Dental Crowns And GST/HST Credits: A Dentist Wants To Have His Cake And Eat It Too – Sales Taxes: VAT, GST

Dental Crowns And GST/HST Credits: A Dentist Wants To Have His Cake And Eat It Too – Sales Taxes: VAT, GST

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In an informal procedure1 decision,
Axelrod v. The King
rendered on December 12, 2022, the Tax
Court of Canada dismissed the appeals of a dentist denying input
tax credits (“ITCs”) claimed in connection with certain
expenses incurred in the course of his professional

  • The dispute arose when the Canada Revenue Agency
    (“CRA”) disallowed ITCs claimed by Dr. Axelrod (the
    “Dentist”) in 2013 and 2014 (“Audit Period”)
    for harmonized sales tax (“HST”) payable in respect of
    property or services acquired by him for consumption, use or supply
    in the course of his prosthodontic practice. These professional
    activities, which formed about one-third of the Dentist’s
    overall professional practice, pertained to the supply of dental
    prostheses (such as dental bridges, implants, dentures, crowns, and
    significant tooth reconstructions, defined collectively as
    “Artificial Teeth”) and related dental services to his

  • Likely based on its long-standing administrative position2
    applicable to orthodontists at the time in respect of supplies of
    orthodontic treatments, the CRA took the position that the
    Dentist’s supplies of Artificial Teeth in connection with
    related dental services supplied to patients were multiple supplies
    of both exempt dental services and zero-rated
    supplies of Artificial Teeth, thereby denying a portion of the ITCs
    claimed by the Dentist in the course of his prosthodontic

  • Although supplies made by the Dentist in the course of his
    prosthodontic practice could be viewed as being similar to the
    overall supplies made by orthodontists, the Dentist appears to have
    taken a rather ambitious filing position that each procedure that
    had, as its ultimate purpose, the installation of an Artificial
    Tooth in a patient’s mouth, was a single supply of an
    Artificial Tooth and that each such single supply was a
    zero-rated supply included in Schedule VI to the
    Excise Tax Act (“ETA”). HST registrants are
    generally eligible to claim ITCs for the tax paid or payable on
    goods or services acquired for consumption, use or supply in the
    course of making taxable or zero-rated supplies. Accordingly, the
    Dentist claimed ITCs on his taxable expenses based on the extent
    such expenses were incurred for consumption, use or supply in his
    prosthodontic practice.

  • Based on a review of the existing case law, including the Tax
    Court decision in Hurd Dentistry3, and a
    detailed analysis of all elements comprising the Dentist’s
    supplies relating to the preparation, fabrication and installation
    of Artificial Teeth, Justice Sommerfeldt concluded, in a manner
    similar to Justice Campbell’s conclusion in Hurd
    (also an informal procedure decision), that the
    supplies made by the Dentist to a patient should be characterized
    as single supplies of exempt dental services, rather than
    single zero-rated supplies of Artificial Teeth.
    Accordingly, the Dentist was therefore not entitled to claim ITCs
    in connection with his prosthodontic practice.


The Dentist carried on a general dentistry practice and was a
HST registrant for purposes of Part IX of the ETA. During the Audit
Period, about one-third of the Dentist’s practice was related
to prosthodontic procedures involving the supply of Artificial
Teeth. The Dentist claimed ITCs in respect of HST paid for various
expenses incurred for purposes of supplying Artificial Teeth and
related dental services to his patients in the course of his
prosthodontic practice, taking the position that he was making a
single supply of Artificial Teeth to his patients and such single
supply was zero-rated pursuant to section 11 of Part II of
Schedule VI of the ETA (“Section VI-II-11”).


Subsection 169(1) of the ETA generally limits an HST
registrant’s ability to claim ITCs with respect to expenses
incurred for consumption, use or supply in the course of commercial
activities. Subsection 123(1) of the ETA notably defines
“commercial activity” as a business or adventure or
concern in the nature of trade carried on by a person but excludes
a business involving the making of exempt supplies. Therefore, ITCs
cannot generally be claimed by HST registrants to recover HST paid
or payable with respect to property and services acquired to make
exempt supplies.

The issue raised in the Dentist’s appeals was whether he was
entitled to claim ITCs for expenses he incurred in the course of
supplying Artificial Teeth and related dental services to his
patients. In his decision, Justice Sommerfeldt examined the nature
of the Dentist’s supplies, by analyzing the term
“artificial teeth” as used in the ETA, determining
whether each separate element of the Dentist’s supplies
constituted either a single supply or multiple supplies, and
finally determining whether such single supply or multiple
supplies, as the case may be, was exempt or zero-rated under the


Artificial teeth

Justice Sommerfeldt agreed with both the Appellant and
Respondent that dentures, dental implants, bridges, crowns and
significant tooth reconstructions all constitute “artificial
teeth” as the term is used in the ETA and that for the purpose
of Section VI-II-11 of the ETA, an artificial tooth need not be
entirely reconstructed to be considered as such, provided that more
than half the total surface of the tooth is fabricated (para.

The Tax Court also held that when the Dentist fabricated and
installed temporary teeth to cover and protect teeth that had been
prepped in advance of an installation, these temporary teeth were
also considered “artificial teeth” within the meaning of
the ETA (para. 18).

Single supply vs. multiple supplies

Where an agreement provides for the provision of several
elements (i.e., package of property and/or services), it must first
be determined whether such elements are constituent elements of a
single supply or multiple supplies for HST purposes. This
determination is especially relevant where, for example, had such
package of property and/or services been supplied separately,
certain components would be taxable or zero-rated, while others
would be exempt under the ETA.

In determining whether the Dentist’s supplies of Artificial
Teeth and related dental services to his patients were a single
supply or multiple supplies, Justice Sommerfeldt considered the
relevant case law4, following the test laid down in
O.A. Brown as it was applied by the Supreme Court of
Canada in the City of Calgary decision.

In making his determination, Justice Sommerfeldt notably
examined the billing of the services rendered by the Dentist. As
required by the Royal College of Dental Surgeons of Ontario, it is
mandatory for dentists issuing invoices to patients to separate
laboratory charges from the other elements of the supply of dental
services. However, based on the reasoning of the Tax Court in
Albert v. The Queen5, a decision rendered in an income
tax context, Justice Sommerfeldt concluded that separate billings
do not necessarily indicate that separate contracts had been
entered into between the Dentist and his patients (para. 28).

On the contrary, Justice Sommerfeldt found that the dental
services and the Artificial Teeth supplied by the Dentist were so
intricately linked to each other that they could not be

It is difficult to imagine that a
patient of [the Dentist] would have wanted to acquire dentures, a
bridge, a crown or an implant without [the Dentist] having first
done all of the preliminary work necessary to ensure that the
particular prosthesis would fit and function properly in the
patient’s mouth, and without [the Dentist] actually installing
the prosthesis in the patient’s mouth. Similarly, all of the
dental services rendered by [the Dentist] would have made no sense
if they had not related to the prosthesis desired by the patient.
(para. 30)

The Tax Court thus concluded that all the elements of the
Dentist’s supplies were so interconnected, interdependent and
intertwined that they could not be viewed as multiple and separate
supplies. A common-sense determination would lead one to conclude
that the elements, together, formed an overall single supply (para.

Justice Sommerfeldt also distinguished the recent Tax Court
decision in Davis Dentistry as applying to orthodontists
carrying on a “conventional orthodontic practice”. In his
view, the correct legal approach in the present case was to follow
the so-called O.A. Brown test contrary to the position
taken in Davis Dentistry:

[…] in Davis Dentistry, Justice Wong stated that the
ETA makes it clear (and Parliamentary intent confirms) that a
conventional orthodontic practice consists of exempt supplies of
services and zero-rated supplies of appliances (such as braces),
such that it is not necessary to apply the O.A. Brown test
to determine whether there is a single supply or multiple supplies,
as the ETA has directly addressed the tax status of both


As the dental services that are the subject of [the
Dentist]’s Appeals related to prosthodontic, rather than
orthodontic, procedures, and as [the Dentist] submits that both his
dental services and the prostheses were part of a single zero-rated
supply, Davis Dentistry may be distinguished. Therefore, I
am of the view that I should follow the approach set out in
O.A. Brown and City of Calgary, in order to
determine whether there were multiple separate supplies or a single
overall or composite supply. (paras. 22-23)

Characterization of the single supply

Having determined that the elements supplied by the Dentist
collectively constituted a single supply, one must next determine
which of those elements is “predominant”.6 In accordance with
the test set out in Global Cash Access (Canada) Inc. v. The
7 and Great-West Life Assurance
Company v. The Queen
8, the predominant element is the
one that drives the recipient’s willingness to pay for the
supply. In this case, the following elements formed the single

  • the diagnosis of the patient’s dental needs, the
    formulation of treatments (including the conceptualization, the
    design, the impression, the measurements, and the preparation of
    artificial teeth to which prostheses would be affixed);

  • the fabrication of prostheses by the laboratory;

  • the fabrication of temporary prostheses to cover and protect
    any natural teeth that had been prepped; and

  • the modification and adjustments to ensure a proper fit and
    bite. (para. 56)

The key question was therefore which element drove the patients
to pay the Dentist’s fees. Justice Sommerfeldt concluded that
the predominant element was the Dentist’s professional dental
services and not the Artificial Teeth themselves (para. 57),
especially given the importance of the time invested by the Dentist
in fabricating the Artificial Teeth.

As such, Justice Sommerfeldt concluded that the supplies made by
the Dentist to his patients were single supplies of dental
services, which were exempt supplies pursuant to section 5
of Part II of Schedule V of the ETA as supplies of health care
services rendered to an individual by a medical practitioner. Based
on the foregoing, the Dentist’s appeals were dismissed.

The Dentist’s counsel filed an appeal of the Tax Court
decision on January 11, 2023.

Key Takeaways

  • Even though Hurd Dentistry involved a conventional
    orthodontic practice, rather than a dentist’s prosthodontic
    practice, Justice Sommerfeldt essentially followed the reasoning of
    that informal procedure decision in his ruling in this case. As a
    result, he concluded that the supplies rendered by the Dentist were
    single supplies of which the exempt dental services were the
    predominant element and accordingly denied the Dentist’s ITC
    claims in respect of the expenses he had incurred in providing his
    prosthodontic supplies.

  • The taxpayer in this case, in taking the position that his
    prosthodontic practice, taken as a whole, was a “commercial
    activity” for HST purposes, took a gamble that doesn’t
    appear to have paid off (pending any further appeal), considering
    that the more conservative middle-ground approach of claiming ITCs
    on his expenses as instructed by the CRA in its administrative
    policy applicable to orthodontists during the Audit Period, was
    apparently an acceptable stance in the CRA’s view.

  • Justice Sommerfeldt’s decision to distinguish Davis
    is understandable, in our view. With respect,
    Justice Wong’s reasoning in that case for not applying the
    A. Brown test to determine whether there is a single
    supply or multiple supplies where an orthodontist is supplying both
    orthodontic appliances and orthodontic dental services –
    “because the statute has directly addressed the tax status of
    both”9 – appears to be flawed. In
    fact, this is exactly the practical purpose behind this common law
    test where a combination of elements is supplied, and the ETA
    specifically addressesthe tax status of one or
    certain of these elements as being taxable, and other element(s) as
    being zero-rated or exempt, if supplied separately.

  • In light of Justice Sommerfeldt’s ruling, it is noteworthy
    that the Crown’s appeal of Davis Dentistry was heard
    on November 1, 2022, by the Federal Court of Appeal
    (“FCA”), with a decision likely to be released within the
    next few weeks. Both orthodontists and dentists involved in a
    prosthodontic practice should:

    • follow the release of the FCA decision in Davis
      , which will most likely affect the Dentist’s
      appeal; and

    • closely monitor how the CRA may ultimately change its
      administrative policy based on the FCA decision.

For now, dentists should be aware that ITCs claimed in
connection with a conventional prosthodontic practice could be at

The authors would like to thank Antonin Lapointe, stagiaire, for his


1. In
theory, decisions issued pursuant to the informal procedure may not
be treated as precedents for other cases.

2. See
GST/HST Ruling RITS #56427 dated December 1, 2004—Eligibility
by an Orthodontist for Input Tax Credits.

Brian Hurd Dentistry Professional Corporation v. The Queen
2017 TCC 142 (Informal Procedure). [Hurd

4.City of Calgary v. The Queen, 2012 SCC
20 [City of Calgary]; O.A. Brownv. The
, [1995] GSTC 40 (TCC) [O.A. Brown];
Mercantile Contracts Ltd.v. Customs & Excise
, File No. LON/88/786, U.K. (unreported);
Hurd Dentistry, supra note 3; Dr. Kevin L. Davis
Dentistry Professional Corporation
v. The Queen, 2021
TCC 25 [Davis Dentistry]; and Haden (Commissioner of
v.McCarty, (1963) 275 Ala 76, a
decision of the Supreme Court of Alabama.

5.Albert v. The Queen, 2009 TCC 16, a
decision decided under the Income Tax Act

6. As
confirmed by the Federal Court of Appeal in Canadian Imperial
Bank of Commerce v. The Queen
, 2021 FCA 96.

7.Global Cash Access (Canada) Inc. v. The
, 2013 FCA 269.

8.Great-West Life Assurance Company v. The
, 2016 FCA 316.

9.Davis Dentistry, para. 41.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
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