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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
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Case Number: 58786
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XXXXX
XXXXX
XXXXX
XXXXXXXXXX
XXXXX
XXXXX
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August 18, 2005
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Subject:
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GST/HST RULING AND INTERPRETATION
XXXXX
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Dear XXXXX:
Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees collected by XXXXX (the Association). We apologize for the delay in our response.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
Statement of Facts
We understand that:
• The Association meets the definition of non-profit organization, as that term is defined in the ETA, and registered for the GST/HST effective XXXXX.
• The mission and objects of the Association are:
a) XXXXX
b) XXXXX
c) XXXXX
d) XXXXX
e) XXXXX
• Membership in the Association consists of the following provincial/regional organizations (collectively referred to herein as "the Provincial Bodies"):
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
• Each Provincial Body is a separate legal entity from the Association and may be suspended for non-payment of fees, be expelled or may withdraw from the Association.
• Since XXXXX the fee for the membership dues in the Association has been set at $XXXXX per XXXXX. XXXXX.
• The By-laws stipulate that the Association's Membership fees shall be collected from XXXXX by the Provincial Bodies in their principal region of operation. These fees are payable to the Association by XXXXX.
• Each Provincial Body shall appoint to the Board of Directors one representative for every XXXXX or portion thereof, to a maximum of XXXXX and each representative present at a meeting shall have the right to exercise one vote.
• The President of each Provincial Body shall be entitled to attend the Association's annual general meeting.
• The Association publishes XXXXX. The magazine is made available free of charge to XXXXX as part of their membership in a Provincial Body and has a cover price of $XXXXX an issue.
• A Provincial Body in good standing may use the full name of the Association, its acronyms and its logo in any manner approved in writing by the Association in advance of said use, along with the term "Member".
• An XXXXX may use only the then current approved logo of the Association in a manner that is approved in writing by the Association in advance of said use and may not use any other item or asset of the Association nor the term "Member" along with the logo.
• The members of the Association are not given any other membership benefits than those previously mentioned above.
• The Association has not made an election under section 17 of Part VI of Schedule V to the ETA to exclude its memberships from the exempting provision in this section.
• Membership in the Association is not required to maintain a professional status recognized by statute.
Ruling Requested
You would like to know if the Association must account for GST/HST on the $XXXXX membership fee.
Ruling Given
Based on the facts set out above, we rule that the $XXXXX membership fee in the Association is exempt from GST/HST. As an exempt supply, there is no GST/HST to collect on the consideration for Association membership fees.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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
Section 17 of Part VI of Schedule V to the ETA exempts the supply of a membership in an NPO (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,
b) the right to receive services supplied by the body that are in the nature of investigating, conciliating or settling complaints or disputes involving members,
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,
e) the right to receive a discount on the value of the consideration for a supply to be made by the body where the total value of all such discounts to which a member is entitled by reason of the membership is insignificant in relation to the consideration for the membership, or
f) the right to receive periodic newsletters, reports or publications the value of which is insignificant in relation to the consideration for the membership, or that provide information on the activities of the body or its financial status, other than newsletters, reports or publications the value of which is significant in relation to the consideration for the membership and for which a fee is ordinarily charged by the body to non-members,
except where the body has made an election under the section in prescribed form containing prescribed information, form GST23 Election by a Public Sector Body to Have Its Exempt Memberships Treated as Taxable Supplies, which is enclosed.
It is the Provincial Bodies who are members of the Association, not the XXXXX. Our understanding is that the benefits received by the Provincial Bodies as a result of their membership in the Association are not beyond what is permitted in paragraphs (a) to (f) as listed above and therefore the membership in the Association is exempt.
Please note that the tax status of the Provincial Bodies' membership in the Association will have no effect on the tax status of a an individual XXXXX membership in any of the Provincial Bodies. The same criteria will have to be applied by each Provincial Body to determine if the membership supplied to individual XXXXX is exempt under section 17 of Part VI of Schedule V. Also, the supply of a membership made by an organization in which membership is required to maintain a professional status recognized by statute is an exempt supply pursuant to section 18 of Part VI of Schedule V. Like section 17, an election is also available under section 18 to make the supply of the membership taxable by completing and retaining form GST24 "Election to Tax Professional Memberships." This form may be obtained from the local Canada Revenue Agency office or on our web site at www.cra.gc.ca.
Based on the information provided we are unable to provide a ruling on the Association's entitlement to input tax credits (ITCs), but have enclosed the following interpretation on the subject.
Interpretation Given
Generally, a GST/HST registrant is entitled to an input tax credit for the GST/HST paid on property or services acquired for consumption, use or supply in the course of the registrant's commercial activities. Commercial activity does not include the making of exempt supplies. Consequently, no ITCs are allowed with respect to inputs to exempt supplies made by a GST/HST registrant. Generally, where goods or services are used partly for making exempt supplies and partially for making taxable supplies, registrants are entitled to partial ITCs to the extent that the inputs are for use in making taxable supplies. We have included guide RC4022(E) General Information for GST/HST Registrants, which provides further details on ITC eligibility.
Although the Association has registered, registration for GST/HST is only mandatory under certain conditions. In general, every person who makes a taxable supply in Canada in the course of a commercial activity is required to register for the GST/HST unless the person is a small supplier. An NPO is a small supplier if its taxable revenues (before expenses) from all their businesses (including associates) is $50,000 or less in the last four consecutive calendar quarters or in any single calendar quarter. An NPO who is a small supplier and is engaged in commercial activity in Canada can voluntarily register for the GST/HST. If the NPO decides to register it must collect and remit GST/HST on its taxable supplies and is eligible to claim ITCs related to its taxable activities, as previously discussed.
An NPO that is a small supplier and no longer wishes to be registered for the GST/HST may apply to deregister using form RC145 Request to Close Business Number (BN) Accounts, which is available on our web site at www.cra-arc.gc.ca. Generally, a request to cancel a registration is processed effective the last day of a fiscal year provided the person is a small supplier and has been registered for at least one year ending on that date. There are certain requirements to be considered when cancelling your registration. The Business Window agents of the Canada Revenue Agency would be happy to provide you with deregistration information at 1-800-959-5525.
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, Goods and Services Tax Rulings, 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) 954-4206.
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
2005/07/29 — RITS 59279 — Application of the GST to the Construction of a New Home
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