29 November 2005 GST/HST Interpretation 65402 - Application of GST/HST to Purse Winnings

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your submission XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to purse winnings awarded in the racing of Standardbred horses in XXXXX.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

XXXXX.

XXXXX enters into agreements with many racetracks in XXXXX for the distribution of purse money in Standardbred racing. XXXXX.

Interpretation Requested

Does the GST/HST apply to purse payments made directly by XXXXX to owners, drivers and trainers of Standardbred horses in XXXXX?

Interpretation Given

We considered the issues provided in your submission, along with previous communications and the relevant legislative provisions in the ETA.

Pursuant to subsection 188(2), "Where, in the course of an activity that involves the organization, promotion, hosting or other staging of a competitive event, a person gives a prize to a competitor in the event,

(a) the giving of the prize shall be deemed, for the purposes of this Part, not to be a supply;

(b) the prize shall be deemed, for the purposes of this Part, not to be consideration for a supply by the competitor to the person; and

(c) tax payable by the person in respect of any property given as the prize shall not be included in determining any input tax credit of the person for any reporting period."

In Standardbred horse racing, the competitive event is a contest of speed between Standardbred horses at a racetrack. The owner is the person with legal rights to ownership of the horse and the person who enters or may authorize an agent to enter the horse in the race. It is the position of the CRA that for purposes of subsection 188(2), the horse is the competitor and as the horse is chattel, the owner would be the person entitled to the prize won by their horse in the competitive event. Accordingly, the prize paid to the owner would not be subject to the GST/HST pursuant to subsection 188(2).

Driving or training a horse is the supply of a service and the GST/HST applies on the amount that is payable in respect of the supply of these service(s). Even if payment for these services is deducted directly from the purse payable to the owner pursuant to XXXXX, the services are being rendered to the owner, the recipient of the supply, and the GST/HST would apply. Accordingly, drivers and trainers that are GST/HST registrants, are required to collect the GST/HST on taxable supplies of property and services, including driving and training services supplied to owners of horses in a racing event.

It is understood that the method of distribution of the purse may vary depending upon arrangements with owners and individual racetracks or event organizers. However, the method of payment by the owner of a horse for the services of the driver or trainer does not change the status of the supply of the services being rendered.

XXXXX.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

Should you require any additional information, please do not hesitate to contact Donna Harding, Manager of the Charities, Non-Profit Organizations, and Educational Services Unit at (613) 954-7936 or Debra Murphy, Rulings Officer at (613) 952-0420.

Yours truly,

Danielle Laflèche
Director,
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate
Policy and Planning Branch

2005/12/16 — RITS 76598 — Acceptability of an Invoice as a Credit Note