27 April 1998 GST/HST Interpretation HQR0000878 - Tax Status of Bible Courses, Videos, and Audiocassettes

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Ottawa ON
 XXXXX                                                                                K1A 0L5              

Dear XXXXX

Thank you for your letters of September 18, 1997, concerning the application of the Goods and Services Tax (GST) Harmonized Sales Tax (HST) to the transactions described below made by XXXXX Based on the information provided, as well as our telephone conversation on February 6, 1998, our understanding of the facts and the transactions is as follows.

Statement of Facts and Transactions

 XXXXX

 XXXXX

 XXXXX

 XXXXX

 XXXXX

 XXXXX has been collecting GST XXXXX and has been remitting it quarterly. XXXXX In addition XXXXX sells various videos XXXXX to educate and counsel the viewer in his or her spiritual life. XXXXX purchases the videos from its parent organization XXXXX and resells them for an amount above their direct cost. The XXXXX pays GST at the border on the import of these supplies. XXXXX also sells various gospel music videos, CDs and audiocassettes to donors. These also contain testimonies and prayers. The XXXXX purchases the videos from its parent organization XXXXX and resells them for an amount above their direct cost XXXXX pays GST at the border on the import of these supplies. XXXXX has been collecting and remitting the GST on its sales of videos, CDs, and audiocassettes.

Rulings Requested

1. What is the tax status of the supplies of Bible home-study courses?

2. What is the tax status of the videos, music videos, CDs and audiocassettes?

The XXXXX is also requesting information on what action it should take regarding the tax it previously collected if this tax was remitted in error on exempt supplies.

Rulings Given

1. Supplies of Bible home-study courses.

Based on the facts set out above, we rule that the supplies of Bible home-study courses are exempt pursuant to section 1 of Part V.1 of Schedule V of the Excise Tax Act ("ETA"). That is, there are no provisions to exclude supplies of donated goods and supplies of courses from the general exemption for charities.

Consequently, the XXXXX is entitled to the 50% charity rebate for the GST it pays on expenses it incurs that are related to the supply of the exempt courses.

2. Supplies of videos, music videos, CDs and audiocassettes.

Based on the facts set out above, we rule that the supplies of the videos, music videos, CDs, and audiocassettes are taxable as they are excluded from the general exemption for charities by paragraph 1(d) of Part V.1 of Schedule V to the ETA and are therefore supplied in the course of a commercial activity. In summary, paragraph 1(d) excludes from the exemption supplies of tangible personal property, other than used or donated goods.

Consequently, as a GST/HST registrant, the XXXXX is required to charge GST on its taxable supplies and remit any resulting net tax as required, but as well may claim input tax credits equal to 100% of the GST it paid or that becomes payable by it, on the expenses it incurs related to the supply of these items; e.g., the GST it paid at the border on the importation of these items.

For your information, we are attaching the text of the general charity exemption under section 1 of Part V.1 of the ETA.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST Memoranda Series. We are bound by these rulings 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 transactions for which you requested a ruling.

Please note that the GST (or the federal component of the HST) does not apply to some imported items which are listed in Schedule VII to the ETA. Section 4 of Schedule VII provides for the non-taxable importation of goods imported by a charity that have been donated to that charity. Although we do not have sufficient information on hand to make a determination, section 4 of Schedule VII may apply to the donated items imported by the XXXXX

Tax Collected and Remitted in Error

In our telephone conversation, you requested additional information concerning tax collected and remitted in error. Please note that subsection 225(1) of the ETA requires any amounts collected in a reporting period as tax in error to be included in a person's net tax for the reporting period.

The ETA does not obligate a supplier to refund or credit an amount collected as tax in error from a customer. However, where a supplier has collected an excess amount of tax, subsection 232(1) of the ETA gives the supplier the discretion to refund or credit the excess amount to its customer, and provides the means by which to do so. Consequently, if the XXXXX collected an amount as tax in error on an exempt supply, the XXXXX may, within two years after the day the amount was so charged or collected, choose to refund or credit the excess tax to its customers.

However, for amounts the XXXXX charged or collected as tax before July 1996, the time limit for refunding or crediting the amount is four years after the end of the XXXXX reporting period in which the amount was so charged or collected, provided such amounts are refunded or credited before July 1998.

If the XXXXX chooses to take this action, then pursuant to subsection 232(3) of the ETA, the XXXXX must, within a reasonable time, issue a credit note to its customers for the amount of the refund or credit. Pursuant to the recently amended Credit Note and Debit Note Information (GST/HST) Regulations, the credit note must contain the following information:

1. a statement that the document is a credit note;

2. the XXXXX name (or business name) and Business Number;

3. the customer's name (or business name);

4. the date on which the note is issued;

5. a brief description of the items;

6. the date of any invoice concerning the credit or refund; and

7. the amount of the refund or credit of tax for which the note is issued.

If the amount refunded or credited has been included in determining net tax for its reporting period in which it issued the credit note, or for a previous reporting period, the XXXXX may deduct that amount in determining its net tax for the reporting period in which it issued the credit note on line 107 of the GST/HST return.

If the XXXXX does not refund or credit the amounts it collected as tax in error from its customers, the customers may apply for a rebate under section 261 of the ETA. Thus, the XXXXX could advise its customers who have paid an amount as tax in error to apply for a rebate using application GST189, General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST). The time limit to apply for such a rebate has recently been reduced from four years to two years after the day the amount was paid by the person. However, for amounts paid before July 1996, the time limit is four years after the day the amount was paid by the person, provided that the person files a rebate application for those amounts before July 1998.

On April 1[,] 1997, the HST replaced the GST and the provincial sales tax in the three participating provinces of Nova Scotia, New Brunswick, and Newfoundland with a harmonized rate of 15%. If you supply goods that are delivered or made available in a participating province, services to be performed in a participating province, or intangible property that may be used in a participating province, to the extent that they are taxable supplies (other than zero-rated supplies), tax must be collected at the harmonized rate.

Should you have any further questions or require clarification on the above matters, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Rulings Officer
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division

Att. Part V.1, Supplies by Charities (section 1)

Legislative References: sections 232 and 261, section 1 of Part V.1 of Schedule V

NCS Subject Codes: R 5 11685-8