9 June 2006 GST/HST Interpretation 62036 - Paying or crediting an amount on account of the short-term accommodation rebate

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:

We are writing in response to the letter XXXXX from your representative at XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by the XXXXX (the Society). 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.

The Minister of Finance announced in the Federal Budget of May 2, 2006, a proposal to reduce the rate of the GST and the federal portion of the HST by 1%, effective July 1, 2006. The general rule is that the rate of GST will be reduced from 7% to 6% and the rate of the HST from 15% to 14% on supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the CRA Web site.

Statement of Facts

We understand that

1. The Society was incorporated to XXXXX (the Games) XXXXX.

2. Your representative has indicated that the Society meets the definition of non-profit organization, as that term is defined in subsection 123(1).

3. The Society is a GST/HST registrant XXXXX.

4. The Society will sell admission tickets to the Games' opening and closing ceremonies. These ceremonies will include paid participants. The advertising and promotional material for the opening and closing ceremonies will feature the paid professional participants.

5. The Society will sell admission tickets to the various athletic and competitive events that encompass the Games. None of the athletes or competitors are remunerated for their participation in the Games. Cash prizes are not awarded to athletes or competitors.

6. The Society will sell admission tickets to various cultural events that will include paid professional participants. The advertising and promotional material for these events will feature the paid professional participants.

7. The price of all admission tickets will be over $1.00.

8. The Society will sell various souvenirs (e.g., pins, shirts, and postcards) prior to and during the Games. It is anticipated that the Society will have retail locations at various venues for the period of the Games. The Society will normally sell the goods for a price above the Society's direct cost. As a GST/HST registrant, the Society will charge GST/HST on these sales.

Ruling Requested

You have asked us to confirm the following:

i) The Society's supply of the admission tickets to the opening and closing ceremonies is a taxable supply and will be subject to the GST.

ii) The Society's supply of admission tickets to the cultural events is a taxable supply and will be subject to GST.

iii) The Society's supply of the admission tickets and passes, with the exception of those noted above for the opening and closing ceremonies as well as cultural events will be an exempt supply

iv) The Society's supply of the merchandise, as described in paragraph 8 above, will be subject to GST.

Ruling Given

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

i) The supply of the admission tickets (i.e., right to be a spectator) to the Games' opening and closing ceremonies is a taxable supply by the Society and subject to GST at the rate of 7%.

ii) The supply of the admission tickets (i.e., right to be a spectator) to the Games' various cultural events is a taxable supply by the Society and subject to GST at the rate of 7%.

iii) The supply by the Society, of the admission tickets and passes (i.e., the right to be a spectator at the various athletic and competitive events), is an exempt supply pursuant to section 11 of Part VI of Schedule V.

iv) The supply of the merchandise sold prior to and during the Games is a taxable supply by the Society and subject to GST at the rate of 7%.

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 11 of Part VI of Schedule V exempts the following type of supply:

A supply of a right to be a spectator at a performance, athletic event or competitive event, where all or substantially all of the performers, athletes or competitors taking part in the performance or event do not receive, directly or indirectly, remuneration for doing so (other than a reasonable amount as prizes, gifts or compensation for travel or other expenses incidental to the performers', athletes' or competitors' participation in the performance or event, or grants paid by a government or a municipality to the performers, athletes or competitors), and no advertisement or representation in respect of the performance or event features participants who are so remunerated, but does not include a supply of a right to be a spectator at a competitive event in which cash prizes are awarded and in which any competitor is a professional participant in any competitive event.

None of the athletes or competitors in the Games athletic and competitive events are remunerated for taking part in the events. Further, cash prizes are not awarded to the competitors of the competitive events at the Games. As a result, the supply of the right to be a spectator at the various athletic and competitive events is an exempt supply pursuant to section 11 of Part VI of Schedule V.

Given that the Games' opening and closing ceremonies and the various cultural events will include paid professional participants and the advertising and promotional material for these events will feature the paid professional participants, the supply is not exempt under section 11 of Part VI of Schedule V. As there is no other provision that will exempt the supply and the Games is a GST/HST registrant, the supply of the right to be a spectator (i.e., the admission tickets) at these events by the Society will be subject to GST at the rate of 7%.

As there is no provision that will exempt the supply of the souvenirs and the Society is a GST/HST registrant, the Society will be required to collect GST at the rate of 7% on these supplies made in the XXXXX.

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

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