22 July 2004 GST/HST Interpretation 49110 - XXXXX

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.

Dear XXXXX:

Thank you for your e-mail XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX(Committee).

Statement of Facts

You have provided the following information in your e-mail to us and during our telephone conversations, and more specifically during the conference call XXXXX.

•   The Committee is set up under XXXXX and is responsible for XXXXX.

•   The Committee consists of: XXXXX individuals appointed by the XXXXX (Association), XXXXX individuals appointed by XXXXX, XXXXX individuals appointed by XXXXX, and an independent chairperson appointed by consensus of XXXXX.

•   It is unknown whether the Committee can sue or be sued.

•   The Committee cannot hold property in its own name. However, it does have possession of several assets that were purchased for its use. It is believed that the XXXXX parties involved will have to decide how to dispose of those assets when the Committee winds up. It is not known who actually owns those assets. Most likely the assets will remain with the Association.

•   The Committee contacts suppliers and orders goods/services and instructs the suppliers to make the invoices out to the Association and send the invoices to the Association. The Association receives the invoices and based on a note on the invoices indicating that the supplies were for the Committee, the Association pays the invoices out of the bank account set up for the Committee. The debts appear to be those of the Association.

•   It is not known whether the Committee can enter into a contract in its own name. However, the invoices for goods/services acquired are in the name of the Association. The Committee does not have any funds of its own that it can access.

•   The Committee does not have its own constitution. XXXXX

•   The Committee does not have a board of directors.

•   The Committee is not at arms length as it is responsible to the XXXXX and the Association.

•   XXXXX. At the end of its existence the Committee must provide reports of its activities to XXXXX.

•   The Association may be considered the parent body of the Committee but this is not known for certain.

•   The Committee does not have its own seal.

•   The Committee is not a separate legal entity. It is an ad-hoc committee with a specific mandate that is set out XXXXX.

•   The XXXXX fund the Committee XXXXX. These funds are given to the Association and are held in a bank account designated for the use of the Committee. XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

•   The Association keeps records of the disbursements from the account for expenses incurred by the Committee. The Association is responsible for several different programs/activities, XXXXX.

•   The Association is a non-profit organization.

Interpretation Requested

You have asked the following question: Is the Committee required to pay the GST/HST on its acquisition of goods and services, or is it relieved of paying the tax?

Interpretation Given

For purposes of the Excise Tax Act (ETA), the person required to pay the GST/HST on the goods and services used by the Committee would be the recipient of those goods and services. If the Committee is not a legal entity, using the criteria set out in Chapter 2.4 of the GST/HST Memorandum, generally it would not be a person for purposes of the ETA and therefore cannot be the recipient of the goods and services.

Explanation

In order to determine whether the Committee is required to pay the GST/HST on its acquisition of goods and services, it must be determined whether it is the recipient of the supply for GST/HST purposes. To make this determination, the following two issues must be addressed.

First issue: Is the Committee a person as defined in section 123(1) of the ETA? If so, what is the tax status of that person?

Second issue: Is the Committee the recipient of the goods and services to be used by the Committee?

In order to meet the definition of person under subsection 123(1) of the ETA, an entity must be "an individual, a partnership, a corporation, the estate of a deceased individual, a trust, or a body that is a society, union, club, association, commission or other organization of any kind". Based on the information you have provided, the Committee is not a person unless it meets the definition of person as a body that is an "organization of any kind".

An "organization of any kind" generally must also be a legal entity in order to be a person under subsection 123(1) of the ETA. A legal entity is defined in Black's Law Dictionary (Sixth Edition) to be "An entity, other than a natural person, who has sufficient existence in legal contemplation that it can function legally, be sued or sue and make decisions through agents as in the case of corporations".

Chapter 2.4 of the GST/HST Memorandum Series, Branches and Divisions, provides a number of guidelines to be used to determine whether or not an XXXXX is sufficiently autonomous to be considered a person for GST purposes. Enclosed is a copy of the memorandum for your review. It should be noted that the guidelines are not necessarily all-inclusive or of equal significance in each particular case. An entity that is not a person cannot be the recipient of the goods and services.

With respect to the second issue as to who is the recipient, please note that the definition of "recipient" under subsection 123(1) of the ETA indicates that where consideration for a supply is payable under an agreement, the "recipient" is the person who is liable under that agreement to pay the consideration. Where there is no agreement, the recipient is the person who is liable to pay the consideration.

Consequently, the person who is invoiced for the goods and services would normally be regarded as the recipient of the supplies unless there is an agreement with the suppliers whereby someone other than the person is liable for the consideration payable. It is the recipient that is required to pay the GST/HST on the acquisition of the goods and services.

If the recipient is also a non-profit organization, and receives government funding for the year that is at least 40% of its total revenue, it would meet the requirements of a "qualifying non-profit organization" as defined in subsection 259(2) of the ETA. Where this is the case, the recipient would be eligible for a rebate of 50% of its non-creditable tax charged as per subsection 259(3) of the ETA. If the Association is the recipient of the supplies acquired by the Committee, and is a qualifying non-profit organization, then that GST/HST rebate would apply on the expenses related to operating the Committee.

For further details on government funding, please see the enclosed Technical Information Bulletin, B-067: Goods and Services Tax Treatment of Grants and Subsidies and the Public Service Body Rebate (GST/HST) Regulations.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-7954.

Yours truly,

K. Chesterman
Aboriginal Affairs Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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