GST/HST/HST Rulings and
Interpretations Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX K1A 0L5
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XXXXX
XXXXX
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November 19, 1997
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Subject:
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GST/HST INTERPRETATION
Bingo XXXXX Entitlement To Rebate
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Dear Mr. O'Neill:
This is in response to a letter dated November 20, 1996, (with attachment) to XXXXX concerning XXXXX bingos held by a bingo association. XXXXX has asked that we respond to your query.
We understand the following from your letter and from the XXXXX when applying to obtain a licence to conduct a XXXXX bingo game, the bingo association must include in the application package, its governing documents and a list of its member organizations;
• the XXXXX bingo game is operated by (a) a member of a bingo sponsor's association licensed to conduct a XXXXX game which is also conducting the regular bingo event or (b) the licensee which is conducting the regular bingo event;
• the association deposits proceeds from the XXXXX bingo game in a XXXXX lottery trust account opened by the association to administer the particular XXXXX licence;
• the association withdraws by cheque only (i) expenses (including GST/HST) incurred in the conduct of the XXXXX game, (ii) the payment of prizes and (iii) the disbursement or net proceeds to its member organizations participating in the particular XXXXX licence;
• the proceeds (including interest accrued on the account) received by the association's member organizations shall be used only for the (charitable) purposes listed and approved on the concurrent regular bingo licence;
• the association does not retain any proceeds from the XXXXX bingo game.
It is our understanding that such an association claimed rebates for the GST/HST paid on expenses, the total amount of which was distributed to its member organizations. The rebates were subsequently disallowed by the Department on the basis that the association is not a charity for GST/HST purposes.
Interpretation Requested
Is an unincorporated association made up of charitable organizations entitled to a Goods and Services Tax (GST)/Harmonized Sales Tax (HST) rebate with respect to expenses incurred to operate a XXXXX bingo game?
Interpretation Given
Unless it is a charity or qualifying (i.e. government funded) non-profit organization, an unincorporated association made up of charitable organizations is not entitled to a GST/HST rebate with respect to GST/HST paid on expenses related to a XXXXX bingo game. On this basis it would not appear that the association which is regarded as a separate legal entity or separate "person" from its member organizations, is eligible for rebates.
Based on the facts provided, XXXXX bingo revenues are being earned on behalf of the association's member organizations. That is, the association is making supplies of bingo cards on behalf of its member organizations. Indicative of this is the fact that bingo revenues are held in a trust account. Furthermore, all proceeds from the XXXXX bingo game are disbursed by the association to its member organizations (once expenses are paid and prizes awarded). Finally, the proceeds received by the member organizations must be used for the (charitable) purposes listed and approved on the licence held by the member organization for its regular bingo games held concurrently with the XXXXX bingo game. GST does not apply to the distribution of net proceeds of the XXXXX bingo game to association member charities and non-profit organizations.
The sale of a bingo card by a charity or a non-profit organization (other than a prescribed person) is exempt in accordance with section 1 of Part V.1 and section 5.1 of Part VI of Schedule V to the Excise Tax Act (ETA), respectively. It should be noted that where the activities of an organization involve solely the making of exempt supplies, the organization is not entitled to register for GST/HST purposes, nor is it entitled to claim input tax credits for the GST/HST paid on its purchases.
Pursuant to section 259 of the ETA, a charity or a qualifying non-profit organization is entitled to a rebate for non-creditable tax charged. "Non-creditable tax charged" is determined as the total of all tax that became payable on a property or service during a reporting period less the total of all input tax credits of the claimant for that tax with some adjustments to the total. In order to qualify for a rebate of "non-creditable tax charged" a non-profit organization must receive at least forty percent of its annual revenue as "government funding". Generally, the rebate is available only on taxable purchases made directly by the eligible charity or non-profit organization. An association that is not a charity nor a qualifying non-profit organization is not entitled to a rebate of "non-creditable tax charged".
On a related matter, it appears that the association is not incurring expenses on behalf of its members. Rather, it appears that it is incurring expenses in its own right for the purpose of making supplies of conducting bingo events to its member organizations. These appear to be taxable supplies, assuming that the association receives consideration for them such as advances and reimbursements to offset its expenses. In this situation the association may register for the GST (it is required to do so if its annual taxable supplies exceed $30,000), collect GST on the advances and reimbursements, and claim input tax credits for the GST paid on its purchases.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. It is our understanding that none of the above issues is currently under audit, objection, or appeal. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0420.
Yours truly,
Lorrie Grannary
Charities, Non-profit Organizations & Educational Sector Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate
c.c.: J.A. Venne
J. M. Place
L. Grannary
XXXXX
Subject File
Legislative References: s. 1, Part V.1; s. 5.1, Part VI of Sch. V
NCS Subject Code(s): I - 118301
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