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 0L5XXXXX
XXXXX
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XXXXXXXXXX
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Case Number: 48589January 5, 2006
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Subject:
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GST/HST APPLICATION RULING
Application of the GST/HST to the purchases and supplies of the 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 the affairs of the XXXXX. We apologize for the delay in responding to your request.
Statement of Facts
Our understanding of the facts is as follows:
1. You have stated that XXXXX is an interjurisdictional organization that was federally incorporated in XXXXX as a not-for-profit association. XXXXX established a permanent XXXXX jointly funded by all member jurisdictions. The XXXXX will combine research, project management and administrative support for XXXXX initiatives.
2. In the XXXXX Financial Statements XXXXX:
"XXXXX is a not-for-profit organization as defined under the Income Tax Act and, therefore, no income taxes are provided for in these financial statements."
3. XXXXX meets the definition of non-profit organization in subsection 123(1) of the Excise Tax Act (ETA) because it was organized solely for non-profit purposes, it is in fact operated solely for non-profit purposes, and it does not distribute or otherwise make available for the personal benefit of any member any of its income unless the member is an association which has as its primary purpose and function the promotion of amateur athletics in Canada.
4. From our records, it is established that XXXXX is not registered for purposes of the GST/HST and has not elected to have supplies of memberships be taxable under section 17 of Part VI of Schedule V to the ETA.
5. XXXXX.
6. XXXXX.
7. XXXXX.
8. XXXXX.
9. XXXXX.
10. XXXXX.
11. XXXXX.
12. XXXXX.
13. XXXXX.
14. XXXXX.
15. XXXXX.
16. XXXXX.
17. XXXXX.
18. XXXXX.
19. XXXXX.
20. XXXXX.
21. XXXXX.
22. XXXXX.
23. XXXXX.
24. XXXXX.
25. XXXXX.
26. XXXXX.
27. The XXXXX Financial Statements XXXXX list three entries under revenues on the Statement of Revenues and Expenses. For the year ended XXXXX,
Membership dues
XXXXX
Associate membership dues
XXXXX
Investment Income
XXXXX
28. XXXXX.
29. In the provided XXXXX for the years XXXXX and XXXXX that you have stated were fixed for a XXXXX-year period, the total amount of assessments equalled $XXXXX. You also stated that the XXXXX Associate Members pay an annual membership fee of $XXXXX for a total of $XXXXX.
Ruling Requested
You would like to know if XXXXX could be considered to be exempt from paying and collecting the GST/HST. If not, you would like to know if XXXXX is entitled to a GST/HST Public Service Bodies Rebate of 50 percent of the GST/HST it pays.
Ruling Given
Based on the facts set out above, we rule that XXXXX is not exempt from paying the GST/HST. Additionally, XXXXX is not entitled to claim the GST/HST Public Service Body Rebate available to qualifying non-profit organizations. XXXXX supplies of memberships are exempt from the GST/HST, and therefore there is no obligation to collect GST/HST on those supplies, however, the organization has options in that regard that are explained below.
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 Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.
Explanation
Every recipient of a taxable supply made in Canada is required to pay tax in respect of the supply on the value of the consideration for the supply. As a recipient of taxable supplies, XXXXX is required to pay the GST/HST on its taxable purchases. XXXXX.
XXXXX makes supplies of memberships to a select group of persons. Although the by-laws indicate that there are no membership dues, members may be required to resign for non-payment of the annual assessment. Additionally, the financial statements clearly label the assessments as membership dues and account for them as revenue from memberships. For these reasons, the assessments paid by those members to XXXXX are consideration for the supply of the membership.
The supply of a membership by a non-profit organization is an exempt supply where certain conditions exist. After reviewing the facts, it is our conclusion that the supply of memberships by XXXXX fit the exempting provision in section 17 of Part VI of Schedule V to the ETA. For this reason, XXXXX is not required to collect tax on the supplies of memberships it makes to its members. However, under section 17 of Part VI of Schedule V to the ETA the non-profit organization may elect to make its memberships taxable by completing form GST 23 - Election by a Public Sector Body to Have its Exempt Memberships Treated as Taxable Supplies [xl]1.
Since no election is filed, XXXXX is not required to collect tax on the supply of its memberships. However, XXXXX is unable to claim input tax credits for the GST/HST incurred in relation to its memberships. As XXXXX is not eligible to claim the Public Service Bodies Rebate because it does not meet the 40% government funding requirement, it is not able to gain any relief from the GST/HST it paid in the course of its business.
If an election were filed, XXXXX would be required to register for purposes of the GST/HST, to collect tax on the supply of the memberships, and would be eligible to claim input tax credits for the GST/HST paid in relation to the supply of those memberships.
XXXXX.
Additional Information
It was noted in our telephone conversation XXXXX that XXXXX is not paying the GST/HST on amounts charged back to XXXXX by XXXXX for overhead and salaries paid on their behalf. If it were found that XXXXX is receiving a single supply of administration services from XXXXX, no exemption would exist that would preclude XXXXX from charging tax on any amounts charged back to XXXXX. It is possible that XXXXX should be charging the GST/HST on the full amount charged back to XXXXX for the services provided under the agreement described above XXXXX. We have enclosed Policy Statement P-077R2 Single and Multiple Supplies to assist you in determining the nature of the transaction.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0329.
Yours truly,
Trent MacDonald
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate
2006/01/05 — RITS 48590 — [Application of the GST/HST to the Purchase and Supply of Memberships]
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