Date: 19980210
Docket: 96-3559-GST-I
BETWEEN:
LES ENTREPRISES PHILIPPE PLAMONDON INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
LAMARRE, J.T.C.C.
[1] The appellant is appealing from an assessment bearing No. 5213281 made by the Minister of National Revenue ("the Minister") pursuant to the Excise Tax Act ("the Act") in respect of the goods and services tax ("GST") not collected on the supply of meals, food and drink during the period from January 1, 1992 to June 30, 1995. The amount assessed comes to $29,611.64 in GST, to which was added $2,676.89 in interest and $2,676.39 in penalties.
[2] In assessing the appellant the Minister relied on the facts contained in paragraph 6 of the Reply to the Notice of Appeal, which read as follows:
[TRANSLATION]
(a) the appellant is a registrant for GST purposes;
(b) for the period from January 1, 1992 to June 30, 1995 the appellant operated a cafeteria in an outdoor recreational centre known as "Le Centre de Plein Air 4 Saisons" ("the outdoor recreational centre");
(c) the appellant was an agent of the Minister for the purposes of collecting GST;
(d) during the aforementioned period neither the appellant nor the outdoor recreational centre was a school, school authority, university or public college;
(e) during the aforementioned period the appellant supplied meals, food and beverages by sale without collecting the GST payable by the recipients;
(f) these supplies were subject to GST since they were taxable supplies;
(g) the GST the appellant failed to collect during this period amounted to $29,611.64, which represented the net tax owed by the appellant for the aforementioned period.
[3] Michel Robitaille, an accountant, who testified for the appellant, admitted subparagraphs 6(a), (b) and (e). He maintained that the appellant did not have to collect the GST on the supply of meals, food and beverages since it was supplied in an outdoor recreational centre, the Centre de Plein Air 4 Saisons ("the Centre"), which was a charitable organization providing services to young people under 14 years of age, and which was itself exempt from collecting the GST under s. 12 of Part VI of Schedule V of the Act.
[4] He further maintained that the Centre is a school body within the meaning of s. 123 of the Act, and the supply of food services to a school body is exempt from GST under s. 14 of Part III of Schedule V of the Act.
[5] According to the documents entered in evidence the Centre is administered by the Corporation de l'Institut des Frères de N.D. de la Miséricorde, and this corporation is recognized as a charity. The Centre offers educational activities firstly to school groups. It also offers accommodation to other groups, such as families or YMCA groups, by reservation and with the approval of the Frères de la Corporation. The Centre charges flat rates for services including accommodation, light meals, use of equipment and organized activities.
[6] The Centre also offers a cafeteria service. In order to provide this service, it made the appellant responsible for administering the kitchen by contract. The appellant accordingly leased premises at the Centre. It was the appellant who purchased food. The appellant then billed the Centre, which in turn charged back the cost of meals provided at the cafeteria to users of the Centre. Kitchen charges were clearly identified on bills to users and charged for in addition to the flat rate charges for a stay at the Centre (Exhibit A-3). Further, in the financial statements of the Centre the item "cafeteria" is found under expenses, separate from the item "maintenance and operation", which includes all expenses relating to operation of the Centre.
[7] Additionally, the appellant is a company created under the Quebec Companies Act, which files an annual financial report and is completely separate from the Centre. Its income comes exclusively from its sales at the Centre’s cafeteria. It pays its own expenses.
Analysis
[8] The appellant argued, first, that the supply of food to the Centre is exempt from GST under s. 14 of Part III of Schedule V of the Act. It maintained that it provided food and beverages to the Centre, which it characterized as a school authority.
[9] Schedule V of the Act lists exempt supplies. Section 14 of Part III of Schedule V exempts the supply of food and beverages under a contract from GST. It reads as follows:
|
14. A supply of food and beverages, including catering services, made to a person that is a school authority, university, or public college under a contract to provide food or beverages (a) to students under a plan referred to in section 13; or (b) in an elementary or secondary school cafeteria primarily to students of the school, except to the extent that the food, beverages and services are provided for a reception, conference or other special occasion or event. |
14. Fourniture d'aliments ou de boissons aux termes d'un contrat. La fourniture d'aliments et de boissons, y compris les services de traiteur, effectuée au profit d'une administration scolaire, d'une université ou d'un collège public aux termes d'un contrat visant à offrir des aliments ou des boissons soit à des étudiants dans le cadre d'un régime visé à l'article 13, soit dans la cafétéria d'une école primaire ou secondaire principalement aux élèves de l'école, sauf dans la mesure où les aliments, les boissons et les services sont offerts dans le cadre d'une réception, d'une conférence ou d'un autre occasion ou événement spécial. |
[10] Under s. 123 of the Act, the expression "school authority" means an organization or part of an organization that operates in a province an elementary or secondary school in which it provides instruction that meets the standards of educational instruction established by the government of the province.
[11] I concur with counsel for the respondent that the evidence does not allow me to conclude that the Centre meets such a definition. For it to do so the Centre would have to offer instruction that meets the standards of educational instruction established by the Government of Quebec, and that was not shown to be the case.
[12] Secondly, the appellant suggested that it provided its cafeteria services for a public authority, since the students at school boards, which are themselves public authorities, are the ones who attended the Centre. I do not accept this second argument either. First, while school board students attend the Centre it is as part of extracurricular activities organized by school boards themselves and financed by them. The fact that these school boards use the services of the Centre does not make the latter a school authority. Moreover, the Centre accommodates organizations other than school boards. Thus, for example, it is used by YMCA members and by families who wish to take advantage of it.
[13] It cannot be said that because the services are primarily offered to students attending school boards that the cafeteria service is offered "to" a public authority. The cafeteria service is offered under a contractual agreement between a company operating a business, the appellant, and the Centre. The contract entered in evidence (as Exhibit A-2) makes this quite clear. Just as a museum contracts with a business for cafeteria services, that business will not be exempt from charging GST because the cafeteria is used by school groups.
[14] I therefore conclude that s. 14 of Part III of Schedule V does not apply in the instant case and that it does not exempt the appellant from charging GST for the supplying of its meals.
[15] Finally, the appellant cannot benefit either from the exemption contained in s. 12 of Part VI of Schedule V as it is not covered by the definition of a public sector body offering a service supplied as part of an educational program covered by that section.
[16] Section 12 of Part VI of Schedule V reads as follows:
|
12. A supply made by a public sector body of a membership in, or services supplied as part of, a program established and operated by the body that consists of a series of supervised instructional classes or activities involving athletics, outdoor recreation, music, dance, arts, crafts or other hobbies or recreational pursuits where |
12. Droit d'adhésion à un programme consistant en une série de cours ou d'activités de formation. La fourniture par un organisme du secteur public d'un droit d'adhésion à un programme, établi et administré par l'organisme, qui consiste en une série de cours ou d'activités de formation, sous surveillance, dans des domaines tels l'athlétisme, les loisirs de plein air, la musique, la danse, les arts, l'artisanat ou d'autres passe-temps ou activités de loisir, ainsi que des services offerts dans le cadre d'un tel programme, si : |
|
(a) it may reasonably be expected, given the nature of the classes or activities or the degree of relevant skill or ability required for participation in them, that the program will be provided primarily to children 14 years of age or under, except where the program involves overnight supervision throughout a substantial portion of the program; or |
a) il est raisonnable de s'attendre, compte tenu de la nature des cours ou des activités ou du niveau d'aptitude ou de capacité nécessaire pour y participer, à ce que le programme soit offert principalement aux enfants de quatorze ans ou moins, sauf si une grande partie du programme comporte une surveillance de nuit; |
|
(b) the program is provided primarily for underprivileged individuals or individuals with a disability. |
b) le programme est offert principalement aux particuliers défavorisés ou ayant un handicap physique ou mental. |
[17] Under s. 123 of the Act, the expression "public sector body" means a government or a public service body, and the latter means a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university.
[18] Although the Centre is a public service body within the meaning of the Act, it is not the Centre that provides the cafeteria services but the appellant, which regularly obtains payment for those services and which could derive profits from them if it increased its sales or reduced its expenses.
[19] It cannot be said either that the cafeteria services are offered in connection with the program offered by the Centre, or "as part of a program established and operated by the [public sector] body", since the cafeteria expenses are charged separately from the accommodation expenses of the Centre offering the recreational program. Additionally, the cafeteria services are not administered by the Centre, as required by s. 12 for entitlement to the exemption.
[20] I therefore conclude that the cafeteria service offered by the appellant is not a service offered as part of a program established and operated by a public sector body within the meaning of s. 12 of Part VI of Schedule V of the Act. The appellant should accordingly have collected GST on the supply of meals, food and beverages to users of the Centre since it was making a taxable supply within the meaning of the Act.
[21] The appeal is accordingly dismissed.
Signed at Ottawa, Canada, February 10, 1998.
"Lucie Lamarre"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true this 19th day of March 1998.
Mario Lagacé, Revisor