(referred to with approval in City of Calgary.)
The appellants, which were community service agencies, received funding from Quebec City to operate summer play programs for children. Revenu Quebec assessed on the basis that this was consideration for taxable supplies by the City, notwithstanding that a supply of such services to the parents would have been exempt under Sched. V, Part VI, s. 12. Lamarre Proulx TCJ noted (at para. 52) that the City:
is, in part, the recipient of the service delivered to the [parent] third parties. The third party is also a recipient of the service, whether he has to pay part of the price or nothing at all.
She found (at para. 54) that where (as here) "there is a direct link between the subsidy and the price of the service, the subsidy must be regarded as the consideration, or part of the consideration, for the service, and it is taxable if the service is taxable." However, as it was accepted that the supply was exempt under s. 12, that consideration was not taxable.