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: 210848
Business Number: […]
August 10, 2020
Dear [Client]:
Subject: GST/HST RULING
[…][Event] Sponsorship
Thank you for your [correspondence] of June 26, 2020, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to sponsorships for […][the Event].
[…].
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 facts as follows based on the agreements provided:
1. […] ([…][The Organization]) is part of […]. As such, it is a […] and also a “public sector body” under subsection 123(1).
2. […][Information about the Organization’s responsibilities]
3. [At] [the Event], […] activities included: […]
4. To ensure [the success of the Event], [the Organization] enlisted the participation of sponsors. […][The Organization provided copies of agreements between the Organization and] […][Sponsor #1], […][Sponsor #2], and […][Sponsor #3].
5. The following terms were defined in each of the agreements: […]
6. The agreement with [Sponsor #1] included the following clauses:
[…][Clauses from the agreement including sponsorship rights and consideration payable. Sponsorship rights include: logo visibility on Event signage (giant screens, billboards, banners, etc.), on a website, and in one newspaper thanking all sponsors; licence to use real property; VIP invitations to attend a part of the Event; and right to use intangible personal property of the Organization.]
7. The agreement with [Sponsor #2] included the following clauses:
[…][Clauses from the agreement including sponsorship rights and consideration payable. Sponsorship rights include: logo visibility on Event signage (giant screens, billboards, banners, etc.), on a website, and in one newspaper thanking all sponsors; sponsor’s presentation of certain Event activities; VIP invitation to attend a part of the Event; and right to use intangible personal property of the Organization.]
8. The agreement with [Sponsor #3] includes the following clauses:
[…][Clauses from the agreement including sponsorship rights and consideration payable. Sponsorship rights include: acknowledgement as official sponsor of the Event and exclusive product of the event; logo visibility on Event signage (giant screens, billboards, banners, etc.), on a website, in newspapers, and in social media; verbal mentions of the sponsor during the Event; sponsor’s name on a stage; a licence to use real property to promote its brand by offering samples; VIP invitations to attend the Event; and right to use intangible personal property of the Organization.]
RULING REQUESTED
You would like to know:
1. Should GST/HST have been charged on the consideration payable under the sponsorship agreement signed with [Sponsor #1]?
2. Should GST/HST have been charged on the consideration payable under the sponsorship agreement signed with [Sponsor #2]?
3. Should GST/HST have been charged on the consideration payable under the sponsorship agreement signed with [Sponsor #3]?
RULING GIVEN
Based on the facts set out above, we rule that:
1. No. GST/HST should not have been charged on the consideration payable by [Sponsor #1]. Section 135 applies to the promotional services provided under the agreement and there is deemed to be no supply.
2. No. GST/HST should not have been charged on the consideration payable by [Sponsor #2]. Section 135 applies to the promotional services provided under the agreement and there is deemed to be no supply.
3. No. GST/HST should not have been charged on the consideration payable by [Sponsor #3]. Section 135 applies to the promotional services provided under the agreement and there is deemed to be no supply.
EXPLANATION
Section 135 applies to sponsorships where a sponsor agrees to support a public sector body in exchange for a service or the use of intangible personal property belonging to the body. Section 135 applies when the following conditions are met:
- the supplier is a public sector body;
- the public sector body makes the supply of a service or supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property belonging to it;
- the recipient of the supply is a person who sponsors an activity of the organization;
- the supply is used exclusively to advertise the sponsor’s business;
- the consideration paid by the sponsor for the supply is not primarily (more than 50%) for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically.
Since [the Organization] 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.
The supplies in each of the agreements are a single supply of promotional services. Although the supply includes advertising and other elements, including use of intangible personal property belonging to [the Organization], the dominant element is the promotional services that the sponsor acquired. The supplies in the agreements are not primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically. Therefore, the promotional service supplied by [the Organization] to the sponsors is deemed not to be a supply under section 135 and is not subject to GST/HST.
GST/HST collected in error
Any amounts [the Organization] collects as or on account of GST/HST, including GST/HST collected in error (e.g., tax collected in error on an exempt supply), must be included in its net tax calculation for the reporting period in which the tax became collectible or was collected.
Where [the Organization] has charged an amount as GST/HST in error, it has the option to adjust, refund or credit the excess tax to the person within two years after the day the amount was so charged or collected. If [the Organization] chooses to adjust, refund, or credit the excess amount of GST/HST, a credit note containing prescribed information must be issued to the person within a reasonable time by [the Organization]. [The Organization] may also make an adjustment to its net tax calculation to account for any adjustment, refund or credit of an amount of tax paid in error to the extent that the amount was included in determining the net tax for the reporting period or a prior reporting period.
Alternatively, persons that paid an amount as GST/HST on supplies that should not have been taxed may file an application for a rebate of amounts paid in error. Form GST189, General Application for Rebate of GST/HST, is used to apply for the rebate. The time limit to apply for this rebate is within two years after the day the amount was paid.
Additional information concerning tax collected in error may be found in GST/HST Memorandum Series 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act. Additional information concerning the claiming of rebates of tax paid in error may be found in Guide RC4033, General Application for GST/HST Rebates.
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 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. The interpretations given in this letter, including any additional information, 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 interpretations 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 613-670-7943. 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.
Yours truly,
Desneiges Arbour
Charities and Non-profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
[…]
Email this Content