be exempt of the GST under the above noted provision, the operator of the establishment must provide the care, supervision and a place of residence. The supply of a service of placing children in foster homes does not qualify for exemption and is subject to the GST.

The group homes owned by XXXXX are staffed and operated by its' employees for the purpose of providing care and supervision of children in a residential place. Accordingly, these services meet the requirements of the exempting provision noted above. Therefore, the GST does not apply on the supply of these particular services and there is no provision for recovery of the GST paid on the supplies purchased by XXXXX in providing the services.

As a registrant, XXXXX is required to remit the GST on all of its' taxable supplies. As some of XXXXX supplies are exempt of the GST, the corporation may qualify as a small supplier under subsection 148(1) of the ETA. A small supplier generally includes a person whose total taxable supplies (including zero-rated supplies) in the preceding four calendar quarters are $30,000 or less ($50,000 or less in the case of public service bodies). A person who is a small supplier is not required to be registered for GST/HST purposes, but may voluntarily register. If XXXXX is a small supplier, it may choose to de-register.

We have enclosed GST/HST Memoranda 2.2 Small Suppliers, 2.7 Cancellation of Registration, and 400-3-1 Becoming and Ceasing to be a Registrant for your information. After reviewing the material and the company's taxable supplies, you may wish to contact GST/HST enquiries at 1-800-959-5525 to discuss registration requirements.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-3158.

Yours truly,

Debra Murphy
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate