30 March 1999 GST/HST Ruling HQR0001506 - Tax Status of Beef Check-Off Fees

Dear XXXXX

This is in response to your letter of May 11, 1998 to the XXXXX  XXXXX regarding the tax status of levies paid to the XXXXX  XXXXX[.]  The XXXXX  has asked us to respond to your query. We regret the delay in our reply.

Statement of Facts

Our understanding of the facts is as follows:

1. The XXXXX[.]

2. Pursuant to the XXXXX  once the producers of a commodity have the support of other producers of the commodity to establish a plan for a proposed fund, levy and council, the XXXXX[.]

3. Pursuant to subsection 3(1) of the Act, "the council shall establish a levy or class of levies that shall be paid by producers or a class of producers of the commodity for which the fund was established." In accordance with subsection 3(2) of the Act, the council may pay from the fund amounts to benefit and promote the industry or to conduct or support research or educational programs.

4. Pursuant to subsection 7(1) of the Act, regulations may be made establishing the time and manner of payment of the levy and requirements of persons to collect the levy.

5. Pursuant to section 2 of the XXXXX every producer of XXXXX a levy XXXXX.

6. The XXXXX s registered for GST/HST purposes.

Ruling Requested

What is the tax status of the levy paid by XXXXX[.]

Ruling Given

Based on the facts set out above, we rule that:

The levy paid by XXXXX  is consideration for a taxable supply and is thereby subject to GST/HST.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. If you require information regarding the application of the HST to your activities, please contact the Department.

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.

Explanation

Activities consisting of research, education or the promotion of a commodity constitutes a supply of a service. Since there is no provision in the Excise Tax Act to exempt such a service, it is a taxable supply and an organization that is a GST registrant is required to collect GST/HST on the consideration paid or payable for such a supply. Levies paid to an organization by producers to fund the organization's mandate to provide such a service is regarded as consideration for the service notwithstanding that the activities of the organization may relate to the producers as a group.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0420.

Yours truly,

Lorrie Grannary
Charities and Non-profit Organizations Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate