31 March 2004 GST/HST Interpretation 50357 - Application of the Goods and Services Tax (GST) to the Levy Established Pursuant to the

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST) to the levy established pursuant to the XXXXX.

Statement of Facts

Our understanding of the facts is as follows:

(1) In the province of XXXXX (the "Act") enables producers XXXXX to collect levies. XXXXX(the minister) may establish a specific council, XXXXX, to administer a specific levy fund (i.e. a fund in which collected levies are held) and to apply amounts out of the fund to promote the interests of all producers through market promotion, market development, research and education.

(2) XXXXX before the minister may establish a fund under the Act, to promote the interests of all producers of a commodity, the producers of that commodity must obtain the minister's approval to a plan informing the producers about the proposed fund, levy and council. The plan must include information on whether the levy is refundable (in whole or in part), any related matters that the minister may require, and whether the producers of the commodity support such a plan or support a different plan.

(3) Where a plan is supported by the producers of a commodity and approved by the minister, a council and fund are established in relation to the commodity. The council is composed of one or more representatives of the government (at least one of whom must be a representative of the ministry which administers the Act), producers of the commodity in sufficient numbers to constitute a majority of the council, and one or more persons who the minister considers represent people involved in the supply of goods or services to the producers or involved in the processing, distribution or consumption of the commodity.

(4) Where a council and fund are established under the Act, the council is responsible to the minister for the administration of the fund and the management, administration and control of the fund are vested in the council. XXXXX.

(5) XXXXX provides that a council is a corporation and XXXXX has all the powers of a corporation under XXXXX.

(6) XXXXX provides that the council may pay out of the fund, amounts that it considers appropriate to pay, as an expense approved by the minister as being necessary for or incidental to the administration of the Act in relation to the fund; or pay to a person including a person representing the producers of a commodity, a sum to benefit and promote the industry XXXXX in respect of a commodity or to conduct or support research or educational programs in respect of the development and promotion of a commodity.

(7) XXXXX regulations may be made establishing the time and the manner of payment of the levy, the requirements of persons to collect the levy and many additional authorizations, exemptions, and reporting requirements.

(8) XXXXX.

(9) XXXXX.

(10) XXXXX.

Ruling Requested

What is the tax status of the levy paid XXXXX?

Ruling Given

Based on the facts set out above, we rule that the levy XXXXX is consideration for a taxable supply.

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

Explanation

Activities consisting of research, education or the promotion of a commodity constitute a supply of a service. Since there is no provision in the ETA to exempt such a service, the service is a taxable supply. The levy paid to the XXXXX in respect of such services is regarded as consideration for these services.

Section 240 of the ETA states that every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered, except in certain circumstances, such as when the person is a small supplier. Under subsection 148(1) of the ETA, a person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies, including zero-rated supplies, made by the person (or an associate of the person at the beginning of the particular calendar quarter) that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000 or, where the person is a public service body XXXXX $50,000. XXXXX.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7945.

Yours truly,

Susan Mills
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate