GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Ottawa ON
XXXXX K1A 0L5
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XXXXX
XXXXX
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April 27, 1998
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Subject:
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GST/HST APPLICATION RULING
Tax Status of Cash Sponsorships of the XXXXX
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Dear XXXXX
Your ruling request of July 18, 1997 made to our XXXXX Tax Services Office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sponsorships received by XXXXX for the XXXXX conference was forwarded to us for a reply. Our understanding of the facts is as follows.
Statement of Facts
1. XXXXX is a non-profit organization that provides education material on issues regarding the XXXXX industry through news bulletins, educational packages, and a conference every XXXXX .
2. XXXXX is currently organizing XXXXX . A registration fee of XXXXX plus GST will allow individuals to participate in XXXXX days of seminars, admission to a trade show, meals and refreshments. An exhibit booth at the trade show can be rented for XXXXX is soliciting cash sponsorships for XXXXX . In exchange for their sponsorships, sponsors receive the following supplies:
a) right to provide information or promotional items in the registration kits;
b) express registration and conference check-in;
c) recognition on signage, promotional brochures and other conference documents;
d) sponsor's profile included in the final conference program.
4. In addition to supplies above, each level of sponsorship has various other privileges, levels of exposure, and recognition. These additional sponsorship features include:
a) Joint Venture Team (Cash sponsorship of XXXXX or more):
• full page advertisement in the final program;
• opportunity to XXXXX
• opportunity to make a brief presentation to conference delegates affirming sponsor's support of the XXXXX industry;
• five complimentary conference registrations, with an additional complimentary registration for each additional XXXXX
• opportunity to add XXXXX to the sponsor's Internet home page;
• opportunity to incorporate XXXXX into the sponsor's print materials;
• recognition in all media releases;
• all benefits of the XXXXX level (see below).
b) XXXXX (Cash sponsorship of XXXXX
• complimentary hospitality suite (one night);
• complimentary exhibit booth XXXXX value);
• four complimentary registrations XXXXX value);
• early and final registration lists of delegates and exhibitors.
c) XXXXX (Cash sponsorship of XXXXX
• complimentary hospitality suite XXXXX
• complimentary exhibit booth XXXXX value);
• three complimentary registrations XXXXX value);
• early and final registration list of delegates and exhibitors.
d) XXXXX (Cash sponsorship of XXXXX
• complimentary exhibit booth XXXXX value);
• two complimentary registrations XXXXX value).
e) XXXXX (Cash sponsorship of XXXXX
• one complimentary registration XXXXX value).
5. For sponsorships under XXXXX , sponsors receive recognition at the conference and in the final program.
6. The complimentary registrations and exhibit booths are not offered to sponsors as separate transactions.
7. There is no advertising by newspaper, radio, etc. for the conferences. The conferences are advertised through a periodic publication produced by XXXXX that is offered free of charge and sent to individuals on the corporation's mailing list.
Ruling Requested
Are the sponsorship payments received by XXXXX for the XXXXX conference consideration for taxable supplies?
Ruling Given
Based on the information set out above, we rule that the XXXXX is providing multiple supplies in exchange for the sponsorship payments for the XXXXX conference. Furthermore, it is our ruling that the sponsorship payments are in respect of promotional supplies to which section 135 (see Explanation below) of the Excise Tax Act ("ETA") applies, and in respect of the following taxable supplies:
• conference registrations;
• exhibit booth; and
• hospitality suite.
The following promotional supplies made by XXXXX in exchange for the sponsorships fall within the parameters of section 135 of the ETA:
• recognition of sponsor on conference signage;
• recognition of sponsor in promotional brochures;
• sponsor's profile included in the final conference program;
• sponsor's receipt of a full-page advertisement in the conference program;
• recognition of sponsor in conference media releases;
• sponsor's right to include information and promotional items in registration kits;
• sponsor right to use of XXXXX logo on sponsor's Internet home page;
• sponsor right to use of XXXXX logo in sponsor's print materials;
• sponsor's right to express registration and conference check-in (incidental);
• early and final registration lists of delegates and exhibitors (incidental),
• sponsor's right to chair sessions; and
• sponsor's right to make a presentation to delegates.
XXXXX is not required to collect the GST on the portion of the payment received from the sponsors that is in respect of the promotional supplies. However, XXXXX is required to collect the GST on the portion of the payment received from the sponsors that is in respect of taxable supplies. Consequently, XXXXX must distinguish the taxable supplies from those supplies that fall under section 135, allocate a reasonable amount of the consideration received from the sponsors to each taxable supply, and collect the tax on these amounts. We would accept the fair market value of the supply as the basis for a reasonable allocation.
XXXXX entitlement to input tax credits is based on the extent to which its purchases are used to make taxable supplies in the course of commercial activities. In this particular case, since the organization of the conference is a commercial activity, XXXXX may claim input tax credits for the GST it paid on related purchases. Supplies deemed "not to be supplies" under section 135 do not affect entitlements to input tax credits.
This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST 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 transactions for which you requested a ruling.
Explanation
It is the Department's view that the various supplies provided by XXXXX in exchange for sponsorship payments constitute multiple supplies. As such, we look at each individual supply to determine its tax status.
Pursuant to section 135 of the ETA, "... where a public sector body makes
(a) a supply of a service, or
(b) a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property of the body, to a person who is the sponsor of an activity of the body for use by the person exclusively in publicizing the person's business, the supply by the body of the service or the use of the property shall be deemed not to be a supply, except where it may 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 or for a prescribed service."
It is clear that some of XXXXX supplies are promotional supplies covered under section 135 of the ETA, while others (i.e., provision of the conference registrations, exhibit booth, and hospitality suite) do not fall under section 135. It is also our view that these latter supplies are taxable, and are not "incidental" to the promotional supplies.
Furthermore, the sponsorship payments are not primarily for a service of advertising by means of radio, newspaper, magazines or periodic publications. For example, one of the promotional supplies made by XXXXX in exchange for the sponsorship is an acknowledgment of the sponsor in the conference brochure. Since the brochure is not a publication published periodically, XXXXX is not making a taxable supply of advertising in this situation. Accordingly, section 135 of the ETA deems this promotional service not to be a supply and therefore the acknowledgment in the conference brochure is not subject to GST.
Subsection 153(1) of the ETA provides that the "value of consideration" for a supply is deemed to be:
"(a) where the consideration ... is expressed in money, the amount of the money; and
(b) where the consideration ... is other than money, the fair market value of the consideration ... at the time the supply was made."
Pursuant to subsection 165(1) of the ETA, it is this amount (i.e., the value of the consideration for the supply) that is subject to tax. As noted under the ruling, we would generally accept the fair market value of the supply as a reasonable basis for the value of consideration. This policy would only apply in circumstances where the remaining supplies are subject to the deeming provisions of section 135.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.
Yours truly,
Susan Eastman
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
| c.c.: |
E. Vermes, A/Director
M. Place
S. Eastman |
XXXXX
Legislative References: ETA: section 135, subsection 153(1), subsection 165(1)
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