There is ongoing confusion in the health care sector regarding the GST/HST treatment of hospital “on-call” fees paid to physicians. Many hospitals have historically treated these payments as exempt from GST/HST, but the Canada Revenue Agency (CRA) has made its position clear: most on-call fees are taxable supplies for GST/HST purposes. This blog post is intended to help hospital administrators understand the CRA’s position, recognize the legal and practical risks of non-compliance, and take practical steps to minimize the risk of lawsuits from physicians.

CRA’s Position: On-Call Fees Are Generally Taxable

The CRA has stated that on-call fees paid to physicians—stipends for being available to respond to hospital needs—are not exempt health care services. Instead, these fees are considered the supply of a right (intangible personal property), not the supply of a health care service rendered to an individual. As such, they are generally subject to GST/HST at the applicable rate for the province in which the supply is made^1,2.

The CRA’s position is set out in GST/HST Interpretation 150125 and in Excise and GST/HST News No. 101. The only exception is where the on-call fee is paid or reimbursed under a provincial health care plan for all insured persons, which is rare in standard hospital arrangements^1,2.

Legal and Practical Risks for Hospitals

1. Potential Lawsuits from Physicians

If a hospital refuses to pay GST/HST on on-call fees, physicians may be left with the obligation to remit the tax out-of-pocket. The Excise Tax Act deems the amount paid to include GST/HST if it is not charged separately, meaning the physician’s net compensation is reduced. Physicians may seek to recover these amounts from the hospital, including any penalties or interest assessed by the CRA. Hospitals could face lawsuits for breach of contract or unjust enrichment if they fail to pay the GST/HST component². 

2. CRA Assessments and Penalties

If the CRA audits a hospital and finds that GST/HST was not paid on on-call fees, the hospital may be assessed for the unpaid tax, plus interest and penalties. This can result in significant financial exposure and reputational risk to the institution in attracting physicians needed to meet its service agreement obligations. 

3. Contractual Disputes

Ambiguity in contracts regarding GST/HST responsibility can lead to disputes with physicians. If contracts are silent or unclear, courts may interpret the agreement in a way that is unfavourable to the hospital.

Practical Steps for Hospital Administrators

1. Review and Update Contracts

• Ensure all contracts with physicians for on-call services clearly state whether the on-call fee is inclusive or exclusive of GST/HST.
• Specify which party is responsible for remitting GST/HST.
• Include indemnity clauses to protect the hospital from liability if the physician fails to remit the tax, and vice versa. 

2. Implement GST/HST Compliance Procedures

• Treat on-call fees as taxable supplies and pay GST/HST in addition to the agreed fee, unless there is clear evidence that the supply is exempt.
• Require physicians to provide GST/HST invoices for on-call fees.
• Verify the GST/HST registration status of physicians and maintain records of their GST/HST numbers. 

3. Educate Staff and Physicians

• Provide training to payroll, finance, and contract management staff on the CRA’s position regarding on-call fees.
• Communicate with physicians about the hospital’s GST/HST policies and the importance of compliance. 

4. Seek Professional Advice

• Consult with qualified tax advisors or designated accountants to ensure your hospital’s practices are compliant with the Excise Tax Act and current CRA guidance.
• Obtain a written legal opinion from a qualified tax lawyer or accountant with expertise in health care taxation and keep this opinion on file. A contemporaneous legal opinion can serve as evidence of due diligence and provide a defensible position if the hospital’s GST/HST treatment of on-call fees is later challenged by the CRA or by physicians³.
• Consider obtaining a GST/HST ruling from the CRA if there is uncertainty about the tax status of specific arrangements. 

5. Proactive Communication

• If a physician raises concerns about GST/HST on on-call fees, respond promptly and in writing.
• Where possible, resolve disputes before they escalate to litigation by negotiating a fair resolution and updating practices as needed.

Key Takeaways

• The CRA’s position is that hospital on-call fees are generally considered to be a taxable supply for GST/HST purposes.
• Hospitals that fail to pay GST/HST on these fees risk lawsuits from physicians, CRA assessments, and contractual disputes.
• Proactive contract management, compliance procedures, and clear communication are essential to minimize legal and financial risk.
• Obtaining a written legal opinion and consulting with qualified tax professionals are prudent steps to demonstrate due diligence and protect the hospital’s interests.

For further reading, see the CRA’s guidance in Excise and GST/HST News No. 101 – Medical practitioner on-call fees and GST/HST Interpretation 150125.

 

Disclaimer:
This blog post is provided for informational purposes only and does not constitute legal or tax advice. The information is based on sources believed to be reliable as of the date of publication, but laws and administrative policies may change. Hospital administrators should consult with qualified legal and tax professionals before taking any action based on the content of this post. The author and the firm accept no liability for any actions taken or not taken based on this information.

Cited sources:

[1] ETA s. SCHEDULE V – Exempt Supplies

Additional relevant sources:

GST/HST Interpretation 247650 – Public Service Body Rebate for […][a Hospital Authority resident in a participating province in Canada]

GST/HST Interpretation 247167 – Supplies of uninsured activities by a medical practitioner

GST/HST Ruling 246452r – AND GST/HST INTERPRETATION – Application of GST/HST to supplies of hospital beds, mattresses and other products

Medsleep Inc. v. The King, 2025 TCC 70 (2025) 

Footnotes

1. CRA Newsletter – Excise and GST/HST News No. 101: The CRA directly addresses the GST/HST treatment of hospital on-call fees, explaining that the fee paid to a physician for being on call is considered a taxable supply of a right (intangible personal property), not an exempt health care service.

2. CRA GST/HST Interpretation 150125 – Hospital On-Call Fee: This interpretation letter provides a detailed explanation of why on-call fees are taxable, and discusses the registration requirements for physicians and the implications if GST/HST is not collected from the hospital..

3. Seeking and maintaining a written legal opinion is recognized as a best practice in compliance management, especially in areas where there is ongoing confusion or risk of dispute, such as the GST/HST treatment of on-call fees. A legal opinion can serve as evidence of due diligence and provide a defensible position if challenged by the CRA or by physicians. See also Excise and GST/HST News No. 101 and GST/HST Interpretation 150125 for further guidance;.