The appellant operated a snowmobile club as a member of Snowmobilers of Manitoba Inc., which was dedicated to developing and maintaining snowmobiling trails on provincial crown lands. It sold trail passes to snowmobilers, which were issued by the provincial government, and it received back approximately 80% of the sale proceeds from the government, which reflected a 20% administrative holdback to cover such costs as liability insurance. Hershfield J found (at para. 16) that the gross amounts paid by the snowmobilers for the passes were government levies.
In finding that funds received from the province were taxable consideration for services performed (of managing and maintaining the snowmobile trails) which were not subject to GST due to the provinces’s Crown status, Hershfield J. stated (at para. 21):
[T]he particular service is one the government has undertaken to provide and has effectively retained a third party to perform it. Funding in respect of that retention can, in my view, properly be regarded as consideration for the services provided. ...
Section 123 of the Act defines consideration as including any amount paid for a supply. Even if only a small portion of the funds set aside by the province is to help pay for equipment,…and even if the grant is inadequate to actually cover the cost of such equipment, the setting aside of the funds for that purpose as part of a contracting out scenario may be sufficient to constitute consideration at law.
As the appellant was engaged in commercial activity, it was entitled to input tax credits on its purchase of trail-grooming equipment.