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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 172004
Dear [Client]:
Subject: GST/HST RULING
Application of the GST/HST to contributions [made by an employers’ Organization] to the […] Trust Fund [pursuant to a collective agreement]
Thank you for your letter of August 7, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to contributions remitted to […] (the Trust Fund”) by […][the employers’ Organization (the Organization)].
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
1. According to their website, [the Organization] is described as follows: […]
2. […][Relevant provincial legislation (the Legislation) affecting the Employer’s obligations to the Organization](Footnote 1) contains the following provisions:
i. Paragraph […]: “collective agreement” means an agreement in writing between an employer or an employers’ organization and a bargaining agent containing terms or conditions of employment, and may include one or more documents containing one or more agreements.
ii. Paragraph […]: “employers’ organization” means an organization of employers that acts on behalf of an employer or employers and has as one of its objects the regulation of relations between employers and employees, whether or not the organization is a registered employers’ organization.
iii. Paragraph […]: “registered employers’ organization” means an employers’ organization registered by the Board (Footnote 2) as an agent for collective bargaining in a part of the construction industry.
iv. Subsection […]: An employer has the right
* to be a member of an employers’ organization and to participate in its lawful activities,
* to bargain collectively with the employer’s employees, and
* to conduct collective bargaining through an employers’ organization.
v. Subsection […]: The provisions of a collective agreement are binding on
* the bargaining agent and every employee in the unit on whose behalf it was bargaining collectively;
* the employer, where the employer acted on the employer’s own behalf;
* the employers’ organization and each employer on whose behalf it was bargaining collectively, where the employers’ organization acted on behalf of employers.
vi. Subsection […]: A registered employers’ organization may require an employer who is bound by a collective agreement entered into by the registered employers’ organization or on whose behalf the registered employers’ organization bargains collectively to pay dues to the registered employers’ organization if the dues
* are uniformly required to be paid by all members to the registered employers’ organization, and
* are reasonably related to the services performed by the registered employers’ organization in respect of its duties under this Act.
vii. Subsection […]: If an employer fails to pay the dues required under subsection (1), the dues are a debt payable by the employer to the registered employers’ organization and may be collected by civil action.
viii. Subsection […]: This section does not restrict the ability of a registered employers’ organization to establish and collect dues from its members in addition to the dues referred to in subsection (1).
ix. Subsection […]: On the issuance of a registration certificate, the employers’ organization named in it becomes a registered employers’ organization and has exclusive authority to bargain collectively with the group of trade unions named in the registration certificate on behalf of
* all employers actually or customarily engaged in the part of the construction industry set out in the registration certificate with whom any of the trade unions in the group of trade unions has established, or subsequently establishes, the right of collective bargaining, and
* any other employer actually or customarily engaged in the construction industry who is party to an agreement, notwithstanding anything in that agreement, that provides that the employer shall comply with any of the terms of a collective agreement entered into by any of the trade unions in the group of trade unions in respect of work in the part of the construction industry set out in the registration certificate, but only while that agreement to comply remains in force.
x. Subsection […]: Subsection […] applies to employers only to the extent of their collective bargaining obligations with a trade union.
xi. Subsection […]: When a registered employers’ organization and a group of trade unions enter into a collective agreement, the collective agreement is binding on
* the employers referred to in section […],
* the employees of the employers referred to in […],
* the registered employers’ organization insofar as the terms and conditions of the collective agreement apply to it, and
* the group of trade unions and each trade union within the group.
3. During [the negotiation of] […] the collective agreements […] between [the Organization] and the […] unions of […][X], it was agreed that for each hour worked by employees pursuant to the collective agreements, amounts will be contributed by each employer to support workforce development initiatives.
4. […][Example of the Employer’s obligations to the Organization under an agreement](Footnote 3) […];
* In satisfaction of the Employers' obligations to [the Organization] under section […] of [the Legislation] and in satisfaction of the Employers' obligations under this Collective Agreement, the Employer shall pay to [the Organization] the contribution rates for [Organization-]sponsored initiatives, and the hourly dues levied by [the Organization] pursuant to [the Legislation] and pursuant to this Collective Agreement.
…
* In addition to the contributions stipulated above, the Employer shall contribute to [the Organization] amounts set by [the Organization], and amended from time to time by notice to the Employer, for […][other programs and initiatives]. These amounts may be applicable to specific work carried out under this Collective Agreement, as stipulated in the notices to the Employer.
* All costs relating to the administration of the fund(s) shall be borne by the Association.
5. […](the ‘Funding Agreement’) between [X] and [the Organization] states:
* Commencing on the effective date of […][the relevant yyyy] collective agreements between [the Organization] […] and the [X] […] Unions that participated in […] Bargaining, employers will contribute […] per hour worked to the […] Trust. [The Organization] will collect these funds, along with [Organization] dues and fees, and contributions for […][other programs].
* When the […] in each of the collective agreements results in a wage increase, the first increase will be reduced by […]. Thereafter, when employers remit the […] per hour, […] will be on behalf of the employer and […] will be on behalf of the employee.
* The contributions for workforce development initiatives will then be forwarded to […][the Trust Fund]. Funds will also be collected and forwarded to the Trust by the other registered employers’ organizations that participated in the […] Bargaining. Other employers […] may also become participants.
6. […][Information about specific initiatives].
7. […][Information about specific initiatives].
RULING REQUESTED
You would like to know whether […][the employers] are required to pay GST on the contributions they remit to the Trust Fund, which the trustees would collect and forward to the CRA.
RULING GIVEN
Based on the facts set out above, we rule that the contributions to the Trust Fund made by [the employers], through [the Organization] pursuant to the collective agreements are not consideration for a supply and therefore are not subject to GST/HST.
EXPLANATION
Where a person makes a payment to another person, it must be determined whether that payment is consideration for a supply of property or services made by the other person. Generally, payments will not be regarded as consideration for a supply where the payments are not directly linked to any supply of property or service.
In this case the payment of amounts is an industry development fee set by [the Organization] which is authorized [under the Legislation] to do so […]. Contractors/employers are required to pay the amounts to [the Organization], who then provides it to the Trust Fund in accordance with the Funding Agreement.
There is no direct link between the contributions made by the contractors to the Trust Fund and a supply made by the Trust Fund to the contractors. The payment of amounts as an industry development fee set by [the Organization] are therefore not consideration for a supply and therefore not subject to GST/HST.
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 613-670-9891. 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,
Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
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