5 January 2006 GST/HST Ruling 48591 - Application of the GST/HST to the purchases and supplies of the 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 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 the XXXXX is an unincorporated interjurisdictional association of XXXXX.

2. In the XXXXX Financial Statements of the XXXXX:

"The 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. The 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 the 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. The XXXXX Financial Statements of the 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

23. XXXXX.

Ruling Requested

You would like to know if the XXXXX could be considered to be exempt from paying and collecting the GST/HST. If not, you would like to know if the 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

1. The XXXXX is not exempt from paying the GST/HST.

2. The XXXXX is not entitled to claim the GST/HST Public Service Body Rebate available to qualifying non-profit organizations.

3. The 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 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

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, the XXXXX is required to pay the GST/HST on its taxable purchases. XXXXX.

The XXXXX makes supplies of memberships to a select group of persons. The Regular Members are required to pay an assessed amount or risk losing their membership status. There is a direct link between the supply of those memberships and the assessments paid by the Regular Members. As a result, the assessments are consideration for the supply of the membership. The flat fee charged to the Associate Member is also consideration for the supply of a 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 the XXXXX fit the exempting provision in section 17 of Part VI of Schedule V to the ETA. For this reason, the XXXXX is not required to collect tax on the supplies of memberships it makes to its members. However, the XXXXX is unable to claim input tax credits for the GST/HST incurred in relation to the supply of its memberships.

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^[xlii]1. Since no election is filed, the XXXXX is not required to collect tax on the supply of its memberships.

If an election were filed, the 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.

As it has been determined that the assessments are consideration for an exempt supply made to the members, the assessments cannot be considered government funding, the XXXXX is not a qualifying NPO and therefore is not eligible to claim a GST/HST Public Service Bodies Rebate.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-0329.

Yours truly,

Trent MacDonald
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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