9 July 2007 GST/HST Ruling 80137 - Application of GST to Lease and Sub-Lease Agreements

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 letter, with attachments, XXXXX, with respect to your request XXXXX that the XXXXX be prescribed for the purpose of claiming the federal printed book rebate. We apologize for the delay in responding to your request.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

We understand that:

1. The XXXXX was incorporated XXXXX on XXXXX.

2. The XXXXX became a registered charity as defined by the Income Tax Act effective XXXXX. The XXXXX is also a charity for ETA purposes.

3. The XXXXX was established by the XXXXX to raise and disburse funds for special educational projects that could not otherwise be offered by the XXXXX.

4. XXXXX:

XXXXX.

5. XXXXX.

6. Educators at all elementary and secondary schools served by the XXXXX are invited and encouraged to submit an application for funding for projects that provide innovative, unique and exciting enhancements to curriculum requirements. The XXXXXoffers XXXXX granting periods each year;XXXXX.

7. To qualify for funding from the XXXXX, the project must enhance educational opportunities for students in the XXXXX, support an initiative in XXXXX the focus areas, among other criteria. Project applications are thoroughly reviewed by panels made up of educators, parents and community partners before being approved for funding by the XXXXX Board of Directors.

8. There are no conditions placed by the XXXXX Board of Directors on the panels reviewing project applications that funding must primarily go to projects promoting literacy. There is also no such requirement in the XXXXX governing documents submitted for our review. Approved project funding fluctuates between the various focus areas in each grant period.

9. The XXXXX accepts donations from individuals, corporations and organizations interested in furthering excellence in public education. Donors can request that their donations go toward funding projects in a specific focus area.

10. Printed books for approved projects that are purchased by the XXXXX are delivered to various schools in the XXXXX. The XXXXX provides the books free of charge to the schools.

11. The XXXXX does not operate a public lending library.

Ruling Requested

You are requesting that the XXXXX be prescribed for the purpose of claiming the federal printed book rebate under section 259.1.

Ruling Given

Based on the facts set out above, we rule that the XXXXX is not eligible to be prescribed for the purpose of claiming the federal printed book rebate under section 259.1.

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

Section 259.1 provides for a rebate of 100% of the Goods and Services Tax (GST) or the federal component of the Harmonized Sales Tax (HST) payable by a "specified person" on the purchase of certain printed books, audio recordings of printed books and printed versions of religious scriptures that are acquired or imported for purposes other than for sale. For ETA purposes, a sale is defined to include any transfer of ownership of property including by way of gift or barter.

The definition of a "specified person" under section 259.1 includes, among others, a prescribed charity, the primary purpose of which is the promotion of literacy. Literacy is interpreted as meaning the promotion of basic reading and writing skills.

The term "primary" is not defined in the ETA. Common dictionary meanings of "primary" include: of the first or highest in rank or importance; principal; chief; main; not subordinate. In determining whether the primary purpose of an organization is the promotion of literacy, the Canada Revenue Agency considers the following factors:

•   the purposes and objectives of the organization as set out in its governing documents;

•   how the organization's activities are promoted or advertised (e.g., in its literature, brochures, solicitations, on its web site, etc.); and

•   whether the organization's resources are dedicated primarily (more than 50%) to the promotion of literacy.

Based on the information provided, the primary purpose of the XXXXX is to raise and disburse funds for projects that promote the advancement of education within the XXXXX region. Although the projects the XXXXX approves for funding must be in one or more of the focus areas XXXXX, there is no condition stipulating that its activities or resources be primarily dedicated to the promotion of literacy either in its governing documents, promotional materials or when approving projects for funding.

Therefore, we regret to inform you that the XXXXX is not eligible to be prescribed for the purpose of claiming the federal printed book rebate under section 259.1 as it does not have as its primary purpose the promotion of literacy.

If you require clarification with respect to any of the issues discussed in this letter, please call Nadine Kennedy at 613-952-9592.

Yours truly,

Danielle Laflèche
Director
Public Service Bodies and Governments
Excise and GST/HST Rulings Directorate

2007/07/13 — RITS 84087 — GST on Assignment Fee