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
XXXXX
Case Number: 96274
Business Number: XXXXX
Attention: XXXXX
Chairperson
February 17, 2009
Subject:
GST/HST INTERPRETATION
Request for Ruling
Dear XXXXX:
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax /Harmonized Sales Tax (the "tax") to the activities engaged in by the XXXXX (the "Committee").
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand that:
1. In XXXXX there was a XXXXX that forced the evacuation of over XXXXX people. An inquiry by XXXXX determined that the XXXXX was the result of construction digging being done in the area. In its final recommendations, that XXXXX recommended that all aspects of XXXXX planning, design and operation be coordinated to both help prevent XXXXX and to provide a better way of responding to them.
2. The Committee was incorporated under the laws of the Province of XXXXX on XXXXX. It purports to be a non-profit corporation for the purposes of the ETA. The Committee was created to engage in activities to encourage and promote safety around XXXXX.
3. The Committee was registered under the ETA with the above-noted business number when it was incorporated. However, it cancelled its registration in XXXXX, and remains non-registered to collect or remit the Tax.
4. According to the By-laws of the Committee, all its members must pay an annual membership fee XXXXX $XXXXX $XXXXX. In return for these fees, members receive the right to vote at meetings, and they are enrolled in the XXXXX System described in more detail below.
5. XXXXX:
a) XXXXX
b) XXXXX
c) XXXXX
6. The activities the Committee carries on in furtherance of its objects are as follows:
a) An XXXXX System that allows a telephone message to be delivered simultaneously to some or all members of the Committee, thereby allowing for quick preventative actions to be taken in response to emergency situations.
b) The creation and sale of manuals for the use of members and the general public regarding XXXXX.
c) Annual safety seminars for industry members, heavy equipment operators, and other people who work XXXXX.
d) Public awareness and public education activities including attendance at public events and schools.
The XXXXX System
7. The XXXXX System is provided through a set fee contract with XXXXX. No additional fee is charged to the membership for their enrolment in the XXXXX System. We are advised that XXXXX operators, XXXXX and municipalities who are not members of the Committee are not permitted to enrol.
8. The XXXXX System operates as follows: should a Committee member become aware of a XXXXX hazard, a call is made to a central control centre, which passes the call simultaneously to every member of the Committee who XXXXX in the affected sector. (The central control centre is housed in the offices of XXXXX, one of the member XXXXX companies of the Committee. XXXXX allocates one of its staff members to act in this capacity.) The XXXXX system cannot be used to contact non-members.
Safety Manuals
9. The manuals are sold directly by the Committee or through another organization named "XXXXX". The amounts charged by the Committee for the printed material are calculated only to offset the costs of their production. There are no administrative or similar costs recouped in the price for the manuals. The price of the manuals is the same for members or non-members. XXXXX collects and remits the Tax on the manuals it sells.
Safety Seminars
10. The Committee offers safety seminars every two years. They are offered for a fee to contractors, excavators, and other people who need to be made aware of safe practices when digging around XXXXX. These seminars are provided on a cost recovery basis. The fee charged for these services is based on the cost of renting the venue and the preparation of the materials. The admission fee for the seminars will normally exceed one dollar.
11. The Committee's XXXXX financial statements show the following income in XXXXX:
XXXXX: $ XXXXX
XXXXX: $ XXXXX
XXXXX: $ XXXXX
XXXXX: $ XXXXX
XXXXX: $ XXXXX
Ruling Requested
You have asked whether the Committee is required under the Excise Tax Act to register to collect and remit the Goods and Services Tax ("the Tax") on the membership fees charged to its members.
If this question is answered in the affirmative, you also wish to know when the obligation to register to collect and remit the tax occurred and how far back the Committee needs to account for remittance of the Tax.
Ruling Given
Based on the information provided, we rule that the Committee's supply of memberships is a taxable supply. We have not been provided with the Committee's governing documents; therefore this ruling is provided based on the Committee's statement that it is a "public sector body" within the meaning of the ETA.
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
Membership fees
Section 17 (of Part VI of Schedule V) of the Act exempts from the Tax:
17. A supply of a membership in a public sector body (other than a membership in a club the main purpose of which is to provide dining, recreational or sporting facilities or in a registered party) where each member does not receive a benefit by reason of the membership, other than
(a) an indirect benefit that is intended to accrue to all members collectively,
(c) the right to vote at or participate in meetings,
(d) the right to receive or acquire property or services supplied to the member for consideration that is not part of the consideration for the membership and that is equal to the fair market value of the property or services at the time the supply is made,
The right to participate and vote at meetings is expressly permitted under this section. Unless the automatic enrolment of members in the XXXXX System is an "indirect benefit", the Committee's membership fee is a taxable supply.
Our position with respect to what constitutes an "indirect benefit" is set out as follows:
In accordance with paragraph 17(a), a member of an NPO may receive "an indirect benefit that is intended to accrue to all members collectively" without causing an otherwise exempt membership to be taxable. The fact that a benefit is available to all members does not necessarily signify that the benefit is "indirect." In fact, benefits that are meant to accrue only to members by reason of their membership are generally direct benefits. It is only when the benefit accruing to a member is incidental, in the sense that it is a secondary consequence of an objective involving more than just the interests of the members, that it will be viewed as indirect. For example, the benefits of a lobbying activity might be regarded as indirect if the activity is carried out on behalf of a broad public sector so that individual members and non-members alike benefit in an incidental or "indirect" manner. (Emphasis Added)
The Committee was created for the purpose of operating and maintaining the XXXXX System. This system is the only activity engaged in by the Committee in which only members are entitled to participate. Enrolment in the XXXXX system constitutes a direct benefit of membership in the Committee. Therefore the supply of memberships is a taxable supply.
Registration
In general, under subsection 240(1), every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for GST/HST purposes.
One exception to the general requirement to register is where the person is a "small supplier". In general, subsection 148(1) provides that a person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies (other than supplies of financial services, sales of capital property, and goodwill attributable to the sale of a business) made by the person, or an associate of the person at the beginning of the particular calendar quarter, that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed, where the person is a public service body, $50,000.
It may be that for some periods since its creation, the Committee has qualified as a small supplier. However, the Committee's financial statements for fiscal XXXXX reveal that the Committee's income exceeded the $50,000 small supplier threshold.
Under paragraph 240(2.1)(b), a person who no longer qualifies as a small supplier and is required to be registered, must apply to the Minister for registration before the thirtieth day after the day the person first makes a taxable supply in Canada.
Available on our web site is form RC1A Business Number (BN) - GST/HST Account Information. You can use this form to register for a GST/HST program account under your business number and either mail or fax it to us. You can also register online or by phone at 1-800-959-5525. More information is available in the booklet RC2, The Business Number and Your Canada Revenue Agency Accounts on our web site at http://www.cra-arc.gc.ca/E/pub/tg/rc2/README.html.
Your letter of XXXXX provided limited information regarding the Committee's supply of manuals and safety seminars. Although you have not requested a ruling on these supplies, we are providing the following information to assist you in determining their tax status.
Manuals
Section 6 of Part VI of Schedule V of the Act exempts from the Tax:
6. A supply by way of sale made by a public service body (other than a municipality) to a recipient of tangible personal property (other than capital property of the body or, if the body is a person designated to be a municipality for the purposes of section 259 of the Act, designated municipal property), or of a service purchased by the body for the purpose of making a supply by way of sale of the service, if the total charge for the supply is the usual charge by the body for such supplies to such recipients and
(a) if the body does not charge the recipient any amount as tax under Part IX of the Act in respect of the supply, the total charge for the supply does not, and could not reasonably be expected to, exceed the direct cost of the supply; and
(b) if the body charges the recipient an amount as tax under that Part in respect of the supply, the consideration for the supply does not, and could not reasonably be expected to, equal or exceed the direct cost of the supply determined without reference to tax imposed under that Part and without reference to any tax that became payable under the first paragraph of section 16 of An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, at a time when the body was a registrant as defined in section 1 of that Act. (Emphasis added)
Where the "direct cost" is defined in the Act as the:
"direct cost" of a supply of tangible personal property or a service means the total of all amounts each of which is the consideration paid or payable by the supplier
(a) for the property or service if it was purchased by the supplier for the purpose of making a supply by way of sale of the property or service, or
(b) for an article or material (other than capital property of the supplier) that was purchased by the supplier, to the extent that the article or material is to be incorporated into or is to form a constituent or component part of the property, or is to be consumed or expended directly in the process of manufacturing, producing, processing or packaging the property....
The manuals are tangible personal property. To determine the tax status of this supply, the Committee must determine if the charge for the manuals is the "usual charge for such supplies" and whether or not the charge exceeds the manual's direct cost.
The Provision of Safety Seminars
Section 123(1) of the Act defines "admission" as: "in respect of a place of amusement or a seminar, an activity or an event...a right of entry or access to, or attendance at, the place of amusement or the seminar, activity or event."
Section 9 of Part VI of Schedule V provides an exemption for the supply by a public sector body of an admission: "where the maximum consideration for a supply by the body of such an admission does not exceed one dollar."
The foregoing comments represent our general views with respect to the sale of the manuals and the provision of safety seminars. 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 613-952-0329. 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,
Michael Mavis
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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