GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Ottawa, ON K1A 0L5
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Subject:
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GST/HST APPLICATION RULING
XXXXX
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Dear XXXXX
Thank you for your letter of April 2, 1997, with attachments, in which you requested a ruling with respect to the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the administrative fees and non-member equalization payments ("equalization payments") paid by XXXXX producers to the XXXXX
Our understanding of the facts and the transactions is as follows.
Statement of Facts
XXXXX is a trade union recognized and registered under the laws of the XXXXX is not registered for the purposes of the Excise Tax Act ("ETA"). XXXXX has neither charged GST nor claimed any rebates or input tax credits for GST it paid.
XXXXX membership consists of many XXXXX performers residing and working in XXXXX . Each performer who is a union member pays membership dues to XXXXX as set by the elected council of XXXXX negotiates and enters into collective agreements recognized under the laws of XXXXX on behalf of its members with XXXXX producers as well as other corporate and non-corporate entities. These collective agreements provide that XXXXX becomes the exclusive bargaining agent for specified categories of performers whose services are contracted for by a particular producer.
XXXXX administers the negotiated collective agreements for the benefit of its members. Its members may or may not be employees of the producer; that is, members may be self-employed performers.
6. The XXXXX provided describes the obligations of the producer and the obligations of and benefits conferred on the XXXXX of the Agreement, "Obligations of Producer," requires the producer to "assist in defraying the costs of administering the terms of the Agreement by paying an administration fee to the XXXXX The administration fee is XXXXX of the Gross Fees paid to all performers (both members and non-members) engaged for the production of a program. For XXXXX productions, the administration fee is XXXXX of the Gross Fees paid to all performers.
8. "Gross fees" are defined on XXXXX of the Agreement as "the total compensation paid to a Performer during the production of a Program" with certain exclusions, such as travel allowances.
9. XXXXX of the Agreement, "Performer Benefits," describes the insurance and retirement programs administered by XXXXX for the benefit of union members and stipulates that these programs are to be funded by payments made by the producer to XXXXX "Equalization Payments," requires the Producer to contribute to XXXXX an amount equal to XXXXX of the Gross Fees (inclusive of Use Fees) payable to all such performers; and for XXXXX productions, the amount is equal to XXXXX of the Gross Fees (inclusive of Use Fees) payable.
11."Use Fees" are defined on XXXXX of the Agreement as including "residuals, prepayment of residuals, royalty payments, and other payments made as a result of sale, trade, rental, distribution, or other exploitation of a Program, an audio or visual segment of a Program, or its characters, and includes all payments or fees contemplated by XXXXX ("Distribution Rights, Residual Fees, Prepaid Use Rights and Royalties") of this Agreement."
12. XXXXX , "The Plans," provides that the "funds payable to the union pursuant to this Article including, without limitation, the equalization payments, may be used and applied by the Union in such manner and for such purposes as may be determined in the sole and absolute discretion of the Union. For greater certainty, the equalization payments belong exclusively to the Union."
13. Pursuant to XXXXX of the Constitution XXXXX , one of the aims and objectives of the union is to "regulate relations between employers and employees through collective bargaining in the XXXXX of the Canada Labour Code defines a "trade union" as "any organization of employees, or branch or local thereof, the purposes of which include the regulation of relations between employers and employees."
Rulings Requested
1. Is XXXXX required to collect and remit GST to Revenue Canada with respect to the administration fee paid by the XXXXX to XXXXX required to collect and remit GST with respect to the equalization payments made by the XXXXX to XXXXX
Rulings Given
1. Based on the facts set out above, we rule that the administration fee payable by the XXXXX is consideration for an exempt supply pursuant to subparagraph 189(a)(i) of the ETA and therefore XXXXX is not required to collect tax on this fee.
2. Based on the facts set out above, we rule that the equalization payments by the XXXXX are consideration for an exempt supply pursuant to subparagraph 189(a)(i) of the ETA and therefore XXXXX is not required to collect tax on these payments.
This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act ("ETA"), or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.
Rationale
The union, XXXXX negotiates collective agreements with various XXXXX and these agreements set out the obligations of the Producer and the wage and benefit plans designed and administered by XXXXX for the benefit of union members. Pursuant to these agreements, XXXXX are required to make payments (e.g., the administration fee and the equalization payment) to XXXXX to assist XXXXX in administering the provisions of the agreements. Pursuant to subparagraph 189(a)(i) of the ETA,
"... where an amount is paid by a person to an organization as
(a) a membership due paid to a trade union defined
(i) in section 3 of the Canada Labour Code ...
... the organization shall be deemed to have made an exempt supply to the person and the amount shall be deemed to be consideration for the supply."
XXXXX is a "trade union" as defined in XXXXX of the Canada Labour Code (see Fact 14) as one of its aims and objectives, as noted in Fact 13, is to "regulate relations between employers and employees through collective bargaining in the XXXXX pay membership dues to the organization, which is a trade union. Accordingly, on the basis of the above ETA provision, XXXXX is deemed to have made an exempt supply to its members. In our view, the amounts paid by the producers at issue represent membership dues and therefore consideration for that deemed exempt supply to the members, notwithstanding that the amount is paid by the producers. That is, pursuant to the terms of the collective agreement, the producers have undertaken to pay part of the consideration for services (deemed to be exempt) provided by the union to its members.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.
Yours truly,
Susan Eastman
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
File no. 11925-9
c.c.: XXXXX
b.c.c.: J.A. Venne
M. Place
S. Eastman
Legislative References: Excise Tax Act, sections 123(1), 165(1), 189, 221(1)
Canada Labour Code, sections 3, 25, 70, 94
NCS Subject Code(s): R 9
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