6 June 2007 GST/HST Ruling 81993 - Application of GST/HST on Fundraising Event With a XXXXX as a Prize

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 fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a fundraising event with a XXXXX as a prize.

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

Statement of Facts

We understand the facts in this case as follows:

•   The XXXXX (the Charity) sold tickets for a XXXXX draw with a prize of a XXXXX (the Prize).

•   XXXXX (the Supplier) agreed to provide the Prize to the prizewinner and the Charity agreed to pay the Supplier $XXXXX plus HST for the Prize. The agreement between the Charity and the Supplier (the Agreement) did not provide an option for the Supplier to give the prizewinner a cash prize.

•   The prizewinner had recently purchased the same XXXXX and preferred to receive cash. The prizewinner contacted the Charity and the Charity suggested the prizewinner contact the Supplier to see whether arrangements could be made with the Supplier.

•   The Supplier made arrangements with the prizewinner to provide the prizewinner with cash instead of the Prize.

•   The Charity paid the Supplier $XXXXX (the amount originally agreed upon as consideration for the Prize). Neither the Charity nor the prizewinner took possession or title of the Prize.

•   The Supplier is registered for GST/HST purposes.

Ruling Requested

Does GST/HST apply to the Charity's payment to the Supplier?

Ruling Given

Based on the facts set out above, we rule that the Charity's payment to the Supplier is consideration for the supply of the Prize and the Charity is required to pay HST on that consideration.

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 133 provides that, where an agreement is entered into to provide property, the entering into of the agreement is deemed to be a supply of the property made at the time the agreement is entered into. As a result, the Charity's payment to the Supplier is consideration for the supply of the Prize even though the prizewinner arranged with the Supplier to receive cash instead of the Prize.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8226.

Yours truly,

Corinne Campbell-Rosser
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/05/23 — RITS 82739 — Notion of "Associated Persons" Section 127 Excise Tax Act