Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 95769r
Attention: XXXXX
XXXXX
Business Number: XXXXX
July 10, 2008
Subject:
GST/HST RULING
Tax status of postage stamps and memberships
Dear XXXXX:
XXXXX you request clarification regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to two supplies addressed in a January 16, 2008 ruling issued to the XXXXX (the Organization) XXXXX. Specifically, you would like clarification on the tax status of postage stamps and memberships sold by the Organization.
XXXXX.
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
Statement of Facts
We understand that
1. The Organization is a registered charity under the Income Tax Act, and is therefore a charity for purposes of the ETA.
2. The Organization has been registered for GST/HST purposes since XXXXX.
3. The Organization, through its programs, provides XXXXX.
4. The Organization operates out of a portion of the XXXXX.
Postage Stamps
5. The Organization purchases postage stamps at face value from the Canada Post Corporation and resells them to its members at face value.
6. Members can buy as few as one stamp at a time.
7. Members can deposit their outgoing mail in a mailbox at the Organization's facilities. Once a day, an employee of the Organization will deposit the outgoing mail in a Canada Post drop box.
Memberships
8. The Organization sells its memberships for XXXXX.
9. Members of the Organization are entitled to the following benefits:
• Use of the Organization's facilities (e.g., XXXXX)
• Right to join clubs within the Organization (e.g., XXXXX)
• Right to participate in programs offered by the Organization (e.g., XXXXX)
10. Some programs or clubs are offered free of charge, others have a nominal fee to cover the cost of an instructor. Approximately XXXXX% of members participate in the programs.
11. Members can sign up for an unlimited number of programs or clubs.
12. Program offerings are based on the demand from members and availability of instructors or program leaders.
13. Only members are permitted to sign up for the various programs offered by the Organization.
14. Only the Organization's cafeteria is open to the public. Both the public and members are charged for meals purchased in the cafeteria.
Ruling Requested
You would like to know if GST applies to the Organization's sale of stamps and memberships.
Ruling Given
Based on the facts set out above, we rule that the Organization's supply of the postage stamps is exempt of GST. The Organization's membership is a taxable supply.
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
Generally, supplies of goods and services are subject to GST/HST unless they are specifically exempted. Most supplies made by a charity of property or services are exempt under section 1 of Part V.1 of Schedule V. However, if a supply falls within any of paragraphs 1(a) to 1(n) of Part V.1 of Schedule V the supply is generally taxable. For your information, we have included a copy of section 1 of Part V.1 of Schedule V.
Postage Stamps
The Organization's supply of the stamps (i.e., evidence for the payment of a mail delivery service) is exempt as the supply does not fall within any of the paragraphs 1(a) to 1(n) of Part V.1 of Schedule V.
A postage stamp is a stamp authorized by the Canada Post Corporation for use as evidence of the payment of postage. "Postage" is generally considered to mean the charge or surcharge payable for the collection, transmission and delivery by the Canada Post Corporation of goods (i.e., mail). For GST/HST purposes a freight transportation service means a particular service of transporting tangible personal property, and includes a service of delivering mail. Therefore the postage stamp evidences the payment of a freight transportation service.
Memberships
Some memberships supplied by charities are taxable as they do not fall within the general exemption for charities found in section 1 of Part V.1 of Schedule V.
The Organization's membership is taxable as it is excluded by paragraph 1(g) from the general exemption for charities. Under paragraph 1(g), a charity's membership is taxable when it includes the right to participate in a recreational or athletic activity, or use facilities, at a place of amusement. A "place of amusement" is defined in the ETA to include any place the purpose of which is to provide any type of amusement or recreation. The Organization' facility meets the definition of place of amusement. As the Organization's memberships include a right to participate in a recreational or athletic activity (i.e., the programs offered by the Organization) and use the Organization's facilities, the supply is taxable.
Memberships that provide these rights can remain exempt where the value of the right to participate in a recreational or athletic activity, or use facilities, at a place of amusement is insignificant in relation to the consideration for the membership. In the Organization's case the value of these rights is not insignificant, as the right to participate in the Organization's programs and use the Organization's facilities is only available by acquiring the membership and is the purpose for which membership is acquired. Therefore the value of these rights is equal to the consideration paid for the membership.
XXXXX ruling and individuals who have a disability
The explanation provided in our ruling dated XXXXX indicated that your Organization's memberships were taxable because of paragraph 1(f). As explained in our telephone conversation XXXXX, your membership does not entitle a person to supervision or instruction; therefore it does not fall under that provision. Nevertheless the supply of the memberships is taxable.
You have requested information regarding what types of individuals are referred to in the statement "individuals who...have a disability" found in paragraph 1(f). The CRA's interpretation of the term "disability" is that it generally refers to a long-term impairment that restricts an individual in carrying out his or her activities of daily living. As previously stated, the Organization's membership does not meet the requirements of the provision [paragraph 1(f)] that refers to these types of individuals.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4206. 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,
Carol A. Gaudet
Charities, Non-profit organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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