Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 196070
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Supplies made by […][a public sector body] to sponsors
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies made by […][a public sector body] to sponsors.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand
1. […][The Public Sector Body (the PSB)] […] meets the definition of “public sector body”.
2. From [mm/dd] to [mm/dd/yyyy], […][the PSB] will rent space at […][the Centre] in […][Province A], to host […][the Event].
3. […], [the PSB] will try to obtain sponsors to recoup some of the money it will need to organize [the Event].
4. There will be 5 different […][sponsorship packages] available to those who wish to support [the Event]. The cost and the benefits received for each sponsorship [package] is the following:
[…][Sponsorship packages A, B, and C include logo visibility, branding opportunities, acknowledgement during the Event, and use of an exhibition booth. Sponsorship package D includes logo placement and branding opportunities. Sponsorship package E includes only the use of an exhibition booth.]
5. Based on […][the information] published on [the Event]’s website […] and as [the PSB] confirmed […] on [mm/dd/yyyy], [the PSB] does not intend to carry out any service of advertising by means of radio, television, newspaper, magazine or other publication published periodically.
6. A copy of the current Draft Sponsorship Agreement, as of [mm/dd/yyyy], was provided. Section [#] describes a variety of promotional services, notably concerning logo visibility, such as displaying the logo on multi-media screens, on [the Event] web page, and during the morning plenary. There will also be acknowledgments during the opening and closing ceremonies, along with speaking opportunities. Furthermore, section [#] grants the sponsor the right to use the Official Marks of [the Event] (name and logo). There is no mention of any advertising in the Draft Sponsorship Agreement.
7. […][For logistics reasons], [the PSB] will have the sponsorship money paid directly to [the Centre], as per section [#] of the Draft Sponsorship Agreement. This will reduce the amount [the PSB] will need to pay as rent.
RULING REQUESTED
You would like to know
1. Must the [the PSB] charge GST/HST on the money it receives as consideration for the supplies it makes to sponsors?
2. Does the fact that the sponsorship money will be paid to [the Centre] directly instead of to [the PSB] change the response?
RULING GIVEN
Based on the facts set out above, we rule that
1. 1 For […][sponsorship packages A, B, C, and D], no tax must be charged since section 135 applies and will deem that there is no supply.
1. 2 For […][sponsorship package E], [tax] at […]% must be charged since it is a supply of real property and thus section 135 of the ETA does not apply.
2. No, the response does not change if the money is paid directly to [the Centre]. The supplier and the recipient remain [the PSB] and the sponsor, respectively. This will also not affect the tax on the rent that [the Centre] will charge to [the PSB].
EXPLANATIONS
Ruling 1
Section 135 of the ETA states:
135 For the purposes of this Part, where a public sector body makes
(a) a supply of a service, or
(b) a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property of the body,
to a person who is the sponsor of an activity of the body for use by the person exclusively in publicizing the person’s business, the supply by the body of the service or the use of the property shall be deemed not to be a supply, except where it may reasonably be regarded that the consideration for the supply is primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically or for a prescribed service.
Since [the PSB] is a public sector body, the supplies it makes to the sponsors could be deemed not to be a supply, and thus not subject to GST/HST, provided they are supplies of services or intangible personal property described above, they are acquired by the sponsor to publicize the sponsor’s business, and provided they are not primarily a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically.
Based on the information provided, [the PSB] does not intend to carry out any services of advertising by the means described in section 135. All the sponsorship benefits described are either promotional services (logo visibility) or the right to use the Official Marks of [the Event] (the name and logo), which would fall under paragraph 135(a) and 135(b) respectively. The only exception is the booth in the designated area, which is the right to use real property.
[Sponsorship package E] sponsors only receive the use of a booth. Section 136 deems a supply of the right to use real property to be a supply of real property, so section 135 doesn’t apply. Therefore, this supply is taxable since no provision in Schedule V exempts it. The applicable tax rate would be […]% because section 1 of Part IV of Schedule IX states that a supply of real property is made in a province if the property is situated in the province (in this case, [Province A]).
On the other hand, for [sponsorship packages A, B, and C], although the sponsors receive the use of real property, they also receive a multitude of promotional services as part of the sponsorship package. These packages are all considered a single supply of promotional services, because, amongst other things, it is not possible for a sponsor to choose which benefit it wants and to only pay that price. Therefore, the entire package would be deemed not to be a supply because of section 135, and thus would not be subject to GST/HST. [Sponsorship package D] is also deemed not to be a supply for the same reasons.
Ruling 2
The fact that [the Centre] will receive the sponsorship money instead of [the PSB] does not change the above ruling. The supplier of the sponsorship packages remains [the PSB] and the recipients (the persons liable to pay for these supplies) remain the sponsors.
The fact that [the Centre] will receive the money instead of [the PSB] will also not affect the amount of [tax] that will be charged on the rent by [the Centre] to [the PSB], since the total consideration for that supply will remain unchanged. The money received will simply be considered a form of payment.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-0671. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Pierre-Olivier Roy
Charities and Non-Profit Organizations Unit
Public Service Bodies and Government Division
Excise and GST/HST Rulings Directorate
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