8 December 1998 GST/HST Ruling HQR0001270 - Application of the GST/HST to Membership Fees

Dear XXXXX

Thank you for your letter of July 15, 1998 (with attachment) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of XXXXX[.]

Background Facts

XXXXX is a non-profit organization that produces a national journal for the dissemination of scholarly articles which is available to non-members for a nominal fee. The subscription revenue per year is approximately XXXXX[.] The organization receives additional revenues from grants. XXXXX charges GST on the sale of the subscriptions and on any published materials. It has a membership fee of XXXXX on which GST is not charged and the total revenues from membership fees are approximately XXXXX annually. XXXXX collected GST in the amount of XXXXX for its fiscal year which ended March 31, 1998. Members receive no benefits other than a newsletter, copy of the journal, notices of annual conferences and information pertaining to the conferences.

Ruling Requested

•   Due to the size of its operations, does XXXXX have to collect GST?

•   During the year, XXXXX paid expenses totaling XXXXX of which XXXXX was GST. Can XXXXX claim a rebate?

•   Do we complete Form 34 or 66?

•   Can XXXXX claim rebates retroactively?

Rulings Given

1. Due to the size of its operations, does XXXXX have to collect GST?

Since the annual revenues from XXXXX taxable supplies are approximately XXXXX it qualifies as a small supplier. However, since XXXXX is already registered, the organization is required to charge GST on its taxable supplies and is entitled to claim input tax credits to recover the GST paid on its purchases used to make taxable supplies. A small supplier, may apply to deregister using form GST 11, "Request for Cancellation of Registration", which is available at any Revenue Canada tax services office.

Since there are no exempting provisions that apply to the sale of subscriptions, this supply will be taxable at the rate of 7% (15% in participating provinces) on the value of the consideration for the subscription. XXXXX supplies of memberships are exempt for the reasons outlined below.

Explanation

A "small supplier" refers to an organization that, because of its level of taxable supplies, may choose whether or not to register for the GST. If it chooses not to register, it will not collect GST on its taxable supplies but it would also be precluded from claiming input tax credits (ITCs) in order to recover the tax paid on purchases.

Pursuant to subsection 148(1) of the Excise Tax Act (ETA), a public service body, such as XXXXX is a small supplier if its total revenues for taxable supplies (other than supplies of financial services and sales of capital property) for its previous four quarters or for any particular quarter are $50,000 or less. Where its annual revenues from taxable supplies is $50,000 or less, it may voluntarily register for GST purposes. If its annual revenues from taxable supplies exceeds $50,000, it is required to register for the GST/HST.

With regards to membership fees, please note that a membership in a non-profit organization is generally taxable if the members receive any benefits other than (in summary) the following. These "allowable benefits" are set out under section 17 of Part VI of Schedule V to the ETA.

•   the right to receive an indirect benefit intended to accrue to all members collectively;

•   the right to receive investigation, conciliation, or complaint-settlement services supplied by the body for issues involving members;

•   the right to vote at or participate in meetings;

•   the right to receive or acquire property or services at the fair market value of the property or services at the time of supply by the organization;

•   the right to receive a discount on the fee paid for a supply provided by the organization where the total value of all such discounts to which a member is entitled is insignificant in relation to the membership fee; and

•   the right to receive periodic newsletters.

As indicated by the background facts, since members are not receiving any benefits other than those "allowable benefits" described above, the memberships in XXXXX will be exempt from GST. This is based on our understanding that any discount received by members on the supply of the journal is insignificant in comparison to the membership fee. Accordingly, the organization is not required to charge GST on its membership fees, and will not be entitled to claim ITCs with respect to purchases related to the supply of these memberships.

For your information, please note that non-profit organizations may elect for the exemption under section 17 not to apply, so that its memberships will be taxable. If you are interested in this election, please obtain form GST 23 from your local tax services office.

2. During the year, XXXXX paid expenses totaling XXXXX of which XXXXX was GST. Can XXXXX claim a rebate?

As indicated above, XXXXX is a GST/HST registrant and therefore has to charge the GST/HST on its taxable supplies. It is also entitled to claim ITCs on purchases used in making taxable supplies (i.e. subscriptions). However, XXXXX cannot claim any ITCs on the purchases related to the making of exempt supplies (i.e. memberships).

Some non-profit organizations are eligible for a 50% rebate of the tax paid on purchases in respect of which they are ineligible for ITCs. This is referred to as "non-creditable tax". However, to qualify for the rebate, an organization must be a "qualifying non-profit organization". A qualifying non-profit organization is a non-profit organization that receives at least 40% of its annual revenues in the form of "government funding" in either its current fiscal year or over its two immediately preceding fiscal years.

"Government funding" means an amount of money that is readily measurable and is paid or payable to a non-profit organization by a grantor (e.g. government or municipality) for the purpose of:

(i) financially assisting the organization in carrying out its objectives and not as consideration for supplies made by the organization, or

(ii) payment for exempt supplies of property or services provided to persons other than the grantor or a person related to the grantor.

We trust the information above will assist you in making a determination as to whether XXXXX is a qualifying non-profit organization for any particular fiscal year.

3. Do we complete Form 34 or 66?

Concerning the different forms that you should be using, Form GST 34 is the return for GST/HST registrants. XXXXX should use this form to report the GST that it has collected on its supplies as well as the input tax credits that it is claiming for the GST paid on purchases used to make taxable supplies. Form GST 66 is the rebate form that XXXXX would use to claim a rebate for non-creditable tax for any fiscal year in which it is a qualifying non-profit organization.

4. Can XXXXX claim rebates retroactively?

As a GST/HST registrant, XXXXX ITCs or rebate claims (if it qualifies for rebates) may be submitted within four years following the day that it is required to file a return for the reporting period in which the tax was incurred. Accordingly, with respect to your query, rebates may be claimed retroactively, but must be claimed within the four year timeframe. For example, suppose an organization that is an annual filer incurs tax during its fiscal period ending March 31, 1996. It is required to file its GST/HST return by June 30, 1996, but it has until June 30, 2000 to claim a rebate or ITC in respect of the tax in question.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST 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, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0329.

Yours truly,

Gabrielle Nadeau
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate