Ryan Tax Review

The Car Goes Beep-beep, the “Ambulance” Goes Cha-ching!

As tax professionals, we can’t help ourselves from thinking about the tax implications of almost every aspect of our daily lives.  Recently, our family had to have an elder member moved from their home to a long-term palliative care facility.  We found a company that was able to transport our family member, the service was provided, and when we received the invoice, it was paid without much thought.

Later on, I examined the invoice and noticed that HST had been charged.  This got me thinking. Was this a taxable supply?  What did we order?  What did we actually pay for? 

Exemption for Ambulance Services

Part II of Schedule V of the Excise Tax Act (the “Act”) exempts various health care services.  Specifically, section 4 exempts a supply which meets all of the following conditions:

  • it must be a supply of an ambulance service, including patient transfers;
  • the supply must be made by a person that carries on the business of supplying ambulance services;
  • the supply is not a zero-rated international air ambulance service (as provided for under  section 15 of Schedule VI, Part VII of the Act);
  • the service is not in respect of cosmetic services (as required under section 1.1); and
    • the service is provided for health care purposes (as required under section 1.2). 

The Act does not define the term “ambulance” or “ambulance service”.  However, the definition is important as it helps to characterize the supply.  Characterization is necessary to ensure that the correct tax treatment is applied.  Without a definition, it is not uncommon for the various parties to a transaction to characterize the supply differently. 

In Angels of Flight Canada Inc. v. R.1 (“Angels of Flight”),the definition of an ambulance service was scrutinized at length.  The Canada Revenue Agency (“CRA”) had assessed the registrant for not charging and remitting GST on its services, on the basis that it did not respond to emergencies.  In addition, the company did not have an ambulance service license from the Ontario government.  Nonetheless, the appellant considered itself to be carrying on a business of supplying exempt ambulance services.  The Tax Court of Canada noted that the terms “ambulance” and “ambulance service” were not defined in the Act.  As a result, it relied on the ordinary meaning of the terms in arriving at its decision.  The Court referred to the definition of “ambulance” from the Canadian Oxford Dictionary, which reads: “a vehicle specially equipped for conveying the sick or injured to and from a hospital, especially in emergencies.”2  While the Court acknowledged that Angels of Flight did not respond to emergencies, it did, however, use regular ambulances to provide its services, including the same equipment used by paramedics when responding to emergency calls. 

In addition, the appellant’s vehicles were staffed with nurses and other highly-trained professionals during transportation.  The appellant provided three levels of service, each of which included two crew members.  Depending on the level of service provided, the crew members included some combination of a paramedic, a registered nurse and a critical care nurse. 

The Court found that “where, as is the case here, there is a highly equipped vehicle of the same sort as used for 911 calls, with very well trained professionals, this falls within ‘ambulance service’ in Part II of Schedule V”. 

Ultimately, the Court concluded that Angels of Flight did provide an ambulance service within the meaning of that term as used in the exemption provision.  The CRA appears to have accepted the results in this case.

Tax Status of Similar Services

What about similar transportation services, in particular, those without a fully equipped ambulance or professionally trained staff?  Let’s consider the term “patient transfer”, which is also not defined in the Act.  This reasonably includes transfers between hospitals, between a hospital and a nursing home, and between a hospital or a nursing home and the patient’s home. 

GST Memorandum 28.3, “Passenger Transportation Services”, lists domestic ambulance services as an example of “exempt supplies of passenger transportation services”.  The term “passenger transportation services” is quite broad, and includes all modes of transportation available to the general public.  A patient transfer is therefore considered a passenger transportation service. 

For a supply to be considered eligible for health care exemption purposes, it must meet the definition of a “qualifying health care supply” in Schedule V, Part II, section 1 of the Act.  This section defines the term as:

 “…a supply of property or a service that is made for the purpose of:

  • maintaining health;
  • preventing disease;
  • treating, relieving or remediating an injury, illness, disorder or disability;
  • assisting (other than financially) an individual in coping with an injury, illness, disorder or disability; or
  • providing palliative health care.” 

In considering the situation described above, a private ambulance service acquired to move a loved one into a long-term care facility would definitely be considered a form of passenger transportation –  specifically, a patient transfer.  One could also conclude that the supply had a health care purpose: transferring an individual to a nursing home for palliative health care services. 

The vehicle that came to pick up the individual even looked like an ambulance.  The website of the company providing the service stated that it provides “non-emergency transfers” and its services include stretcher and ambulatory services.  However, the description on the invoice indicated that the supply was for a “passenger pick up and drop off, with family escort”.  In addition, the vehicle was not staffed with a nurse or other trained healthcare professional, nor was any medical equipment available inside the vehicle.

In this particular case, although the vehicle used looked like an ambulance from the outside, the service provided does not appear to have met all of the conditions for an exempt ambulance service under Schedule V, Part II, section 4 of the Act.  The vehicle was not equipped with medical equipment or trained medical professionals, likely precluding the supply from being an exempt ambulance service.  Indeed, the service provider obviously did not consider itself to be carrying on the business of supplying ambulance services, which probably explains why it charged GST/HST on the supply and referred to the transfer of a “passenger”, rather than a “patient”, in its description of the service on the invoice.  The jurisprudence to date also suggests that the service in question was not an exempt ambulance service. 

However, the mere presence of medical equipment and professionals in a vehicle during the transfer is not the only factor to be considered in determining whether a particular passenger transportation service might qualify as an ambulance service.  In the Angels of Flight case, the Court stated that “a nurse accompanying a patient with an IV, whether in a standard car or in a standard van with a stretcher and little equipment, would not constitute the provision of an ambulance service”.  Clearly, the extent of the medical equipment on hand and the level of care to be provided during transport are also important factors.

So what did we pay for?  Well, in fact, we paid for a taxable passenger transportation service.  While we would have never considered calling a taxi for the move, the supply we received was substantially no different than a taxi service for GST/HST purposes.3 

Recovery of Tax Paid in Error

Now, what if the service described above had met the conditions for an exempt ambulance service, but the supplier still charged GST/HST?  What options would be available to recover the tax? 

In such situations, the easiest solution is usually to reach out to the supplier and request that it re-issue the invoice without the tax.  If the supplier is not willing to do so, a second option is to file a GST/HST rebate application.  A rebate claim may be filed for an amount of GST/HST which was not payable or remittable, but has either been paid or remitted by mistake or otherwise.  The rebate is claimed by filing CRA Form GST189, “General Application for Rebate of the GST/HST”, and selecting reason code 1C.  The following information must be included with the rebate application:

  • reason why the amount is not payable or remittable;
  • details on how you calculated the rebate amount claimed; and
  • copies of receipts for all purchases listed. 

The rebate application must be filed within two years after the day the amount in error was paid or remitted.  In addition, only one rebate application per calendar month can be submitted.

Potential Liability

What if the situation were reversed?  What if the supplier thought it was providing an exempt ambulance service and incorrectly failed to charge the tax?  Generally, in these types of situations, the supplier will try to recover any GST/HST assessed to it by the CRA by invoicing its customer for the tax that it originally failed to collect. However, in such a scenario, the supplier could find itself having to bear the cost of any GST/HST assessed under audit, as it would likely have a difficult time trying to collect the tax from individual consumers after the fact.

This common situation illustrates the importance of correctly characterizing the type of service actually provided in order to determine the proper tax status.  Not only is this important for consumers, but also for suppliers.  Either party may have difficulty in identifying the type of supply being made.  Unfortunately, where a supply is not properly characterized, any analysis regarding the place of supply or potential eligibility for exemption or zero-rating could lead to incorrect conclusions concerning the tax status of the supply.  Based on the facts above, it might seem obvious to an experienced tax professional that the passenger transportation was not an ambulance service.  However, what if a nurse or paramedic had gone along for the ride, on the recommendation of a doctor?  What if more emergency equipment was on board during the trip?  It’s easy to see how changes to certain facts can complicate the analysis, creating more uncertainty regarding the tax status of the transaction.

There are many other types of supplies for which an analysis of the tax status can be just as confusing.  Often, the most difficult distinction is between services and intangibles.  For example, this is a common issue when dealing with supplies made by electronic means, such as on-line training courses.  An on-line training course is generally considered a service.  However, if attending the course gives you the right to access the online content being supplied, it could potentially change the nature of the supply to an intangible personal property. 

Another example is making the distinction between a general service and a service that is subject to special place of supply rules under the Act, such as service in relation to tangible personal property.  For instance, a commission paid to a sales agent for their services related to selling property (other than real property) could easily be considered a service in relation to tangible personal property; however, in most cases, it is considered to be a general service for GST/HST purposes.  These distinctions are important, as the type of supply both dictates the place of supply rules to be used in determining the applicable GST/HST rate, and informs the parties to a transaction as to the potential applicability of any exemption or zero-rating provisions.

Not correctly identifying the transportation service that we had ordered resulted in our “ambulance” costing more than expected. 

Irene Belvedere
Team Leader, Client Support Services

1 Angels of Flight Canada Inc. v. R., 2009 TCC 279 (CanLII).
2 Second Edition, 2004.
3 Note, however, that there are special rules in the ETA applicable to suppliers of taxi services.