26 October 1998 GST/HST Interpretation HQR0001284 - Tax Status of Membership Clubs

This is concerning an interpretation letter your office forwarded to us for review on August 10, 1998, concerning XXXXX and its member clubs. During our conversation on August 20, 1998, you advised that Mr. XXXXX confirmed that the member clubs were all independently owned and operated and that each club is responsible for its own finances, operations and human resources activities. Furthermore, he confirmed that the XXXXX has no propriety interest in any profits, nor liability for any losses of the clubs.

We believe that there are sufficient facts for you to issue an application ruling. We suggest that you amend your letter to reflect this fact and, as your letter is already in the form of a ruling, this would only require minor changes.

We generally agree with the content of your draft reply, including your conclusion that the member clubs of XXXXX are separate legal entities. However, we suggest that you emphasize that, under tax administration, a club could not be a "branch or division" of a body, and at the same time be a separate legal entity.

Although the following points are outlined in your facts, and assuming you will be providing explanations for your ruling, you may wish to reiterate the following facts as the reasons for ruling that the clubs are separate persons:

•   the member clubs are "independently owned and operated";

•   each club is responsible for its own finances, personnel and operations;

•   XXXXX is not responsible for any losses of the clubs, nor entitled to any part of the profits;

•   the member clubs are established independently; they are not created or established under the governing documents of XXXXX[;]

•   the governing documents of XXXXX provide that XXXXX Executive members and appointed officers may act in advisory capacity only to any member club."

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

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