File: 11935-6(DRM)
Doc: XXXXX
SS 188(3)(4), s. 5.1, 11/VI/V
XXXXX
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Attention: XXXXX
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July 19, 1995
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I refer to your electronic transmission of December 20, 1994 regarding the application of the Goods and Services Tax (GST) to supplies made by the XXXXX .
Facts
1. XXXXX is a non-profit corporation, and is registered for purposes of the GST.
2. Every year XXXXX hosts a curling bonspiel known as the XXXXX .
3. Posters are circulated to various curling clubs in XXXXX and surrounding area.
4. The posters specify the amount of the entry fee; $ XXXXX , team limit; xx and total cash prize payout; XXXXX .
5. However, the poster does not separately identify the amount of the entry fee to be used as cash prize payout.
ISSUE
1. Would section subsection 188(3) of the Excise Tax Act (ETA) apply in this situation or would subsection 188(4) of the ETA prevail because the contribution "is not separately identified as a contribution to the prizes"?
Response
It is our opinion that subsection 188(4) applies, as XXXXX fails to separately identify, to the competitors in the bonspiel, the amount, if any, of the entry fee that may be considered as a "contribution" to prizes for that event.
For purposes of subsection 188(4), separately identified means that a certain value of the entry fee is distinguished as contributions to prizes. The contributions, whether represented as a percentage of the entry fee or as a specific amount (e.g. XXXXX ) must be shown separate of the entry fee. This information may be shown on the entry form for the event or posters advertising the event, but in either case, must be accessible to all competitors of that event.
For example, if on the posters circulated to advertise the bonspiel, XXXXX had indicated that $ XXXXX of $ XXXXX entry fee is considered as contributions to prizes, the contribution amount of $ XXXXX would not be considered as consideration for a supply in accordance with subsection 188(3).
Subject XXXXX
1. XXXXX hosts the XXXXX XXXXX which is an official event on the World Curling Tour.
2. A majority of the participants who compete on the World Curling Tour play a number of bonspiels (up to fifteen) each year.
3. During the season , a successful team, may win as much as $100,000. However, the average team may win enough to cover entry fees and travel expenses.
4. Many of the top teams have sponsors who provide assistance with their expenses.
5. For purposes of the XXXXX a separate committee and bank account is created, however, any profit or loss from this event is included as a line item in the income statement of XXXXX .
6. Revenue for the bonspiel is derived from the following sources: entry fee, Hat Sale, Raffles and Gate Receipt.
7. Entry fee - The number of competitors is limited to xx teams, each paying an entry fee of $ XXXXX . No posters or entry forms are circulated to the participants, instead a member of the committee, either in person or by phone, contacts potential participants. It is generally understood by the competitors that the entry fee may not be sufficient to cover the total purse paid out. The remaining prize money may be financed by sponsors. In 1993, cash prizes totaled $ XXXXX , and the entry fees were $ XXXXX .
8. Hat Sale - Prior to the bonspiel a hat sale (or calcutta) is conducted. All xx teams are auctioned to the general public. The person with the highest bid per team receives a hat displaying the name of the team. At the conclusion of the bonspiel the individuals with the hats of the top four teams receive 90% of the amount collected from the hat sale. XXXXX retains the remaining 10% of the proceeds from the sale.
9. Raffles - Raffle tickets are sold to participants as well as spectators for $1.
10. Gate Receipt - Spectators to the bonspiel acquire either daily or tournament passes.
ISSUE
1. Would section subsection 188(3) of the Excise Tax Act (ETA) apply in this situation or would subsection 188(4) of the ETA prevail because the contribution "is not separately identified as a contribution to the prizes"?
2. Is the hat sale an exempt supply pursuant to section 5.1 of Part VI of Schedule V to the ETA?
3. Are spectators to the XXXXX required to pay GST on admissions?
Response
1. Subsection 188(4) of the ETA applies as XXXXX fails to separately identify the percentage of the entry fee considered to be contributions to prizes (Please see previous response). Therefore, GST is applicable to the total amount payable as entry fee for the XXXXX .
The fact that the competitors are contacted personally, and that the competitors may be aware that the total of the entry fees collected may not cover the prizes paid out, does not lessen the obligation to separately identify the amount as contribution pursuant to subsection 188(4). Specifically, subsection 188(4) require that the contribution be separately identified. Furthermore, subsection 286(1) of the ETA requires that records, containing sufficient information to attest to the liabilities and obligation under Part IX be maintained. XXXXX must provide documentary evidence that it separately identified to the participants in the event, that a portion, or all, of the entry fee will be paid out as prizes. In other words, XXXXX must provide written evidence (e.g. entry fee, poster) to support subsection 188(4) and for substantiation in accordance with subsection 286(1).
2. The hat sale conducted by XXXXX is an exempt supply as listed in section 5.1 of Part VI of Schedule V to the ETA.
Individuals acquiring the hats at auction, are acquiring a right to participate in a game of chance. Although, several factors (including past performance, sentimentality, ice surface, etc.) may be significant in determining whether an individual bids on a particular team, none of the factors have any bearing on the final results or placement of the teams in the competition. In essence, the greatest determining factor in whether an individual chooses a winning team is luck (chance).
3. A supply of a right to be a spectator at a curling bonspiel is not an exempt supply pursuant to section 11 of the ETA, where any competitor in the bonspiel is determined to be a professional for purposes of the GST, and cash prizes are awarded. It is our opinion that some of the competitors in the XXXXX are professionals, therefore, since cash prizes are awarded, the supply of a right to be a spectator at that event is subject to GST.
The legislation does not define professional in respect of section 11 of Part VI of Schedule V to the ETA, but the Department has adopted the definition and criteria below to assist in determining whether a competitor is a professional.
A professional may be defined as an individual who generally competes in a sport for financial reward. Emphasis should be placed on the term "generally", which will give latitude to the exclusion of individuals who occasionally compete for cash awards. Examples of professional athletes might be professional football players who compete in sports for salary and professional boxers who compete for cash prizes.
The Department may also consider the status of an athlete as determined by a regulatory body such as its national sport association. The criteria established by these regulatory bodies must however, meet our policy of the definition of "professional".
In determining whether an individual is a "professional participant", the following criteria may be considered:
Is there a regulatory body which governs the sport?
Does this regulatory body determine or regulate amateur and professional status for this particular sport?
Do these regulations meet our policy position as defined above?
If there is no regulatory body, or, if regulations established by the regulatory body do not meet policy, then are the athletes who are participants known to compete in similar tournaments for cash?
The Canadian Curling Association does not determine nor does it regulate the "amateur/professional" status of athletes in the sport of curling; therefore, whether competitors in a curling bonspiel are "professional" for purposes of section 11, must be determined solely on the criteria of "an individual who generally competes in a sport for financial reward" and each event must be examined on its own merit.
The Organizers of XXXXX attempt to attract to their competition, the best know players in Canadian Curling. The selection process may be an indication, in an of itself, of the status of the competitors in the event. The participants are not required to "qualify" for the event, instead the teams are personally invited by a member of the organizing committee (a top curler XXXXX ). These participants are known to compete in similar events (including those on the World Curling Tour) for cash prizes. Some of the participants have sponsors who assist with team expenses. Based on these facts, it is our opinion that it is reasonable to conclude that some of the competitors at the XXXXX are professionals.
Regarding the issue of what qualifies as a "reasonable amount" in respect of section 11 of Part VI of Schedule V to the ETA, the determination of whether a prize or gift, etceteras is considered reasonable must be made on a case by case basis. Factors to consider include the amount of the prize pool, the amount awarded to each player or team, and the type of prizes awarded (e.g. cars, etc.).
If you have any other comments or questions, please do not hesitate to contact Joanne Houlahan, Manager, Public Service Bodies, at 954-7945 or Dwayne Moore, Tax Policy Officer at 954-4206.
J.A. Venne
Director
Special Sectors
GST Rulings & Interpretation
c.c.: J. Houlahan
: D. Moore
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