2 May 1997 GST/HST Interpretation HQR0000373 - The Application of GST to Money and Services Provided by

                                                                        File: 11925-6

                                                                        Doc: HQR0000373

                                                                        Ref: section 135

                                                                        XXXXX

I am responding to your facsimile of October 11, 1996 to XXXXX concerning the application of GST to money and services provided by XXXXX XXXXX has inquired as to the meaning XXXXX of its agreement with the XXXXX XXXXX of the agreement reads as follows:

The XXXXX acknowledges that all amounts to be paid in accordance with the provisions of XXXXX of this agreement, shall be payable without any deductions of any taxes, charges or expenses whatsoever. Specifically it is agreed that as well as the consideration provided hereunder, the XXXXX shall also pay thereon GST, or such other sales tax or value added tax that may be imposed to replace the GST.

Further, XXXXX is interested in determining whether the GST applies to cash donations and to services it provided to XXXXX pursuant to the agreement.

The information provided by XXXXX is insufficient to provide a GST application ruling. However, we will provide general comments with respect to the subject matter of your letter. Please note, the Department was not a party to the agreement and thus cannot provide comments on the meaning of the particular paragraph of the agreement. If there are any concerns with the application of a particular section of the agreement, those concerns should be addressed to the other participating members. We will however, provide comments as to the possible GST implications.

In the facsimile, the concepts of "sponsor" and "donations" are used in describing XXXXX and the money and services it provides to XXXXX[.] Note, section 135 of the ETA pertain to the supply of, a service or the license to use a copyright, trade-mark, trade-name or similar property by a public sector body (PSB) to a sponsor of an event of the PSB. In accordance with section 135 of the ETA, the supply of the above, by the PSB, is deemed not to be a supply unless it can reasonably be regarded that the consideration for the supply is primarily for a service of advertising by means of radio, or television or in a newspaper, magazine or other publication published periodically. Therefore, where a sponsor gives an amount to a PSB for a supply of a service, or the licence to use the copyright, trade-mark, trade-name, etc. of the PSB, the amount would not be considered to be in respect of a supply unless it is primarily for purposes of advertising by the methods mentioned above. Where the PSB is deemed not to have made a supply to the sponsor, any money, goods or services the sponsor provides to the PSB is treated similar to a donation, i.e., there is no GST consequence.

Where section 135 does not apply to the supply by the PSB, the PSB is required to collect and remit GST on the total value of the consideration payable by the sponsor for a taxable supply. Consideration may be composed of money and/or goods and services that are exchanged in return for the supply by the PSB. In accordance with section 165 and 221 of the ETA, the PSB is required to collect GST on the fair market value of the consideration payable for the supply. Note, in the case where the consideration is other than money, GST is charged on the fair market value of the goods and services provided at the time the supply is made.

Section 223 of the ETA sets out the disclosure of tax requirements for GST registrants who make taxable supply. Pursuant to section 223, a registrant must either indicate clearly on any invoices, receipts, or written agreements issued to customers the net-of-tax price and the GST thereon (identifies the tax separately) or if prices are on a tax-included basis, both the tax rate and the items that are taxable.

The foregoing comments represent our general views with respect to the subject matter of your letter. Future amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. In addition, these comments do not take into account changes to the interpretation of the Excise Tax Act or to departmental administrative policy. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.If you have any questions or comments, please contact me at (613) 9544206.

Dwayne Moore
Rulings Officer
Charities, NPOs and
Educational Services

GST Rulings and Interpretation