CRA considered that promotional services provided by a public sector body to a sponsor were not subject to GST/HST given the substantial advertising was not the main motivation [corrected link]
ETA s. 135 deem a supply by a public sector body (PSB) of a service, or a licence of copyright, a trade-mark, trade-name or other similar property to a “sponsor” for exclusive use by the sponsor in publicizing the sponsor’s business, to not be a supply – except that this rule is stated not to apply where the consideration for this supply by the PSB to the sponsor is “primarily” for radio, TV, newspaper, or magazine advertising. CRA dealt with a situation where the sponsor, who agreed to make payments to the PSB, was granted the status of “major partner” of events of the PSB, with that status to be publicized, and could display the PSB’s logo on its website, social networks and event posters and programs, etc. However, in addition, the sponsor agreed to “provide bargain-basement space on television for a commercial produced by the [PSB].”
CRA noted that it considers a sponsor to be “one who agrees to provide financial support with respect to another's activities or events while, or by, acquiring advertising or certain promotional rights” and concluded that in this, and similar examples, the PSB’s commitment described above was a “one-time supply of promotional services” and that, as the sponsor was sponsoring the relevant events of the PSB, the promotional services offered by the PSB were a deemed non-supply under s. 135.
In explaining why the exclusion for TV advertising did not apply, CRA noted that in a previous file, it had concluded that even though “in monetary terms, the advertising represented a substantial part of the sponsorship, we considered that the reason a sponsor would want to sign an agreement and pay the funds was for the recognition of being a partner in the … events … and being able to use the logos associated with them.” In the current example, “the television advertising service is not the main reason why [the PSB] would want to sign the agreement. “
Neal Armstrong. Summary of 12 August 2019 GST/HST Interpretation 200527 under ETA s. 135.