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: 131101-2
Business Number: [...]
October 7, 2013
Dear [Client]:
Subject: GST/HST RULING AND INTERPRETATION
Children's [...][sports] programs
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to children's [...][sports] programs provided by the [...]([...][Corporation]).
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand
1. The [Corporation] was incorporated as a corporation without share capital under [...].
2. The [Corporation] is registered for GST/HST purposes with GST/HST account number [...].
3. The [Corporation] has stated that it is a non-profit organization. Given this fact, the [Corporation] would also be a public sector body for GST/HST purposes.
4. The [Corporation] is a [...][sports] club. Its facilities consist of [...].
5. The [Corporation] is a member of [...][Organization X]. [Organization X] is a member of [...][Organization Y].
6. [Organization Y] has created [a] [...]([...][Model]) that clubs can use to teach children how to [...][perform the sport].
7. The [Model] is comprised of [...][Program A], [...][Program B] and [...][Program C]. The [Model]'s programs are described in the [...][manual], available on [Organization Y's] website, as follows:
[...][Describes Program A]
[...][Describes Program B]
[...][Describes Program C]
8. The [Corporation] offers children's [sports] programs based on the [Model]. The [Corporation] uses the [Model's] manuals and lesson plans developed by [Organization Y]. The [Corporation] purchases these manuals and other program materials, such as badges and workbooks, through [Organization X].
9. [Model] materials may be ordered from [Organization X]'s on-line catalogue. The following are examples of the available materials and prices: [...].
10. The [Corporation] offers the following [sports] programs for children:
• [Program A];
• [Program B]; and
• [Program C].
11. The board of the [Corporation] sets the prices and schedules for the children's programs, advertises the programs, and incurs expenses in respect of the programs. The board also solicits qualified volunteers to teach/coach the programs.
12. The fees for these programs are separate from the [Corporation] membership fees. Participants with a [...][membership in the Corporation] pay a lower fee than non-members. There is also a separate fee for optional equipment rental.
13. The program fees for the [yyyy/yyyy] season were as follows: [...].
14. Participants in the programs register with the [Corporation] using the [Corporation]'s registration forms. All program fees are payable to the [Corporation].
15. In the [yyyy/yyyy] [sports] season, the [Corporation]'s programs were scheduled as follows: [...]
• [Program A] - [...].
• [Program B] - [...].
• [Program C] - [...].
Ruling Requested
You would like to know
1. Is [Program A] provided by the [Corporation] exempt from HST under paragraph 12(a) of Part VI of Schedule V?
2. Is [Program B] provided by the [Corporation] exempt from HST under paragraph 12(a) of Part VI of Schedule V?
3. Is [Program C] provided by the [Corporation] exempt from HST under paragraph 12(a) of Part VI of Schedule V?
Ruling Given
Based on the facts set out above, we rule that
1. The [Corporation]'s supplies of services supplied as part of the [Program A] are exempt from GST/HST under section 12 of Part VI of Schedule V.
2. The [Corporation]'s supplies of services supplied as part of the [Program B] are exempt from GST/HST under section 12 of Part VI of Schedule V.
3. The [Corporation]'s supplies of services supplied as part of the [Program C] are exempt from GST/HST under section 12 of Part VI of Schedule V.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
A "non-profit organization" is defined under subsection 123(1) to mean a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada.
It is a question of fact whether, at any particular time, the [Corporation] meets the definition of a non-profit organization for ETA purposes. In particular, whether the [Corporation] meets the criterion of operating solely for a purpose other than profit must be determined on an ongoing basis.
In general, supplies of property and services made by a non-profit organization are taxable for GST/HST purposes unless the supply is an exempt supply under a provision in Schedule V. Section 12 of Part VI of Schedule V exempts the following:
A supply made by a public sector body of a membership in, or services supplied as part of, a program established and operated by the body that consists of a series of supervised instructional classes or activities involving athletics, outdoor recreation, music, dance, arts, crafts or other hobbies or recreational pursuits where
(a) it may reasonably be expected, given the nature of the classes or activities or the degree of relevant skill or ability required for participation in them, that the program will be provided primarily to children 14 years of age or under, except where the program involves overnight supervision throughout a substantial portion of the program; or
(b) the program is provided primarily for underprivileged individuals or individuals with a disability.
A supply will be exempt under section 12 of Part VI of Schedule V where:
• The supplier is a public sector body (which is defined to include a non-profit organization);
• The supply is of a membership in a program or services supplied as part of a program;
• The program is established and operated by the public sector body;
• The program consists of a series of supervised instructional classes or activities involving athletics, outdoor recreation, music, dance, arts, crafts or other hobbies or recreational pursuits;
• One of the following circumstances applies:
- The program is provided primarily to children 14 years of age or under and it does not involve overnight supervision throughout a substantial part of the program; or
- The program is provided primarily to underprivileged individuals or individuals with a disability.
To be exempt under section 12 of Part VI of Schedule V, the program must be established and operated by the supplier. In other words, the exemption applies only where the public sector body itself directly supplies to the participants a program that consists of supervised instructional classes or activities involving athletics or other recreational activities.
The [Corporation] directly supplies [Program A], [Program B] and [Program C] to the participants in the program. The programs are conducted at the [Corporation]'s facilities by volunteer teachers/coaches who are engaged by the [Corporation]. The board of the [Corporation] sets the prices and schedules for the programs, advertises the programs, and incurs expenses in respect of the programs. Participants in the programs register with the [Corporation] using the [Corporation]'s registration forms. All program fees are payable to the [Corporation]. Although the [Corporation] uses the [...] model developed by [Organization Y], the particular children's programs at issue were set up by the [Corporation]. Therefore, [Program A], [Program B] and [Program C] are established and operated by the [Corporation].
Interpretation
Equipment rental fees
Section 12 of Part VI of Schedule V only applies to supplies of memberships in, or services supplied as part of, a program. This exempting provision does not apply to other types of supplies, such as equipment rentals. An equipment rental is a supply of tangible personal property by way of lease, license or similar arrangement. Generally, there is no exempting provision that would exempt such a supply of tangible personal property made by a non-profit organization and such supplies would be taxable. A GST/HST registrant must collect GST/HST on taxable supplies of equipment rentals.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9592. 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,
Heather Reardon
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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