Table of Contents


Canadian Legal Information Institute v. The Queen, 2020 TCC 56

determination by NPO's member to pay NPO's budget gave rise to consideration by operation of law

CanLII was a not-for-profit corporation providing an open-access virtual law library that had all of its operating budget (of around $3 million per annum) funded by its sole member, being the Federation of Law Societies of Canada (Federation), which collected matching fees from 14 Canadian law societies. CanLII collected GST on the payments from the Federation, and claimed input tax credits on its taxable purchases. The Minister disallowed these ITCs on the basis that CanLII provided its service for no consideration (i.e., to its readers) and, therefore, provided an exempt supply pursuant to Shed. V, Pt. V, s. 10.

Lamarre ACJ found that CanLII instead was making a taxable supply for which the amounts collected from the Federation were the consideration. She first noted that the ETA definition of “consideration” included any amount that is payable for a supply “by operation of law,” stating (at para. 40):

I do not read the definition as imposing a requirement for an enforceable legal obligation to pay as argued by the respondent.

In rejecting a Crown submission, she stated (at para. 54):

I agree with CanLII that a direct link exists between the payment of the levy by the Federation and the supply of the virtual library. …

Given that the Federation became legally obligated to pay a “levy” for a year to CanLII once such levy and the corresponding levies on the provincial law societies, had been approved by its council, “the levy was paid by operation of law for the supply of the virtual library,” i.e., “[t]here was an obligation on the Federation to pay and payment was not discretionary as argued by the [Crown]” (para. 510.

Accordingly, the Sched. V, Pt. V, s. 10 exemption was inapplicable.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part V - Section 10 law society funding received by CanLII was consideration for taxable supplies of its services 411

Global Cash Access (Canada) Inc. v. Canada, 2013 FCA 269

"consideration" under law of contract

In the course of finding that the appellant was receiving a financial supply from the casinos it contracted with, Sharlow JA stated (at para. 15):

In the context of this appeal, the word "consideration" should be understood to mean anything that would be consideration under the law of contract, and "taxable supply" should be understood to include anything supplied in the course of a commercial activity except a "financial service" as defined in subsection 123(1) of the Excise Tax Act. It is undisputed that the business of the Casinos is a commercial activity, and the acts of Casinos pursuant to its contract with Global are acts in the course of that commercial activity.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (g) commercial efficacy of arrangement involving kiosk and support services turned on the advance of money 428
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply three elements integrally connected 240
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(1) "consideration" under law of contract 123
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (r.4) predominant element not described in (r.4) or (r.5) 183

Boardwalk Equities Inc. v. Canada, 2013 FCA 140, aff'g Calgary Board of Education v. The Queen, 2012 TCC 7

consideration not reduced by credit for subsequent provincial subsidy

The appellant ("Boardwalk Equities") was entitled to receive amounts under an Alberta energy assistance program to defray additional costs to consumers and businesses from a spike in natural gas and electricity costs. The suppliers invoiced Boardwalk Equities for the full value of the natural gas and electricity supplied, plus GST thereon; but showed a "credit" on the same invoices for the Alberta grant to be received by the suppliers on or after the invoice due date (with the suppliers' entitlement to be paid the grant being based on having previously credited the amount of the grant to the customer - Boardwalk Equities). Boardwalk Equities applied for a GST rebate under s. 261 on the basis that the GST payable by it should reflect consideration net of the credit, and was denied that rebate. In dismissing the appeal on the basis that there had been no such reduction in the consideration, Webb JA stated (at para. 13):

When the suppliers received the funds from the Province, the liability of the appellant was then reduced since such amount was accepted by the suppliers as partial payment of the amount that the appellant otherwise had to pay under its agreements with the suppliers. However, this was after the date of the invoices and after the liability arose to pay the GST. Therefore, the liability of the appellant for GST under the Act was correctly calculated as 7% of the amount payable for the supply of natural gas and electricity before the credit for the amount that the suppliers would subsequently receive from the Province is taken into account.

Words and Phrases

Commission Scolaire des Chênes v. Canada, [2002] GSTC 11, 2001 FCA 264

provincial subsidy was paid only if busing services provided

The appellant school boards paid GST charges of independent bus companies for their busing services, and were compensated with a Quebec government subsidy (which was not subject to GST due to provincial government immunity).

In finding that the school boards were making taxable supplies to the Quebec government, so that they were entitled to full input tax credits, Noël J.A. stated (at paras. 19, 28):

[I]n order for a payment to constitute consideration, it must have been made pursuant to a legal obligation (contractual or otherwise) and must be closely enough linked to a supply that it may be regarded as having been made "for" that supply… . That is why a direct link is required.

… It is therefore apparent that the purpose of the subsidy is unequivocal and that the link with the supply in question is equally unequivocal; the service must be provided, failing which the subsidy may be cancelled. Given that this situation is outside the realm of contracts, it is difficult to imagine a more direct link between the payment and the supply of the student transportation service.

See Also

1410109 Ontario Ltd. v. The King, 2022 TCC 141 (Informal Procedure)

a “gratuity” stipulated in the contract was part of the consideration

The taxpayer was a banquet hall which held such events as weddings and other large celebrations. Each patron signed a contract with specified the food, beverage and event packages to be purchased for a specific date. The contract in question stated that “All Pricing is Subject to 13% HST and 15% Gratuities.” Before agreeing with the position of the Minister that the “gratuity” was part of the consideration for the supply under the contract, Bocock J referred inter alia to the finding in NDP Co Ltd v Customs and Excise Commissioner, [1988] VATTR 40 that:

[V]oluntary gratuities are not subject to VAT because voluntary gratuities are: ‘[N]o part of the contract that the customer should pay a charge for service … .’

Before dismissing the taxpayer’s appeal, he stated (at paras. 21, 27-28):

[T]he inclusion of an obligation as part of the bargain, cannot be viewed as a gift but part of the consideration. …

Subsection 133(b) combined with subsection 138(a) … suggests that tips included in an agreement are part of the overall supply of prepared meals, which is subject to HST. …

The ETA defines “consideration” as “any amount that is payable for a supply by operation of law.” The almost mandatory tip is enforceable by operation of contract law whereas a voluntary tip is not “consideration” because it is not payable by operation of law… .

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 133 tips included in contract were part of the agreed-to consideration 187

Aerovition Digital Inc. An Aerovition Corp. v. The Queen, 2022 CCI 6, 2022 TCC 27 (Informal Procedure)

s. 153(2) required a reasonable allocation of consideration between the two distinct supplies made

In order to promote the sale of its farm products (mostly honey), the appellant developed a “labyrinth” of trails on its forest lands and, when it sold tickets for access by visitors to the trails, stipulated that the ticket, generally sold for $12, also constituted a coupon of $1.50 to be applied to the purchase of honey or other products. However, if the visitor purchased further coupons, the value proposition improved, for example, six coupons (with the additional five purchased at $1.50 each), would purchase 20 times as much honey as one coupon.

In 9056-2059 Québec, the Federal Court of Appeal had rejected the CRA position that s. 138 applied to deem all the supplies by the appellant to be taxable supplies of access to a place of amusement (rather than zero-rated supplies of food), in light inter alia of beekeeping accounting for 50% of the appellant’s maintenance costs, and remitted the matter for redetermination by the Minister on that basis.

Before confirming the resulting reassessments that treated $1.50 of the ticket prices as being zero-rated consideration for the honey or other food products, and the balance as consideration that was subject to tax, Boyle J indicated that s. 153(2) required that the “cost of admission to … the … forest must be reasonably divided between access to the labyrinth and other activities, and the mandatory purchase of a coupon to be exchanged for a honey or maple food product” (para. 8, TaxInterpretations translation) and then stated (at para. 19):

Appellant was unable to present any valid reason why the value of the initial coupon should be other than $1.50, which is what it charged for the same coupons when purchased individually.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(2) s. 153(2) requires a reasonable allocation of consideration between component supplies 389

Centre de traitement de la biomasse de la Montérégie inc. v. Agence du revenu du Québec, 2021 QCCA 1068

consideration for a transfer of waste included the assumption of environmental responsibility

The taxpayer received organic sludge from suppliers in the agri-food industry, and was paid by them for taking over the sludge, which it then treated and transformed, using electricity, into residual fertilizer materials ("RFM"). It then paid companies (the "Receivers") to acquire the RFM, which they recovered for composting, agricultural land application or as an energy source. It profited by paying significantly less to the Receivers than it received from its sludge suppliers.

Although s. 206.1 of the Quebec Sales Tax Act denied an input tax refund for tax on supplies of electricity, s. 206.3 provided an exclusion from this rule where the electricity was used for a purpose that came within the exemption in s. 17(aa) of the Quebec Retail Sales Tax Act (“RSTA”), which exempted “sales of electricity … which a person … uses to produce movable property … intended for sale/” The Court of Quebec followed C.R.I. Environnement in finding that this exemption did not apply. C.R.I. Environnement on similar facts had found that the goods were not intended for “sale” because Article 1708 of the Civil Code of Quebec defined a sale as “a contract by which a person, the seller, transfers ownership of property to another person, the buyer, for a price in money which the latter obligates himself to pay,” whereas there, there was no monetary consideration received from the persons to whom the goods were transferred.

In reversing the decision below, and finding that the exemption applied, Marcotte JCA noted that “sale” was broadly defined in s. 2(9) of the RSTA to include “any other contract whereby, for a price or other consideration, a person delivers or binds himself to deliver, to another, movable property” and that “sale price” was defined in s. 2(7) to include “other considerations or prestations accepted by the vendor as the price of the thing covered by the contract of sale.”

Marcotte JCA quoted (at para. 56) from the statement of Waddams, The law of contracts, that:

A valuable consideration in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment loss, or responsibility given, suffered or undertaken by the other.

She then stated (at para. 57, TaxInterpretations translation):

In this case, by transferring its environmental obligations to the Receivers, the Appellant relieved itself of various environmental obligations or liabilities. In my view, this relief conferred a benefit on the Appellant and, in light of the foregoing analysis, constituted valuable consideration that may be characterized as "any other consideration" within the meaning of section 2(9) of the RSTA.

Words and Phrases
consideration sale
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125.1 - Subsection 125.1(3) - Canadian Manufacturing and Processing Profits a taxpayer made sales of partially processed waste when it paid other processors to complete its processing 354

San Domenico Vetraria SpA v. Agenzia delle Entrate, Case C-94/19 (ECLI:EU:C:2020:193) (7th Chamber)

reimbursement of payroll was consideration

Although the European VAT Directive provided that supplies of services (or goods) for consideration were taxable for VAT purposes, Italian VAT legislation provided that the secondment of staff where only the payroll costs were reimbursed was to be ignored for VAT purposes. In finding that this Italian legislation was contrary to the VAT Directive, so that VAT was applicable to the payments made by an Italian subsidiary (San Domenico Vetraria) to its Italian parent (Avir) to reimburse the latter for the payroll costs of a staff member who had been seconded to San Domenico Vetraria, the 7th Chamber stated (at paras. 21-23:

[A] supply of services is effected ‘for consideration’ … if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. … .

[T]he secondment was carried out on the basis of a legal relationship of a contractual nature between Avir and San Domenico Vetraria … [and] there was reciprocal performance, namely the secondment of a director from Avir to San Domenico Vetraria, on the one hand, and the payment by San Domenico Vetraria to Avir of the amounts invoiced to it, on the other.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply a secondment was a taxable supply for VAT purposes 482

National Car Parks Ltd v Revenue and Customs, [2019] EWCA Civ 854

car park machines that did not refund coin payments thereby received extra consideration for VAT purposes

The case focused on this hypothetical example. A customer pays for parking in a car park of the appellant (NCP) by going to the ticket machine which, on its tariff board, displays a price for one hour of £1.40 – but also states that change is not given but overpayments are accepted. She deposits £1.50 in coins into the machine, which flashes up 'press green button for ticket', which she does. The amount paid is printed on her ticket, as is the expiry time of one hour later. The customer displays the ticket in her car and leaves the car park.

In finding that the consideration received by NCP for VAT purposes was £1.50, and rejecting NCP’s submission that £0.10 was a gratuitous payment, Newey LJ stated (at para. 18):

English law, of course, generally adopts an objective approach when deciding what has been agreed in a contractual context. Here, it seems to me that, taken together, the tariff board and the statement that "overpayments" were accepted and no change given indicated, looking at matters objectively, that NCP was willing to grant an hour's parking in exchange for coins worth at least £1.40. In the hypothetical example, the precise figure was settled when the customer inserted her pound coin and 50p piece into the machine and then elected to press the green button rather than cancelling the transaction. The best analysis would seem to be that the contract was brought into being when the green button was pressed. On that basis, the pressing of the green button would represent acceptance by the customer of an offer by NCP to provide an hour's parking in return for the coins that the customer had by then paid into the machine. At all events, there is no question of the customer having any right to repayment of 10p. The contract price was £1.50.

Words and Phrases

MEO — Serviços de Comunicações e Multimédia SA v. Autoridade Tributária e Aduaneira, (2018), ECLI:EU:C:2018:942 (ECJ (5th Chamber))

payments pursuant to contract for remaining minimum service term were consideration
Vodafone Portugal – Comunicações Pessoais SA v Autoridade Tributária e Aduaneira ECLI:EU:C:2020:465 (Case C-43/19) European Court of Justice (Ninth Chamber) is similar

MEO, a Portuguese telecommunications company providing telecommunications, internet access, television and multimedia services for monthly subscription fees was entitled under its customer contracts upon deactivation of service to compensation corresponding to the amount of the agreed monthly subscription fee multiplied by the difference between the duration of the minimum commitment period provided for in the contract and the number of months during which the service was provided. Article 2(1)(c) of the VAT Directive provided that “the supply of services for consideration within the territory of a Member State by a taxable person acting as such” is subject to VAT. Article 73 of the VAT Directive provided:

In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.

In finding that the early-termination amounts so received by MEO were “for consideration” and, thus, subject to VAT, the Court stated (at paras. 39-40, 45):

[A] supply of services is carried out ‘for consideration’, within the meaning of that provision, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the actual consideration for the service supplied to the recipient … . This is the case if there is a direct link between the service supplied and the consideration received … .

[T]he Court has already held, as regards the sale of air tickets that passengers have not used and for which they could not obtain repayment, that the consideration for the price paid at the time of the signing of a contract for the supply of a service is formed by the right derived by the customer to benefit from the fulfilment of the obligations arising from the contract, irrespective of whether the customer uses this right. Thus, that supply is made by the supplier of services when it places the customer in a position to benefit from the supply, so that the existence of the abovementioned direct link is not affected by the fact that the customer does not avail himself of that right … .

[I]t must be held that the consideration for the amount paid by the customer to MEO is constituted by the customer’s right to benefit from the fulfilment, by MEO, of the obligations under the services contract, even if the customer does not wish to avail himself or cannot avail himself of that right for a reason attributable to him.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 182 - Subsection 182(1) fee for early termination of services contact was consideration for the service 149

A Oy v. Veronsaajien oikeudenvalvontayksikkö, [2019] EUECJ C-410/17 (10 January 2019) (European Court of Justice (9th Chamber))

a demolition contract entailed a barter exchange of dismantling services and scrap

Pursuant to demolition contracts, a company (“A”) undertook to demolish old factory buildings with responsibilities that included the disposal and processing of materials and waste. It took the estimated sales proceeds of the materials generated into account in quoting its price for the work but did not communicate this estimate to the client.

Article 73 of The Council Directive 2006/112/EC of 28 November 2006 provided:

In respect of the supply of goods or services … the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party … .

In finding that there was a reciprocal supply of the dismantling services and the materials for consideration, the Court first stated (at paras. 39-40, 45):

[I]t is clear from settled case-law that the consideration which is the taxable amount for a transaction has a subjective value … [being] the value which the recipient of services constituting the consideration for the supply of goods attributes to the services which he is seeking to obtain and must correspond to the amount which he is prepared to spend for that purpose … .

[T]he supply of recyclable scrap metal is made for consideration if the person acquiring it, namely a demolition company, attributes a value to that supply which it takes into account in the calculation of the price quoted for carrying out the demolition works … .

Therefore, in such a case, reciprocal transactions are exchanged under the same contract, between the service provider and its client, so that a direct link … exists between the performance of the demolition works and the supply of the recyclable scrap metal.

The company would also pay a client under a similar dismantling contract. The Court stated (at paras. 57, 59):

[T]he value of the performance of dismantling and waste disposal … must be regarded as equal to the amount that the purchaser, that is a demolition company, takes into account as a factor reducing the purchase price of the goods to be dismantled.

…[T]he taxable base of the supply of goods to be dismantled is, therefore, constituted by the price actually paid for the purchase of those goods and the amount corresponding to the factor applied by the purchaser in order to reduce the purchase price proposed.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(1) demolition contract entailed reciprocal supplies of dismantling services and scrap 305

Adecco UK Ltd & Ors v Revenue & Customs, [2018] EWCA Civ 1794

consideration for temps included their remuneration

The appellants ("Adecco") were employment bureaux supplying clients with temporary staff ("temps") who were not employees of Adecco. Adecco introduced them to clients looking for a temporary worker to undertake an assignment, and if the temps accepted an assignment, Adecco paid them for the work they did for the clients.

Following the finding in Reed Employment Ltd v Revenue and Customs Commissioners [2011] UKFTT 200 (TC) that the bureau in that case effectively paid the temp workers as agents for the clients, so that it was only its commission that was subject to VAT, Adecco sought a VAT refund of the portion of its charges to its clients that reimbursed it for the compensation of the temps.

Although Adecco could not direct the temps as to how to carry out their assignments, had no effective control over when the assignments ended and did not conduct any appraisals of the temps, it nonetheless was found to be making a supply of their services to the clients (rather of only an introductory service) so that it had been correctly treating all of the amounts received from the clients as subject to VAT.

Points noted by Newey LJ in support of this conclusion included that there was no contract between the temps and the clients, the contracts referred to their services being provided "through Adecco," it paid temps on its own behalf, not as agent for the clients, and Adecco charged a client a single sum for each hour a temp worked, i.e., it did not split its fees into remuneration for the temp and commission for itself, the same contract between Adecco and a client was used in irrespective whether Adecco was providing a non-employee or employee.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency a placement service providing non-employee temps to clients was not paying the temps’ compensation on the clients’ behalf 179

Stewardship Ontario v. The Queen, 2018 TCC 59

statutorily-mandated waste recycling charges were consideration for a taxable supply

Stewardship Ontario (“SO”) was a not-for-profit corporation that operated, as part of a regime governed by the Waste Diversion Act, 2002 (Ontario) ('WD Act"), an Ontario program for recycling various types of waste such as paints, solvents, batteries, empty propane tanks and antifreeze. It collected the waste and paid for its processing or disposal. “Stewards,” being persons who had a commercial connection with such waste, were statutorily responsible for paying fees to SO to reflect their reasonable share of the associated costs.

After rejecting the Crown’s argument that SO was not making supplies but instead merely performing a statutory duty, D’Arcy J then also rejected the Crown’s argument that the “Steward Fees” were a “regulatory charge” rather than a “user fee,” stating (at paras. 108-109):

The MHSW Steward Fees are payable by the MHSW Stewards to the Appellant by operation of law. Specifically, section 30 and subsections 31(1) and 34(6) of the WD Act provide that if a person has a commercial connection with designated waste or a product from which the designated waste is derived that person (i.e., a steward) must pay a portion of the Appellant’s cost of developing, implementing and operating a waste diversion program … .

Further, such fees are payable for a supply made by the Appellant. Once a person is found to have, under the MHS Waste Program Agreement, the required commercial connection with the MHS Waste, the person is deemed to be an MHSW Steward. … [O]nce the person becomes an MHSW Steward that person is required to pay the costs of collecting and recycling the designated waste.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply performance of a statutory duty can nonetheless by a supply 279
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(2) statutory object of avoiding tax cascading 397
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service "service" has broad meaning 199
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Recipient those subject to statutory user charges were "recipients" 201

Université Laval v. The Queen, 2016 TCC 17

subsidy paid in consideration for future access rights

Quebec City and the University of Laval entered into an agreement providing that the City would pay a grant of $10 million to the University for the expansion of the University’s sports complex and provide preferred access to the complex by the City populace, and simultaneously entered into a second agreement specifying inter alia that the populace would have access to the complex for 70% of its operating hours. After finding (at paras. 30-32, 50-51) that the two agreements created reciprocal and integrated obligations, Tardif J found (at para. 59) that “the grant was paid in consideration for a supply.”

He then found that ETA s. 136(1) deemed this to be a supply of immovable property (which therefore was a taxable supply) rather than a potentially exempt supply of movable property or a service.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 136 - Subsection 136(1) s. 136 applied to agreement to offer, at a distant date, to license sports complex to unidentified individuals 179
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part VI - Section 25 agreement to licence complex in future was not exempted becasue complex primarily used in commercial activity 140
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part VI - Section 2 agreement to licence sports complex in futre to City inhabitants was a real property supply 153

Invesco Canada Ltd. v. The Queen, 2014 TCC 375

management fee distributions to large MFT unitholders

The appellant, which was the manager (and also trustee) for various mutual fund trusts, charged reduced management fees to the trusts to reflect the reduced management fees agreed with the larger investors (with a corresponding reduction in the GST collected). However, the Funds made special "Management Fee Distributions" to the large investors equal to the difference between the ‘gross" management fees they otherwise would have borne and the reduced management fee amounts. Before finding that the trust obligations to pay the Management Fee Distributions to the large investors was not part of the consideration that the Funds provided in exchange for the appellant's management services, Campbell J stated (at para. 35):

Pursuant to Commission Scolaire des Chênes and the common law definition of consideration, all that would be required for the Management Fee Distributions to constitute consideration for the taxable supply of management services would be a contractual obligation.

See detailed summary under ETA – s. 153(1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(1) discounted management fees charged by manager to MFTs not grossed up by MFT distributions of the discounts to large unitholders 326
Tax Topics - General Concepts - Evidence evidence of surrounding circumstances including income tax objective relevant to contract interpretation 170

Thompson Trailbreakers Snowmobile Club Inc. v. The Queen, [2005] GSTC 124, 2005 TCC 269

funds received by snowmobile club from government for managing trails were taxable consideration

The appellant operated a snowmobile club as a member of Snowmobilers of Manitoba Inc., which was dedicated to developing and maintaining snowmobiling trails on provincial crown lands. It sold trail passes to snowmobilers, which were issued by the provincial government, and it received back approximately 80% of the sale proceeds from the government, which reflected a 20% administrative holdback to cover such costs as liability insurance. Hershfield J found (at para. 16) that the gross amounts paid by the snowmobilers for the passes were government levies.

In finding that funds received from the province were taxable consideration for services performed (of managing and maintaining the snowmobile trails) which were not subject to GST due to the provinces’s Crown status, Hershfield J. stated (at para. 21):

[T]he particular service is one the government has undertaken to provide and has effectively retained a third party to perform it. Funding in respect of that retention can, in my view, properly be regarded as consideration for the services provided. ...

Section 123 of the Act defines consideration as including any amount paid for a supply. Even if only a small portion of the funds set aside by the province is to help pay for equipment,…and even if the grant is inadequate to actually cover the cost of such equipment, the setting aside of the funds for that purpose as part of a contracting out scenario may be sufficient to constitute consideration at law.

As the appellant was engaged in commercial activity, it was entitled to input tax credits on its purchase of trail-grooming equipment.

Commission Scolaire des Découvreurs c. La Reine, 2003 TCC 295

City school renovation subsidy was consideration

The City of Quebec City paid a subsidy to a school board of $880,000 to enable the school board to renovate a school and expand its gymnasium. In return, the school board was required to make the new facility available to the City for free for 30 years. In finding that the school board was making a taxable supply, Lamarre Proulx J stated (at paras. 55-6):

[W]hat is involved is not a definition of the term "consideration" but a clarification in the case of a non-contractual situation. In such a situation, this term must be given its normal legal meaning. … If we refer to the definition of that term in this same reference work, we read:

Consideration provided by the person who receives a benefit in the synallagmatic contract; reciprocal benefit (perceived as equal) charged to a party to a contract, for example, wages in consideration for work, or the price in consideration for the article sold.

In the two agreements at issue, the benefit provided by the appellant was to construct and to provide the premises. What should the benefit provided by the city for the supply of the real estate have been? … We see from reading the agreements.. that the common intention of the parties is that, if the premises are destroyed, disposed of or expropriated, the full amount of the grant, that is, $880,660, shall be reimbursed, prorated according to the number of years remaining. I am therefore obliged to find that this amount is the consideration for the supply by way of lease.. .

Meadow Lake Swimming Pool Committee Inc. v. The Queen, [1999] GSTC 96, Docket: 98-2588-GST-I (TCC)

town payment of operating loss of civic pool operator was taxable consideration

Residents of a town, Meadow Lake, Saskatchewan, formed the appellant to raise funds and build a pool on town property. The town provided an annual grant to cover the pool operating deficit.

In concluding that these grants were consideration for a taxable supply of management servicers by the appellant, Rowe DJ. stated (at para 20):

Pool Committee Inc. received money each year…to utilize the funds solely in connection with the stated purpose of operating, maintaining and regulating the swimming pool…The Town owned the facility and …chose to pay Pool Committee Inc. to run the pool on a day-to-day basis and it received the exact service which was the subject matter of the payment. ...

Pool Committee Inc. - albeit a non-profit corporation specially created for that very purpose - was functioning in the same manner as any other manager or operator of the facility in return for payment of money.

Although a by-law referred to “Lease and Operating Agreement”, Rowe J. found that there was no lease (so that the grant could not be construed as a subsidy for the operation by the appellant of its own pool).

Administrative Policy

2 August 2017 Ruling 182285

Ontario electricity rebate does not reduce the consideration for the supply

The Ontario Rebate for Electricity Consumers Act, 2016 provided a rebate equal to the provincial portion of HST on the electricity bills of residential, farm, small business and other eligible customers. CRA ruled that the rebate is financial assistance and does not reduce the consideration for the supply of the electricity – so that input tax credits or public service body rebate claims of the recipient are not reduced by the rebate amount.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) Ontario electricity rebate does not reduce ITCs 202

19 January 2017 Ruling 172004

contributions, resulting from collective agreement, to workplace development fund were not conisderation for supply

An employers’ organization for collective bargaining on behalf of employers (i.e., construction contractors) in the construction industry agreed during the negotiation of the collective agreements between the organization and the unions, that for each hour worked by employees pursuant to the collective agreements, the employers would contribute amounts to support workforce development initiatives. As a result, and as authorized by the provincial legislation, the contributions were paid by the employers over to the organization, which contributed them to a trust to be applied as bargained for.

CRA ruled that:

There is no direct link between the contributions made by the contractors to the Trust Fund and a supply made by the Trust Fund to the contractors. The payment of amounts as an industry development fee set by [the Organization] are therefore not consideration for a supply and therefore not subject to GST/HST.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply contributions made by construction contractors to a workplace development fund as agreed to by their collective bargaining agent were not subject to GST/HST 338

18 September 2015 Ruling 168521r

HST applicable to on-charges for waste diversion fees imposed on Ontario tire seller

As also described in 144133, Ontario Tire Stewardship (“OTS”) was designated by Waste Diversion Ontario (“WDO”) as an industry funding organization (“IFO”) for used tires and, as such, was responsible for operating the waste diversion and recycling program in Ontario for used tires including collection, transporting and processing. ACo, which imports tires into Ontario as well as purchasing them from Ontario-based tire manufacturers (i.e., from “brand owners”) was designated by WDO as a “steward” in respect of the tires it imported into Ontario for sale in Ontario (but not in respect of the tires it purchased from the brand owners, who instead were the stewards respecting such tires). As a steward, ACo is required to pay fees (calculated by applying a per-tire charge to the tires imported by it) to OTS to help cover the costs of the waste diversion and recycling program operated by OTS. ACo charges its tire customers an amount for each tire and an amount separately identified on its invoices as an “OTS” charge (which ACo determines by referring to the tire stewardship fees posted on the OTS website). After ruling that ACo’s OTS charges were part of the value of the consideration for its taxable supplies of tires and, thus, subject to GST/HST, CRA stated:

The tire stewardship fees that [ACo] pays (as first importer), and the costs of the tire stewardship fees that other stewards (e.g. brand owners) pay and pass on to [ACo] are costs of doing business that [ACo] chooses to pass on to its tire customers in a separately identified “OTS” charge on its invoices. For ETA purposes, this cost, even when separately identified as an “OTS” charge on an invoice to a tire customer, forms part of the consideration for a taxable supply of tires and is subject to GST/HST… .

…[T]he tire stewardship fee is payable by [ACo] when [ACo] is the first importer of the tire …and the fee is payable by the brand owner (i.e. the manufacturer) in respect of tires that [ACo] purchases from the manufacturer. As a result, in both of these circumstances, the tire stewardship fee is not payable by the recipient of [ACo]’s supply of tires (i.e. [ACo]’s tire customer) and it is not excluded from the consideration for the tire charged to the tire customer by virtue of section 154… .

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 154 - Subsection 154(2) on-charges made to an Ontario tire seller’s customers for waste diversion fees imposed on it by Ontario Tire Stewardship are subject to HST 189

22 May 2014 Ruling 156633

additional rent for municipal taxes applied to ground rent is taxable until constructed apartment commences its exempt use

The Lessee of the “Property” constructed a multi-storey, multi-unit residential apartment building (the “Complex”) on the rooftop of an existing building. The residential units in the Complex will be leased for use as a place of residence by an individual for periods of continuous occupancy of at least one month, so that their rental will be exempt. In addition to the “Ground Rent” payment, the Lessee must pay, as “Additional Rent,” an amount in respect of the portion of the municipal property tax bill attributable to the residential space constructed by the Lessee.

After ruling that the supply of real property made under the ground lease agreement is a taxable supply of real property from the commencement of the agreement up to the end of the lease interval in which the Lessee is considered to have made and received a taxable supply of the Complex pursuant to s. 191(3) (the "Taxable Supply Period"), CRA ruled:

The Lessor is required to charge and collect GST/HST on the Ground Rent payments that are paid or become payable under the Agreement for lease intervals that fall within the Taxable Supply Period. The Lessor is not required to charge and collect GST/HST on the Ground Rent payments that are payable under the Agreement for lease intervals that fall within the [subsequent] Exempt Supply Period.

28 October 2013 Ruling 144133

stewardship fees paid under Ontario waste diversion program are regulatory charges, not fees

Pursuant to the Waste Diversion Act, 2002 (Ontario) (“WDA”), Waste Diversion Ontario (“WDO”), a non-share corporation, is responsible for operating waste diversion and recycling programs for designated wastes in cooperation with an industry funding organization (“IFO”) (i.e., Ontario Tire Stewardship (“OTS”) for used tires, Stewardship Ontario (“SO”) for municipal hazardous waste and Ontario Electronic Stewardship (“OES”) for used electrical and electronic equipment) and designates stewards (e.g., a company which imports the product into Ontario or which is the registered owner or licensee of the brand for the product) which it requires to pay fees to cover the costs of the particular waste diversion program, including the costs of the IFO of operating the program (e.g., collection, transportation and processing of waste), and of the related WDO and Ministry costs. In connection with ruling that the fees paid to OTS, OES and SO were not consideration for a supply (so that they could not claim input tax credits for HST on purchases of property or services in respect of the stewardship programs), CRA stated:

[T]here is nothing within the WDA that makes stewards responsible for the implementation or operation of waste diversion programs or for the waste generated as a result of their products. As a result, the stewards are not paying for a supply related to the collection, transportation, consolidation and recycling of the waste generated, or for any other supply. Stewards are only responsible to pay the required stewardship fees and to file stewardship reports. Accordingly, it is our view that the stewardship fees are regulatory charges that are not related to the supply of property or a service (e.g., they are not fees for a service).

23 December 2002 Technical Interpretation RITS 38588

municipal taxes paid by tenant are additional rent

"Where a separate amount is paid by a lessee on account of property taxes, this amount is part of the consideration for the rental of the property, even if the lessee pays the amount directly to the municipality ... While the Tenant may be responsible under the agreement to pay property taxes to the municipality, the ultimate liability to pay the property taxes rests with the Landlord."

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 153 - Subsection 153(1) tenant property taxes part of consideration 66
Tax Topics - Excise Tax Act - Section 165 - Subsection 165(1) 66

Technical Information Bulletin B-067, "Goods and Services Tax Treatment of Grants and Subsidies," 24 August 1992

There is a direct link between a transfer payment and a supply if the payment is directly related to the provision of a supply to the grantor, or to a third party, by the recipient of the transfer payment. If a direct link exists, the payment is consideration... .

CRA also stated that if the grantor of a transfer payment (incluidng acontribution, subsidy, or similar payment) does not receive any property or service in return, then

the payment is not consideration for a supply since there is no activity involved that can be considered to be a supply"