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: 105471A
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION Supplies made by a public sector body to sponsors/endorsers
This letter follows up on our letter dated [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 and endorsers. We are writing to clarify our position regarding the tax status of these supplies.
[…]
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 Association] stated that it is a non-profit industry association that represents the interests of companies involved in the […] industry. As a non-profit organization, [the Association] would also meet the definition of “public sector body” for GST/HST purposes.
2) [The Association] is a GST/HST registrant and its GST/HST number is […].
3) [The Association] was founded in [yyyy], incorporated in [mm/yyyy], and is a member driven organization […].
4) There are approximately [#] members, most of which are […]. Membership in [the Association] is voluntary. The rest are associate members that are also involved in the […] industry, such as […], etc.
5) [The Association] holds events yearly, some of which offer sponsorship opportunities to its members. These events include an annual golf tournament, members’ dinners and […] training seminars.
6) The events allow a variety of businesses to be recognized as sponsors. In the [yyyy] golf tournament event, the consideration provided by a sponsor at the different levels was as follows:
a. Bronze – $[…]
b. Silver – $[…]
c. Gold – $[…]
d. Diamond – $[…]
In exchange for sponsorship money, [the Association] provides signage with the sponsor’s name (larger consideration means a larger banner sign), print material, verbal mention at the dinner, and inclusion in the newsletter (published three times a year). The sponsors do not receive other benefits. The events allow the sponsor to network with the […][members].
7) There is a sponsor named […][the Endorser] that provides endorsement funds to [the Association]. In exchange for endorsement funds, [the Association] allows [the Endorser] to use its logo on [the Endorser]’s products and [the Association] in turn promotes [the Endorser]’s products on its website and literature, which is sent out to new members.
8) For the auction that will take place during the […][fundraising event] in [yyyy], [the Association] indicated that […][tax receipts will be issued]. (Footnote 1)
RULINGS REQUESTED
You would like to know
1. Must [the Association] charge GST/HST on the money it receives as consideration for the supplies it makes to sponsors?
2. Must [the Association] charge GST/HST on the money it receives as consideration for the supplies it makes to endorsers?
Since we do not have the specific agreements for the sponsorships and endorsements, we are unable to determine precisely which supplies [the Association] makes to its sponsors/endorsers and as such we cannot provide a ruling. However, we are pleased to provide you with the following general comments about the application of the GST/HST to sponsorships.
INTERPRETATION GIVEN
Based on the information provided, section 135 of the ETA could apply to both the supplies made to sponsors and endorsers.
Section 135 reads as follows:
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.
As a non-profit organization, [the Association] would also be a public sector body, so 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.
[…]. We would like to add some clarifications [following our previous letter].
First, there is likely no difference between sponsorships and endorsements in this case and it appears to simply be a question of semantics. An endorser can and likely would be considered to be a sponsor for the purposes of section 135. The supplies in both situations described appear to be either promotional services (such as posters and signage) or a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property (such as allowing a business to use [the Association]’s name and logo) in exchange for sponsorship money. As such, section 135 could apply in both situations, again based on the extent of the advertising provided and in which format it is provided.
Second, if a sponsor/endorser wants to support a public sector body for its activities as a whole for the entire year, or even for multiple years at the time, section 135 could still apply. A sponsor does not need to limit its funding to one activity.
On another note, whether an entity can issue an official donation receipt for income tax purposes is the responsibility of the Charities Directorate. The telephone number to reach a client services representative at the Charities Directorate is 1-800-267-2384.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
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
FOOTNOTES
1 […].
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