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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 125897
Business Number: [...]
August 2, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Tax status of annual membership fees
Thank you for your letter of July 6, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the fee payable to the [...] [(Association)] for a membership in the [...] ([Group]) program. We apologize for the delay in responding to your enquiry.
HST applies at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
The following information has been provided to us in your letter, during our telephone conversations on October 20, 2010, November 18, 2010, January 12, 2011, and March 22, 2011, and in the documents on your website that you directed us to:
• The [Association] is a non-profit [...] association representing the interests of [...] across Canada as a national voice for the [...].
• Members may apply to join, for a fee, a [...]. Once accepted as a member, the member is automatically a member of the [Association].
• The [Association's] office is located in [...] [City 1, Participating Province X].
• The [Association] provides services to its members, such as [...] services.
• Members of the [Association] have the option of paying an "Annual Membership Fee", in addition to the fee charged for joining the [...], to be a member of the [Group].
• The [Group] is not incorporated; it is a program that operates under the [Association].
• One of the benefits provided to members of the [Group] is access to [...] service only available to members. The [...] service provided to members is to ensure [...]
• The member also receives the right to have [the Group] advise the [...].
• Each member [...]
• Members also receive a benefit under the membership of having their name placed in [the Group's] data base that other members [...] can access [...].
• [...].
• The [...] [Company] is located on a reserve in [...] [Province Y].
• The [Company] is responsible for [...].
• [...] [the Company] gathers [...] and sends it to [the Association's] office [...] and sends [...] to [the Company].
• Staff of [the Association/Group] [...] and [...].
• The [Company] is a business owned by an Indian(s).
You requested a ruling on whether or not the GST/HST should be charged on the annual membership fee to enrol in the [Group] when supplied to an Indian or an Indian band located on a reserve in [Province Y].
Unfortunately, we are unable to provide you with a ruling in accordance with GST Memorandum 1.4 Excise and GST/HST Rulings and Interpretations Service. A GST/HST ruling is a written statement that the Canada Revenue Agency (CRA) provides to a client that sets out the CRA's position on how the relevant provisions of the legislation apply to a clearly defined fact situation of the client. The CRA will issue a ruling only when the person requesting the ruling has provided all the relevant facts of a transaction or series of transactions. Instead, for your assistance, we are providing the following interpretation.
Interpretation Given
Please note that based on the information provided we have not been able to determine whether the recipient of the supply is in fact an Indian, Indian band, or a band-empowered entity (BEE). However, following information is provided to assist you in determining whether the annual fee to be a member of [Group] is taxable for purposes of the GST/HST when provided to an Indian, Indian band or a BEE.
GST/HST Technical Information Bulletin B-039, GST/HST Administrative Policy - Application of the GST/HST to Indians (Bulletin B-039) defines a BEE to be "a corporation, board, council, association, society, or other organization that is owned or controlled by a band, a tribal council, or a group of bands other than a tribal council". Information on whether or not a BEE meets the owned or controlled conditions can be found in Bulletin B-039. As well, Bulletin B-039 only applies to BEEs that are situated on a reserve. A BEE is considered to be situated on a reserve when the entity maintains a presence on a reserve.
Section 87 of the Indian Act exempts personal property of an Indian or Indian band situated on a reserve. That is, the property must be situated on a reserve in order for tax relief to apply.
Bulletin B-039 describes the CRA's administrative policy respecting the tax treatment of purchases by Indians, Indian bands and BEEs. The CRA's administrative policy is fully consistent with the relieving provisions of section 87 of the Indian Act affecting the personal property of an Indian or an Indian band situated on a reserve. Under Bulletin B-039, Indians, Indian bands and unincorporated BEEs can acquire property situated on or delivered to a reserve relieved of the GST/HST. Incorporated BEEs can acquire property situated on or delivered to a reserve relieved of the GST/HST where the property is for band management activities (BMA). As well, the remaining conditions of Bulletin-B039 must be met in order for relief of the GST/HST to apply.
As stated in Bulletin B-039, a membership comprises various rights to property or services, and is therefore considered to be a supply of intangible personal property (IPP). As IPP is not a physical object, it cannot be delivered to a reserve.
The jurisprudence related to IPP indicates that connecting factors should be used to determine the situs of the IPP. The CRA's position on supplies of IPP has always been that they will be relieved of the GST/HST when supplied to an Indian, Indian band or BEE where there are sufficient connecting factors to situate the property on a reserve and the remaining conditions of Bulletin-B039 are met.
With respect to memberships, the most significant factor is where the rights to property or services provided under the membership are exercisable. Usually, for tax relief to apply, the rights to property or services provided under the membership must be exercisable exclusively on a reserve to be considered situated on a reserve, and all other conditions set out under Bulletin B-039 must be met. For example, the rights under a membership in an off-reserve golf club are not exclusively exercisable on a reserve. Therefore the membership is situated off a reserve and is taxable when made to an Indian, Indian band or BEE.
The facts indicate that the most significant right provided to the members under the membership is the right to the [...] services which take place off a reserve. As well, the facts provided did not suggest any other significant factors connecting the supply to the reserve. Therefore, the membership is situated off a reserve and is taxable when supplied to an Indian, Indian band or BEE as the rights provided under the membership are not exercisable exclusively on a reserve.
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.
GST/HST Technical Information Bulletin B-039, GST/HST Administrative Policy - Application of the GST/HST to Indians, and GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service can be found on the CRA's web-site: www.cra-arc.gc.ca/formspubs/typ/menu-eng.html.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7954. 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,
K. Bennett
Aboriginal Affairs Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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