3 July 2002 GST/HST Ruling 25403 - Application of the GST/HST to Fees for Services Related to an Application for a Liquor Licence

Dear XXXXX

Thank you for your letter of XXXXX, addressed to our Technical Interpretation Services Office (now GST/HST Rulings) in XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees for services related to an application for a liquor licence. Your letter was transferred to this office for reply. We regret the delay in our response caused by consultations on this matter.

Statement of Facts

Our ruling is based on the following facts obtained from your letter and from our telephone conversation of XXXXX.

1. XXXXX (the City) is a municipality incorporated pursuant to the XXXXX.

2. The City is a "municipality" for GST/HST purposes as defined in subsection 123(1) of the Excise Tax Act (ETA).

3. The City is registered for GST/HST purposes and has been assigned GST/HST registration number XXXXX.

4. An applicant wishes to obtain a provincial liquor licence for a location in the City and in this regard makes an application to the City and to the XXXXX of the Provincial Government.

5. XXXXX is responsible for the issuance, renewal, transfer, suspension or cancellation of licences as provided by XXXXX.

6. XXXXX.

7. XXXXX In order to assess the views of residents, the City will require that a public notice be posted advising that an application for a liquor licence has been made for the area; it may enter into a contract with a Referendum Company to carry out a referendum or it may conduct public meetings or telephone surveys.

8. The applicant for the liquor licence is required to pay for internal costs incurred by the City in relation to the administration of the referendum and for the other activities carried on by the City to obtain public input on the issuance of the licence. For example, the City will bill the applicant for the final costs of the referendum, including internal costs at cost plus overhead XXXXX and the cost of the referendum.

9. If the City endorses the application, and if all other requirements of provincial legislation, regulations and policy are satisfied, the XXXXX will issue a liquor licence to the applicant or advise of the next steps in the application process.

10. To the best of your knowledge, none of the issues described herein is being considered by a Canada Customs and Revenue Agency office in connection with a GST/HST return and none of the issues is under objection or appeal.

Ruling Requested

Does the GST/HST apply to amounts the City charges the applicant for the cost of services provided by the Referendum Company and for internal costs and overhead incurred by the City in order to obtain public input on the issuance of the licence?

Ruling Given

Based on the facts provided, we rule that the charges by the City to the applicant in relation to the costs described above are not subject to the GST/HST.

Explanation

Section 20 of Part VI of Schedule V to the ETA provides an exemption for certain supplies made by a government or municipality or by a board, commission or other body established by a government or municipality.

Paragraph 20(c) of this Part exempts a supply of a licence, permit, quota or similar right (other than such a right supplied in respect of the importation of alcoholic beverages) and the supply of any service in respect of an application for such a right.

The issuance of a liquor licence by XXXXX of the Provincial Government is exempt pursuant to paragraph 20(c) of Part VI of Schedule V.

Before a liquor licence can be issued, the province may require that the City solicit the views of residents in the area affected by the licence application. In this situation, the City will require that notices be posted advising the residents that an application for a liquor licence is being considered for an establishment in their area. The City may enter into a contract with a Referendum Company to solicit public feedback; it may conduct public meetings, arrange for telephone surveys, etc. The applicant for the liquor licence will pay the City the costs it incurs for the referendum, public meetings or surveys, including internal costs and overhead.

It is our view that these amounts paid by the licence applicant to the City are consideration for services that are integral to the granting of the liquor licence. The rationale for conducting the referendum, the public meetings or the surveys in these circumstances is to support the application for the licence. Therefore, the referendum and other activities carried out to obtain the views of the public on the application are part of a single regulatory process.

As mentioned above, paragraph 20(c) of Part VI of Schedule V also provides an exemption for the supply of any service in respect of an application for a licence, permit, quota or similar right when supplied by a government, municipality or by a board, commission or other body established by a government or municipality. The fees paid by the applicant in this situation are consideration for exempt services supplied by the City in respect of the application for the liquor licence.

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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Services provided by the Referendum Company to the City

You also requested confirmation that the charge by the Referendum Company to the City will be taxable and that the City will be entitled to claim a rebate of 57.14% of the GST paid to the Referendum Company.

Interpretation Given

We have not been provided with information concerning the Referendum Company, its relationship to the City or the nature of any agreements between the company and the City, therefore; we cannot provide a ruling on the tax status of its supplies to the City. We can however, provide a general interpretation that if the Referendum Company is a GST/HST registrant providing these services to the City in the course of a commercial activity, then the services will be taxable.

The City would be entitled to claim a public service body rebate of 57.14% of the non-creditable tax charged on the consideration for these services pursuant to subsection 259(3) of the ETA.

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 Canada Customs and Revenue Agency 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) 952-9590.

Yours truly,

Elaine Bonnah
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate