File 11830-9(EB)
Doc. 1043
Leg Ref. s. 135
XXXXX January 3, 1995
Background
A woman runs a desk top publishing business. She carries on activities to promote literacy, solicits funds from local businesses (feed stores, credit unions, etc.) and provides books free of charge to school children. The school principal gives her the names of individual children and she inserts a child's name in the book so that the child becomes the hero of the story. The books are then given to the children free of charge.
The inside cover of each book shows the business cards of the sponsors who provided money to the publisher. Recognition is made of their support but no mention is made of their products or services - simply their names, addresses and telephone numbers.
This is not a situation where section 135 applies as the publisher is not a public service body. The publisher has registered for the GST, she claims ITC's and wants to know whether she should be charging and remitting GST on the amounts given to her by the sponsors.
Question:
Do these amounts represent consideration for a supply, or a gift, because the publisher simply recognizes their support in the books and does not really seem to be providing a service of advertising? How should we approach this question?
Response
We first need to establish whether the individual is carrying on a commercial activity. For example, an individual that is carrying on a business with no expectation of profit will not be engaged in a commercial activity. Therefore, additional questions need to be asked concerning the scope of her activities.
If the facts indicate that she is not carrying on a commercial activity, then she will not be required to charge tax on amounts given to her by sponsors of the book program. This of course would also mean that she should not be registered for the GST and is not entitled to claim ITC's for the GST paid on her purchases.
If she is carrying on a commercial activity then we must look to the ETA to see if there is anything that addresses this kind of situation.
Section 135 provides a specific deeming provision for promotional services or intangible rights provided by psb's in return for sponsorships. Therefore, it appears that the absence of such a provision means that when a for profit business provides financial assistance to a registrant who in turn provides promotional services (even limited promotion as in this case) then the amount paid by the sponsor represents consideration for a supply.
As it appears no other provision would deem that a supply has not taken place in this circumstance, GST should be charged on amounts paid by the sponsors for advertising services provided by the individual supplying the books (assuming she is engaged in a commercial activity).
I hope that this will be of assistance. Please contact me if you would like to discuss this further.
Elaine Bonnah
GST Policy and Legislation
MUSH/NPO's and Charities Group
Email this Content