6 May 1999 GST/HST Interpretation HQR0001769 - Application of the GST/HST to Membership Fees

This is in response to your e-mail of Thursday, April 29, 1999, regarding whether the XXXXX would be regarded as "carrying on a business" in the context of "commercial activity", thereby causing its memberships to be taxable supplies.

It is our understanding that the XXXXX is a non-profit organization that was established for the purpose of promoting and studying the literary works of the poet, XXXXX and to foster an interest in XXXXX literature, art and music by lectures, competitions and other means. The by-laws of the XXXXX restrict membership to XXXXX members and new members must be approved by at least two thirds of the current members in attendance at a general meeting. There is an initiation fee of $XXXXX for new members and an annual subscription rate (i.e. membership fee) of $XXXXX of each year.

The XXXXX hosts six social events each year. Non-members are invited to the two major events which are the XXXXX but are only sold tickets on an invitation basis. The XXXXX dinner whereas the St. Andrews night is a dinner and dance. Tickets for both of these events are only available through members and neither event is advertised to the general public. The revenues from these events usually equal the costs incurred to host the events. The other social events include a Ladies Night, a golf tournament and a President's reception. All of these events are restricted to members, spouses and some special guests. The Club holds monthly meetings for the executive officers who change annually, and for the general membership.

You point out that the following facts of the XXXXX case are similar to the XXXXX XXXXX reply from Headquarters:

•   neither the XXXXX has a fixed address or permanent premises housing its operations;

•   neither the XXXXX as a telephone listing - persons wishing to contact either organization must contact a member;

•   neither the XXXXX advertises to the public how it may be contacted;

•   neither has full time or part-time staff - activities are carried on by members;

•   neither organization has ongoing office activity carried on at a particular location;

•   neither organization has specific day-to-day activities - executive officers (or "board members") carry on activities on behalf of the organization from their own homes or premises;

•   neither organization advertises or carries on promotional activities to attract interest in its activities - invitations are extended by the members.

As you note, we ruled that the XXXXX was not carrying on a business (and thus was not making taxable supplies) on the basis, in part, of the above factors. However, while we agree with the above similarities, it is also important to note that the mandate of XXXXX was connected to a very limited time event - one week of social activities. By contrast, the mandate and presumably the activities of the XXXXX are broader - your submission refers to "lectures, competitions and other means" and also "the entertainment and recreation" of members and "six annual social events ..."

Another important distinction between the two organizations is that no membership fee was charged by the XXXXX[.] As mentioned above, the XXXXX makes supplies of membership for an annual fee XXXXX with an initiation fee of $XXXXX[.] Generally, it has been our position that ongoing supplies of memberships for a fee is a business activity. It there is to be tax relief with respect to such supplies, it is usually based on the provisions of section 17 of Part VI of Schedule V rather than on the definition of "commercial activity".

We have not been provided sufficient information to determine whether the section 17 exemption applies to the memberships provided by the XXXXX. However, on the basis of the above, it is our opinion that the activities and supplies of membership by the XXXXX constitute a business. Accordingly, supplies of membership by the XXXXX XXXXX are taxable unless exempt under section 17.

Please feel free to contact me again if you have any further questions or concerns.