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
Case Number: 192645a
Business Number: […]
Subject: GST/HST RULING
Supplies of donated clothing by a public service body
Thank you for your fax of July 19, 2018, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of donated clothing sold through […][the Store].
As a result of a review of our letter dated September 20, 2018, we wish to clarify some of the information provided in that letter. We apologize for any inconvenience these changes may cause. For your convenience, we are reissuing the letter in its entirety. This amendment replaces and supersedes the original letter and is effective the date of this amended letter.
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 the following based on information previously provided and […]:
1. […][The Corporation] is a corporation continued under the […]. It is [a public service body but] not a registered charity.
2. [The Corporation] has branches throughout Canada. […][Additional information on branches]
3. […][The Branch] is a […] branch of [the Corporation].
4. [The Branch] operates a second-hand clothing store […] called […][the Store]. [The Store] is located […][in a participating province]. It is operated by [#] part-time paid employees and volunteers. It only sells donated clothing.
5. […][About the Branch’s GST/HST registration].
6. […][More about GST/HST registration]
7. […] [The Corporation] [applied to designate [the Branch] as an eligible small supplier division] […].
8. According to its GST/HST return […], [the Branch]’s taxable supplies in [yyyy] were […][more than $50,000].
You would like to know:
1. Is [the Branch] required to charge GST/HST on the supplies of used clothing made through [the Store]?
2. Is [the Branch] required to register for GST/HST purposes?
Based on the facts set out above, we rule that:
1. As [the Corporation] is a registrant and [the Branch] is not a small supplier division, GST/HST must be charged on the supplies of used clothing made through [the Store].
2. [The Branch] cannot register as it is not a separate person. [The Corporation] is required to register for GST/HST purposes and account for the GST/HST charged on taxable supplies made by itself and its branches or divisions that are not small supplier divisions (which includes [the Branch]).
The sale of new, used, or donated goods in a second-hand store operated by a non-profit organization is generally taxable and GST/HST must be collected on these sales when made by a GST/HST registrant. See the article “Sale of new, used, or donated goods in a second-hand store” published in Excise and GST/HST News - No. 84 (Spring 2012) available on Canada Revenue Agency’s (CRA) website.
There is no provision in the ETA that would exempt the sale of donated goods through [the Store] operated by [the Branch].
See the Additional Information section of this letter for information about the availability of a point-of-sale rebate on qualifying children’s goods.
A person must register for the GST/HST if it provides taxable supplies in Canada and is not a small supplier. A non-profit organization is a small supplier if the total amount of all revenues from its worldwide taxable supplies, and those of its associates, is $50,000 or less in any single calendar quarter and in the last four consecutive calendar quarters.
Branches or divisions that are part of one legal entity cannot register separately for GST/HST purposes. If a person must register, or registers voluntarily, it has to do so as a single entity. When a person registers with the CRA, it is issued a 9-digit business number that identifies the person. The business number is unique to that person and will always be the first nine digits of any account number that it has with the CRA (for example, GST/HST Account Number 123456789 RT0001, Payroll Account Number 123456789 RP0001, etc.).
A person that is a public service body may apply to have each branch or division with $50,000 or less in taxable supplies treated as an eligible small supplier division. A branch or division that is designated as an eligible division and maintains its status as a small supplier will be treated as an eligible small supplier division. An eligible small supplier division is treated as a non-registrant even though the body itself may be registered. No tax is collected on most taxable supplies of the small supplier division and no input tax credits are claimed by the body or the small supplier division with respect to the purchases of the small supplier division. Form GST31, Application by a Public Service Body to Have Branches or Divisions Treated as Eligible Small Supplier Divisions, is used to apply to designate a branch or division as an eligible small supplier division.
If an eligible branch or division exceeds the $50,000 small supplier threshold, it ceases to be a small supplier division. GST/HST must be charged on its taxable supplies and it may qualify for ITCs. Information on this application is available in GST/HST Memorandum 2.4, Branches and Divisions.
Based on the information available, [the Branch] is a branch of [the Corporation]. [The Corporation] previously applied to designate [the Branch] as an eligible small supplier division. However, [the Branch] is not a small supplier division as its taxable supplies exceeded the above-mentioned threshold. Therefore, [the Branch]’s designation as a small supplier division is no longer effective. [The Corporation] should revoke [the Branch]’s designation as this may cause errors in the future. The designation can be revoked by sending a request in writing to [the Corporation]’s tax services office.
Because [the Branch] exceeded the small supplier threshold, [the Corporation] is a registrant. A registrant means a person that is registered or has to be registered for GST/HST purposes. Therefore, [the Corporation] must register for GST/HST purposes. Since [the Branch] has not been authorized to file separate returns, the GST/HST that is charged and collected by [the Branch] must be accounted for on [the Corporation]’s GST/HST returns.
A person with branches or divisions (for example, [the Corporation]) can apply to have its branches or divisions file separate GST/HST returns. Each branch or division has to be identifiable by either its location or the nature of its activities, and must keep separate books and records.
[The Corporation] can apply to have a branch or division (such as [the Branch]) file separate GST/HST returns if the conditions are met. For more information, see Form GST10, Application or Revocation of the Authorization to File Separate GST/HST Returns and Rebate Applications for Branches or Divisions, which can be found on CRA’s website. Should [the Corporation] be authorized to allow [the Branch] to file separate GST/HST returns, [the Branch] should use the division account ([…]) to file its returns.
Point-of-sale rebate on children’s goods
The participating provinces of Ontario, Nova Scotia, and Prince Edward Island provide a point-of-sale rebate for the provincial part of the HST payable on qualifying children’s goods sold, imported, or brought into these provinces. The CRA and the Canada Border Services Agency administer the point-of-sale rebate on behalf of these provinces.
For further information, including what is considered children’s clothing, how to show the point-of-sale rebate on invoices or receipts, and how to account for the point-of-sale rebate on a GST/HST return, please refer to GST/HST Info Sheet GI-063, Point-of-Sale Rebate on Children’s Goods, which is available on the CRA Website.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings 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. Any additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect 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 613-670-7943. 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.
Charities and Non-profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate