19 August 2004 GST/HST Ruling 50395 - Sponsorship Agreements

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ETA 135

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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: 50395
XXXXX	August 19, 2004

Subject:

GST/HST APPLICATION RULING
Sponsorship Agreements

Dear XXXXX:

We are writing in reply to the request XXXXX (with attachments), from your representatives, XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to various transactions related to the XXXXX. Your representatives requested that we reply directly to you.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

XXXXX

Ruling Requested

1. The agreements reflected by the XXXXX Agreements listed below are deemed not to be a supply pursuant to section 135 of the ETA:

XXXXX

2. The goods and services provided to the XXXXX as consideration for the sponsorship at the XXXXX level, inclusive, is deemed not to be a supply for GST purposes.

3. The agreements reflected by the XXXXX Agreements are taxable supplies for GST purposes.

Ruling Given

Based on the facts set out above, we rule that:

• The supply of promotional rights and services from the XXXXX to a Sponsor under the following agreements is deemed not to be a supply under section 135 of the ETA and thus no GST applies:

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

• The supply of goods and services provided to the XXXXX for the sponsorship at the XXXXX level, inclusive, is a supply for the purposes of Part IX of the ETA.

• The consideration for the supply of promotional rights and services from the XXXXX to a Sponsor under the XXXXX Agreement is subject to GST.

• The consideration for the supply of promotional rights and services from the XXXXX to a Sponsor under a XXXXX Agreement is subject to GST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Pursuant to section 135 of the ETA, "... where a public sector body makes

(a) a supply of a service, or

(b) a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property of the body, to a person who is the sponsor of an activity of the body for use by the person exclusively in publicizing the person's business, the supply by the body of the service or the use of the property shall be deemed not to be a supply, except where it may reasonably be regarded that the consideration for the supply is primarily for a service of advertising by means of radio, or television or in a newspaper, magazine or other publication published periodically or for a prescribed service."

There are no requirements in section 135 of the ETA that the consideration provided by the sponsor be in cash. The supply by the XXXXX of a service and/or the use of property as described in that section is deemed not to be a supply for the purposes of Part IX of the ETA. This deeming provision of section 135 applies to the supply made by the public service body and not to any supply made by the sponsor.

The determination of whether consideration is primarily for a service of advertising by radio or television etc. is a question of fact. That is, it is a determination that must be made on the basis of the information at hand. Taking into account the agreement between the parties and the factors outlined above, a reasonable determination must be made as to whether the sponsor paid consideration "primarily" for a supply of advertising by television, radio or periodic publication.

On the basis of your submissions and the agreements, the deeming provisions of section 135 do not apply in the case of the XXXXX Agreements as the consideration paid by the sponsor is "primarily for the service of advertising by means of radio or television or a periodic publication." For this reason, the supplies made by the XXXXX pursuant to those agreements will be treated as taxable supplies.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7936.

Yours truly,

Chantal Desrosiers
Manager
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

XXXXX

Legislative References:	135
NCS Subject Code(s):	R-11925-6

2004/08/31 — RITS 50429 — Deferred Finance Mortgage Revenue

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19 August 2004 GST/HST Ruling 50395 - Sponsorship Agreements

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