The standard contract between a public service body (PSB) and a food service operator (concessionaire) normally provides for the provision to the concessionaire of a right to operate the food services on your premises and to occupy certain spaces for meal preparation. In the past, this type of supply was generally considered for the purposes of GST/QST as a supply of real property.
Indeed, when the contract provided for the continuous occupation of premises by the concessionaire for periods of 30 days or more, this type of supply was generally considered to be exempt from GST/QST under section 25 Part VI Schedule V LTA, or taxable, if the PSB had made the tax election to make building supplies taxable for its building.
However, in some more recent interpretations of the tax authorities relating to the supply made by a PSB to a concessionaire under an agreement where premises are provided to the concessionaire and consideration is paid by the latter to the PSB, the tax authorities considered that the PSB made the unique supply of a right to manage and operate a food service, i.e. the supply of intangible personal property (IPP).
These interpretations are based in particular on the close supervision by the PSB of the services offered by the concessionaire and the fact that the provision of premises is provided for within a management contract and not in within the framework of a supply by lease, without the characteristics that are usually found in a lease (rent with expiry date, right of peaceful enjoyment, etc.).
According to these interpretations, the supply made to the concessionaire would be a supply of IPP, taxable under GST/QST if the PSB is not a public institution (charitable organization) or exempt if the PSB is a public institution. Finally, if the PSB is a public institution and it has chosen to make the rental of spaces in its building taxable, the premises used by the concessionaire would not be used in the context of commercial activities because the supply made is not a supply of real property, but the supply of IPP. This could affect the rate of commercial activities in the building, in particular if, in the past, these premises had been considered used in the context of commercial activities.
Recommendation
Before concluding an agreement for the operation of your food services, speak to a tax professional in consumption taxes to avoid surprises in GST/QST.
