Determining The Taxability Of A Supply For GST/HST Purposes: Nature Of A Supply, Its Principal Or Dominant Purpose, Taxable And Non-Taxable Characteristics

• Published date: 14 June 2023
• Subject Matter: Tax, Sales Taxes: VAT, GST, Tax Authorities
• Law Firm: SpenceDrake Tax Law
• Author: Mr Cris Best

A-Supreme Nursing & Home Care Services Inc. v. The King, 2023 TCC 39 (CanLII), https://canlii.ca/t/jwjb2

The Tax Court of Canada decision in A-Supreme Nursing & Home Care Services Inc. v. The King, 2023 TCC 39 ("ANHC"), involved a CRA audit of a staffing agency in the business of supplying healthcare workers, resulting in a reassessment for over $1,000,000 in GST/HST. The decision is of interest as it clarifies the scope and taxability of the supply of nursing services for GST/HST purposes. Furthermore, when a supply exhibits both taxable and non-taxable characteristics, how do you determine its principal or dominant purpose and therefore its taxability?

The main issue in ANHC was whether the appellant provided a taxable or exempt supply when supplying nurses and personal support workers to nursing homes and long-term care facilities. The CRA argued that the appellant should have charged GST/HST for the placement of nurses, which is a taxable supply. However, the appellant filed its tax returns on the basis that it supplied nursing services, an exempt or tax-free supply.

As per the Federal Excise Tax Act, RSC 1985, cE-1 ("ETA"), the majority of healthcare services are GST/HST exempt. GST/HST in Ontario, a combined 13%, is considered to be held in trust for the government when charged, referred to as a "deemed trust amount." It is the taxpayer's responsibility to collect, withhold and remit the tax. In AHNC, because the staffing agency failed to do so on the basis that the supply was not subject to GST/HST it was later held by CRA to be directly liable for the respective amount.

An exempt supply, pursuant to section 6 of Part II of Schedule V of the ETA, includes a "supply of a nursing service rendered to an individual by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, if the service is rendered within a nurse-patient relationship..." Considering this definition, was the appellant supplying nursing services or personnel?

Because the appellant provided individuals who directly carried out the nursing services, the nature of the supply exhibited both taxable and nontaxable characteristics. As per the decision in River Cree Resort Limited Partnership and Her Majesty the Queen, 2022 TCC 45, when a supply exhibits dual characteristics the court must determine the nature of the supply, including its principal or dominant purpose.

According to CRA, the appellant was supplying property...