11 June 1997 GST/HST Interpretation HQR0000608 - PROPOSED LAW/REGULATION HST on Membership Fees

                                                                        Sch. IX/III/2

Dear XXXXX

Thank you for your letter of March 19, 1997 concerning the application of the Harmonized Sales Tax (HST) to your supplies of memberships. The additional information you provided by phone was appreciated.

You have indicated in your letter and by phone that the XXXXX is a non-profit national trade association with members across Canada. Your head office is located in XXXXX and the majority of the work you conduct is on a national level.

Most members of the association are corporations with the exception of a few individuals.

Interpretation Requested

You have requested a confirmation that 7% GST would apply to the supply of a membership to your members in the participating provinces.

Interpretation Given

Pursuant to section 2, Part III of Schedule IX to Excise Tax Act (ETA), a supply of intangible personal property is made in a province if the place of negotiation of the supply is in the province and the property can be used otherwise than exclusively outside the province. "Place of negotiation" of a supply means the location of the supplier's permanent establishment at which the individual principally involved in negotiating for the supplier ordinarily works or reports. Negotiating for the purposes of this definition includes the making or acceptance of an offer. You have indicated that the permanent establishment of the XXXXX is located in XXXXX therefore, the place of negotiation is XXXXX[.] Since the place of negotiation of the supply is in XXXXX and the membership can be used throughout Canada, the place of supply would be in XXXXX[.] Memberships supplied by XXXXX to persons other than individuals in Canada would be GST taxable at 7%.

The foregoing comments represent our general views with respect to the subject matter of your letter. These comments are not rulings and, in accordance with the guidelines set out in GST Memoranda Series (1.4), do not bind the Department with respect to a particular situation.

The proposed draft regulations published in March 1997 include the prescribed supply of a membership made to an individual. Pursuant to section 6 of the draft (place of supply) regulations, the place of supply of a membership is considered to be made in a province if the mailing address of the individual is in the province. Supply of a membership made to an individual including a sole proprietor with a mailing address in the participating provinces would be HST taxable at 15%. This rule overrides the general place of supply rules in Part III of Schedule IX.

The foregoing comments represent our general views with respect to the proposed amendment to the Excise Tax Act as it relates to the subject matter of your letter.

In your letter you made reference to XXXXX XXXXX[.] Please note that the participating provinces are XXXXX is not a participating province.

Please contact me at (613) 952-8532 if you have any questions or require further information.

Yours truly,

Leslie White
Border Issues Unit
General Operations and Border Issues Division
GST Rulings and Interpretations

Legal References:

Authority:                               Part III of Schedule IX to the ETA

Reference:                               Draft Regulations and Legislation Relating to the HST and GST

b.c.c.:   hard copy - R/F GST - XXXXX