22 March 2001 GST/HST Interpretation 31723 - Application of GST/HST to Airline and/or Tour Packages Sold to Indians, Indian Bands and Band-empowered Entities on Reserve

This is in reply to XXXXX e-mail of December 18, 2000, regarding the application of GST/HST to airline tickets and/or tour packages sold to Indians, Indian bands and band-empowered entities on reserve. Specifically, XXXXX asked whether the position taken by the Canada Customs and Revenue Agency (CCRA) in a letter dated XXXXX, XXXXX remains unchanged.

XXXXX request for comments is as a result of an enquiry received by the XXXXX TIS Centre from XXXXX. XXXXX is in the process of purchasing XXXXX. The following addresses the question put forward by Debra as well as those raised by XXXXX in her letter of XXXXX, to the XXXXX TIS Office.

The facts of the transaction(s) are as follows:

•   XXXXX is located in XXXXX. XXXXX XXXXX[.]

•   XXXXX sells airline tickets and/or tour packages to Indians on reserve.

•   XXXXX sells airline tickets to Indian bands and band-empowered entities on reserve.

In our view,

•   the supply of a domestic passenger air transportation service to an individual Indian by XXXXX is subject to GST/HST unless the origin of the transportation service and its destination take place on reserve.

•   the supply of a domestic tour package to an individual Indian by XXXXX is subject to GST/HST.

•   the supply of a domestic passenger air transportation service acquired by an Indian band or band empowered entity from XXXXX is relieved of GST/HST provided that the conditions set out in the XXXXX, letter are met; the supply is acquired for band management activities or for real property on reserve and a certificate attesting to this fact is provided to XXXXX.

•   the supply of a domestic passenger air transportation service acquired by an Indian band or band-empowered entity off reserve is subject to GST/HST. However, where the supply is acquired for band management activities or for real property on reserve, the Indian band or band-empowered entity will be entitled to a rebate of that tax amount.

Comments:

Passenger Air Transportation Services

The supply of a passenger air transportation service to an individual or a group of individuals within the taxation area (i.e., Canada, the United States except for Hawaii and the islands of St. Pierre and Miquelon) is subject to GST/HST. International passenger air transportation services to or from the taxation area are zero-rated.

TIB-039R "GST Administrative Policy Application of GST to Indians" sets out the CCRA's administrative position with respect to the application of GST/HST to purchases made by Indians, Indian bands and band-empowered entities.

TIB-039R clearly states that GST will apply to transportation services acquired by individual Indians unless both the origin and the destination of the transportation service are on a reserve. TIB-039R cites, as an example, a taxi service operating within the boundaries of a reserve.

As a domestic passenger air transportation service is a transportation service, its supply to an individual Indian must meet the requirements set out in TIB-039R for tax relief to apply. Where these requirements are not met, its supply to an individual Indian will be subject to GST/HST.

TIB-039R provides that an Indian band or band-empowered entity may acquire a service, including a transportation service, on reserve relieved of GST/HST provided that it is acquired for band management activities or for real property on reserve. For tax relief to apply, the transportation service need not take place on reserve, as in the case of transportation services supplied to individual Indians.

TIB-039R also states that Indian bands and band-empowered entities may acquire services, other than transportation, short-term accommodation, meals and entertainment, off reserve relieved of GST/HST provided that they are for use in band management activities or for real property on reserve. Off reserve purchases of transportation, short-term accommodation, meals and entertainment are subject to GST/HST. A GST/HST rebate on the acquisition of these services will be provided to an Indian band or band-empowered entity where they are acquired for the purposes described above.

On XXXXX, the CCRA (formerly Revenue Canada) issued a letter XXXXX to XXXXX concerning the application of GST/HST to purchases of airline tickets by an Indian band from a travel agent on reserve. The letter states, in part,

If the band or band-empowered entity enters into an agreement with a travel agent on reserve to acquire a transportation service and pays consideration to that travel agent on reserve, then we will consider the transportation service to have been acquired on reserve.

The travel agent on reserve may arrange to have the tickets printed by another travel agent located off reserve. However, if the band or band-empowered entity does not have an agreement with any party other than the travel agent on reserve and only makes payment to that agent, then we would still regard the transportation services as acquired on reserve. In this situation, we would consider that the travel agent off reserve is acting as an agent of the travel agent on reserve in printing the tickets on its behalf ...

This letter sets out the conditions under which the CCRA will view a supply of transportation services as having been acquired on reserve by an Indian band or band-empowered entity. The CCRA took this administrative position on the basis that the agreement for the supply of transportation services is between the travel agent on reserve and the Indian band or band-empowered entity. The person making the supply of transportation service under the agreement is the travel agent on reserve and the person liable under the agreement to pay the consideration for that supply (i.e., the recipient of the supply) is the Indian band or band-empowered entity. The travel agent off reserve is not a party to the agreement. The administrative position taken by the CCRA in its letter of XXXXX, has not changed.

Domestic Tour Packages

Under TIB-039R, transportation services supplied to an individual Indian must start and end on reserve for tax relief to apply.

As a domestic tour package is not a transportation service for purposes of TIB-039R, its supply to an individual Indian is subject to GST/HST.

Please call me at (613) 954-7952 if you have any questions, or comments on this matter.

Yours truly,