ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-00420059-0000
DATE: 20140806
BETWEEN:
THE PRINCESS MARGARET HOSPITAL FOUNDATION
Appellant
– and –
THE MINISTER OF REVENUE
Respondent
Daniel Sandler and Brian Studniberg, for the Appellant
Jessica Fiore and Lori E.J. Patyk, for the Respondent
HEARD: June 5, 2014
REASONS FOR DECISION
Justice w. matheson
[1] This is an appeal from the decision of the Minister of Revenue dated December 20, 2010, proceeding by way of a special case under Rule 22 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. I am satisfied that this is an appropriate matter to be addressed as a special case.
[2] The special case seeks an interpretation of a retail sales tax exemption provided by s. 12 of Regulation 1012, R.R.O. 1990, under the Retail Sales Tax Act, R.S.O. 1990, c. 1 (5th Supp.) (“RSTA”).
[3] Section 12 provides that charitable organizations, among others, are exempt from retail sales tax with respect to their consumption of prepared food products where they provide the prepared food products to others without specific charge. Here, the issue relates to prepared food products provided by the Appellant to others at fundraising events, conferences and other activities (collectively, “events”).
[4] The Appellant is a registered charity, as defined in ss. 248 (1) of the Income Tax Act (Canada).
[5] The Respondent is the Minister of the Crown responsible for the administration of retail sales tax in Ontario under the RSTA.
Agreed facts
[6] The Princess Margaret Hospital Foundation was established in order to solicit, receive and maintain funds and to apply those funds to improve and enhance cancer research, professional education and patient care activities provided by the Princess Margaret Hospital.
[7] The Foundation supports research, patient care and education programs, and in the course of doing so periodically holds or participates in events to raise funds for its charitable endeavours. These events include fundraising events, recognition dinners, board meetings, committee meetings and volunteer appreciation events.
[8] During the relevant period, the Foundation provided prepared food products to people attending certain of its events.
[9] At some of the events, participants were required to pay a registration fee or buy a ticket (or a table) in order to participate. At those events, a single amount was charged to participants that covered all aspects of the event. There was no itemized charge to participants for prepared food products. A single amount was charged that covered all aspects of the event. Further, registration fees or ticket prices were not reduced or refunded where the attendee or participant chose to forgo the prepared food products that were made available.
[10] In April 2009, the Foundation applied for a refund of retail sales tax for the period from May 1, 2005 to February 28, 2009. The request related to retail sales tax the Foundation had paid to persons who supplied prepared food products to the Foundation, where the prepared food products were used for participants at certain of the Foundation’s events. The Respondent allowed the request for a refund in part. The refund was allowed where no fee had been charged for the event. The refund was denied for the events where participants paid a registration fee or bought a ticket or table. The refund was denied on the basis that the Foundation did not meet the requirement in s. 12 of Regulation 1012 under the RSTA that the prepared food products be provided “without specific charge.”
[11] The retail sales tax in dispute totals $192,139.10.
Question for the opinion of the court
[12] In the special case, the parties pose the following question for the opinion of the court:
Whether the prepared food products provided by the Appellant to others in the circumstances [in which the refund was denied] were “without specific charge” and thus exempt from retail sales tax under section 12 of Regulation 1012, made under the RSTA.
[13] Section 12 of Regulation 1012 provides as follows:
The following persons or classes of persons are exempt from tax with respect to their consumption of prepared food products where the prepared food products are provided by them to others without specific charge:
Religious, charitable or benevolent organizations. [Emphasis added.]
[14] A number of the prerequisites to the application of s. 12 are not in dispute, as follows:
(a) the Foundation is a charitable organization within the meaning of s. 12 subparagraph 4;
(b) the items claimed by the Foundation meet the definition of “prepared food products” as provided for in RSTA Regulation 1013, R.R.O. 1990; and,
(c) the prepared food products were provided by the Foundation to others, as contemplated by s. 12.
[15] The focus of the special case is the interpretation of the phrase “provided … without specific charge”. By way of example, the Respondent would agree that dinner provided at a volunteer meeting for which there is no entrance fee is exempt from retail sales tax. However, it submits that the food served at a charitable dinner for which attendees buy tickets is not exempt. In contrast, the Foundation submits that if the charge for the charitable dinner is not itemized, showing a charge for the dinner itself distinct from other components of the ticket price (such as the cost of entertainment, services and the making of a charitable donation), the dinner is exempt.
Discussion
[16] The issue is one of statutory interpretation. The required approach to the interpretation of a taxation statute was set out by the Supreme Court of Canada in Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20, at paras. 21-25, as follows:
the modern approach to statutory interpretation applies to taxation statutes, no less than it does to other statutes – the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament;
where the language of a tax statute is precise and unambiguous, the plain words of the Act will play a dominant role in the interpretative process – taxpayers are entitled to rely on the clear meaning of taxation provisions in structuring their affairs;
thus, legislative purpose may not be used to supplant clear statutory language;
however, where the words of the Act give rise to more than one reasonable interpretation, the ordinary meaning of the words will play a lesser role and greater recourse to the context, scheme and purpose of the Act may be necessary;
even when the meaning of a particular provision may not appear to be ambiguous at first glance, statutory context and purpose may reveal or resolve latent ambiguities – in order to resolve explicit or latent ambiguities, the courts must undertake a unified textual, contextual and purposive approach to statutory interpretation; and,
in the exceptional case where application of the ordinary principles of interpretation does not resolve the issue, there is a residual presumption in favour of the taxpayer.
[17] Given the importance of the statutory words and context to the interpretative process, I will set out in some detail the provisions that apply.
RSTA and Regulations
[18] The RSTA imposes an obligation to pay tax on purchasers of tangible personal property:
- (1) Every purchaser of tangible personal property … shall pay to Her Majesty in right of Ontario a tax in respect of the consumption or use thereof... [Emphasis added.]
[19] Here, the Foundation is a purchaser of tangible personal property. Both “purchaser” and “tangible personal property” are defined in s. 1 of the RSTA, as follows:
“purchaser” means a consumer or person who acquires tangible personal property anywhere, or who acquires or receives a taxable service at a sale in Ontario, for his, her or its own consumption or use, or for the consumption or use in Ontario of other persons at his, her or its expense, …
“tangible personal property” means personal property that can be seen, weighed, measured, felt or touched or that is in any way perceptible to the senses and includes computer programs, natural gas and manufactured gas;
[20] Here, the tangible personal property is “prepared food products”, which is defined in s. 1(1) of Regulation 1013, as follows:
“prepared food products” means meals, lunches, food products sold hot, individual portions of prepackaged snack cake or pastry and other arrangements of food purchased from an eating establishment for consumption on or off the premises where the food is sold and includes non-alcoholic beverages sold with or without other prepared food products and soft drinks sold with prepared food products as part of a single transaction at a total price that exceeds $4;
[21] The RSTA contemplates that there will be exemptions from the obligation to pay tax. It provides that the Minister may make regulations in a number of areas including the following:
- (3) The Minister may make regulations,
(d) prescribing persons or classes of persons with respect to whose consumption of prepared food products no tax is exigible provided that those prepared food products are provided by them without specific charge; [Emphasis added.]
[22] In keeping with this regulation-making authority, s. 12 of Regulation 1012 provides as follows:
The following persons or classes of persons are exempt from tax with respect to their consumption of prepared food products where the prepared food products are provided by them to others without specific charge:
Hospitals.
Nursing homes and homes for the aged.
Penal or correctional institutions.
Religious, charitable or benevolent organizations.
Employers where the prepared food products are provided to their employees in eating establishments operated by or on behalf of the employer.
Schools and universities where the prepared food products are provided to a student in an eating establishment operated by or on behalf of the school or university. [Emphasis added.]
[23] The term “consumption” is defined in s. 1(1) of the RSTA, as follows:
“consumption” includes the use … of tangible personal property including that manufactured by the consumer or further processed or otherwise improved by the consumer and includes the provision by way of promotional distribution of any tangible personal property or taxable service;
[24] By way of example under s. 12, when a hospital purchases food and uses it to provide meals to its patients without specific charge to the patients, as is ordinarily the case, the hospital’s purchase of that food is exempt from tax. If it has paid tax on that food, it may apply for a refund. However, when a member of the public buys lunch in the hospital cafeteria, there is no exemption. That food was also purchased by the hospital and provided to others, but that was done with a specific charge.
[25] The issue in this special case arises because the prepared food products in question were provided as part of a bundle of products, services and usually a donation, for which a single fee was paid. The RSTA does not require that each product or service or donation amount that forms part of a fee charged for an event be separately itemized. In contrast, the Income Tax Act, R.S.C. 1985, c. 1 (5th Suppl.) (“ITA”) does require a degree of itemization. Section 3501 of the Income Tax Regulations, C.R.C. c. 945 requires that every official charitable receipt clearly show the eligible amount of the gift, separate from the amount of any “advantage” received by the taxpayer. The amount of the “advantage” is defined in s. 248(32) of the ITA to generally include the value of the property, services or other benefits received by the taxpayer. This regime therefore requires that the charity determine the amount paid that qualifies for a charitable receipt and the amount paid that does not. The regime does not, however, require that the advantages be broken down further. Therefore, prepared food products need not be separated from any other products or services received at the same event.
Discussion
[26] The Foundation submits that a bundled single price for an event falls within the exemption provided in s. 12. Following the words of the section, the Foundation submits that its consumption (i.e., use) of prepared food products is exempt because the prepared food products were provided by it to others (i.e., the people who purchased tickets to the event) “without specific charge”. The Foundation’s position is that “without specific charge” means that there must be a demarcated charge for the prepared food products.
[27] The Minister submits that obviously the overall fee includes a charge for the food, and argues for an interpretation that recognizes this proposition. The Minister relies on various contextual elements of the legislative regime.
[28] The starting point is the following language in s. 12:
The following persons or classes of persons are exempt from tax with respect to their consumption of prepared food products where the prepared food products are provided by them to others without specific charge: …
[29] The plain words of s. 12 require that “the prepared food products are provided by them to others without specific charge”. The phrase “without specific charge” refers to the prepared food products, not to an overall ticket price. There must be a specific charge for the prepared food products. This language is precise and unambiguous.
[30] Next, with respect to the meaning of the word “specific” as an adjective, the Foundation provided these definitions:
(a) “precise or exact in respect of fulfillment, conditions, or terms; definite, explicit”; “exactly named or indicated, or capable of being so; precise, particular”, from the Oxford English Dictionary (Second Edition); and,
(b) “clearly defined; definite, precise”, from The Canadian Oxford Dictionary (Thumb Index Edition);
(c) “Of, relating to, or designating a particular defined thing; explicit
[31] Based upon these definitions, the Foundation argues that “specific” means a definite or exact charge for prepared food products themselves. I agree.
[32] The Minister argues that it is clear that the Foundation is recouping the cost of the prepared meal, whether it is itemized or not. I am prepared to accept that proposition, but it does not necessarily result in the interpretation requested by the Minister. If it was sufficient that there be a “charge” that “covers” the prepared food products, s. 12 need only say “without charge”. Instead, there needs to be a specific charge for the food. The Minister’s position would make the word “specific” superfluous.
[33] There is a presumption that the words in legislation must mean something. Every word is presumed to make sense and to have a specific role to play: Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. (Markham: LexisNexis Canada, 2008) at p. 210. The word “specific” must have a role. This is not a case where I must conclude that the presence of the word “specific” is a mistake and may therefore ignore it: Sullivan, at p. 179.
[34] It is logical to suggest that, in arriving at a ticket price, an institution covered by s. 12 may have itemized the elements of the ticket price even though the breakdown was not given to ticket purchasers. The Minister argues that while there is no breakdown on the ticket, the Foundation is required to have a breakdown to comply with the federal tax regime for charitable receipts. There are two problems with this argument. First, the ITA regime only requires a breakdown as between the “advantages” received by the ticket purchaser and the amount for which a charitable receipt can be issued, not a more detailed breakdown. As a result, prepared food products could still be bundled in with other products or services received by the taxpayer. Second, under the ITA that breakdown must be based upon the “value” of the advantages to the person receiving the charitable receipt, not the amount the Foundation paid for the food, on which retail sales tax is paid. There is nothing before me that shows that those amounts would necessarily be the same. I therefore do not see the ITA regime as creating a legal obligation that addresses the issue.
[35] The Minister further argues that it is counterintuitive to suggest that the legislation leaves control in the hands of the charitable organization, in that the organization decides what to display on its tickets. However, as the ITA regime illustrates, legislation may take that control away. It has not done so here.
[36] Further, while s. 12 requires a specific charge, I am not persuaded that it requires that the specific charge be shown on the ticket. That would obviously be sufficient, but the organization may also have an internal breakdown that allocates a specific amount of the ticket price to the prepared food products. The Foundation argues that, in addition to meaning definite or exact, “specific” means the charge must be explicit. In turn, the Foundation argues the charge must be on the ticket. Some of the proffered definitions support this submission, but it is not necessarily part of the definition. For example, the definition “exactly named or indicated, or capable of being so” (my emphasis) allows for the possibility that there was an exact charge for the prepared food products, which was capable of being indicated on the ticket, even though it was not shown on the ticket. This argument about the meaning of “specific” was not the focus of significant attention in the argument before me, likely because there is no evidence before me that the Foundation had an internal breakdown in this case in any event. I have therefore not made my determination on this basis.
[37] The Minister advanced two further arguments, focusing on statutory context shown by other elements of s. 12 and related provisions.
[38] The Minister argues that in interpreting s. 12, one must look at the list of institutions under s. 12 and consider their common characteristics. Thus, one must not only consider charities but also hospitals, nursing homes, penal and correctional institutions, employers, schools and universities. The Minister submits that those institutions all normally provide meals at their own locations, usually on a continuous basis, without specific charge for each meal. The Minister therefore argues that an individual charitable dinner held at a different location falls outside these common characteristics and that this should inform the statutory interpretation of the section.
[39] The Minister’s argument goes well beyond the facts in the special case before me, and even then does not explain all the listed institutions sufficiently. But even if I accept the proposition, it does not follow that the exemption only applies where the meals are provided at the institution’s location, on a continuous basis. Those restrictions are not found in the section, and others are. For example, subparagraphs 5 and 6 of s. 12 both incorporate limitations. For employers, schools and universities, the exemption is only available as follows:
s. 12 …
Employers where the prepared food products are provided to their employees in eating establishments operated by or on behalf of the employer.
Schools and universities where the prepared food products are provided to a student in an eating establishment operated by or on behalf of the school or university.
[40] The Minister further argues that the Foundation’s interpretation would create an overlap between s. 12 as it applies to schools and universities and s. 22.1(1) of Regulation 1013 that would make s. 22.1 redundant. Section 22.1(1) provides as follows:
A student who receives prepared food products under a meal plan is exempt from the tax imposed by the [RSTA] with respect to the prepared food products.
[41] I disagree. Section 12 provides an exemption to the school or university for its purchase of prepared food products. Section of 22.1 of the Regulation addresses the student’s obligation to pay sales tax, not that of the school or university. There is no overlap between them. There is still a role for s. 22.1(1).
[42] I therefore do not find these arguments based upon statutory context persuasive. I reach the conclusion set out below.
Opinion of the court
[43] In my opinion, the prepared food products provided by the Appellant to others in the circumstances described in the special case were “without specific charge” and thus exempt from retail sales tax under section 12 of Regulation 1012 made under the RSTA.
[44] The appeal is therefore allowed, and I order that the retail sales tax in the amount of $192,139.10 be refunded to the Foundation. As agreed in the special case, the Foundation shall also have its costs, fixed at $25,000.
Justice W. Matheson
Released: August 6, 2014
COURT FILE NO.: CV-11-00420059-0000
DATE: 20140806
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE PRINCESS MARGARET HOSPITAL
FOUNDATION
Appellant
– and –
THE MINISTER OF REVENUE
Respondent
REASONS FOR DECISION
Justice W. Matheson
Released: August 6, 2014