A quick-fix tax guide for municipalities

Contributor Martin Goguen leads MRSB’s Tax Recovery service and has been providing tax advice to Canadian municipalities for over a decade

While privately owned businesses and commercial enterprises encompass a set of tax rules and regulations that are more complicated than personal tax, GST/HST as it relates to municipalities can be even more complex.

I often field questions from municipality clients who, understandably, are confused as to which activities they should be charging HST on. Many of the supplies made by municipalities are specifically exempt from HST, but many municipalities are also engaged in commercial activities, which are not exempt, without realizing the implications of doing so.

Here is a brief guide to a few of the activities that can cause problems for municipalities when it comes to taxes:

Residential services

Services provided to residents by municipalities  are exempt only if they are not optional. Municipal service that are provided on an optional fee-for-service basis are taxable. The fees paid by a resident to the municipality to cut the grass on his property would be taxable; however, if they municipality cuts the grass of a resident because he or she failed to comply with a municipal by-law, the fees would be exempt (non-optional).

Admission to a place of amusement

The supply of admission to a fair, athletic contest, artistic presentation, etc. is taxable if any amount charged to your customer is greater than $1. For example, if you charge $2 for adults and $0.50 for children, both supplies of admission would be taxable and HST would have to be remitted on the revenue.

Recreational programs

Supplies of membership fees and services for recreational programs are taxable unless they are provided primarily to children under 14 years of age or younger, and mostly do not involve overnight supervision. Services and programs provided primarily to underprivileged individuals or individuals with a disability are also not taxable.

Real property

Most supplies of real property by a municipality, either by way of sale or lease, are taxable. Common examples include banquet facility rentals, licenses to use real property and commercial property leases.

Of course, the above activities do not cover the breadth of GST/HST questions faced by most municipalities. If you would like to read my full report with additional information regarding not-for-profit organizations, click here for a free download.