9 February 1999 GST/HST Interpretation HQR0001555 - Section 129 — Small Supplier Designation

This is in reply to your e-mail of January 8, 1999, and our subsequent telephone conversations, in which you requested clarification of the application of the small supplier designation, provided for under section 129 of the Excise Tax Act, that is available to public service bodies.

The situation you presented involves an incorporated charity with six branches, and each of its branches as well as the head office make taxable supplies. As it is a single entity for GST/HST purposes, the incorporated charity is a GST/HST registrant if either the total taxable supplies or the gross revenue of the head office, its branches, divisions, and associates combined, exceed the small supplier thresholds described in sections 148 and 148.1. The charity in question is a GST/HST registrant as it does not qualify as a small supplier. However, the taxable supplies made by three of its branches as well as the head office were less than $50,000 each over the previous four calendar quarters, while the taxable supplies of each of the remaining three branches were in excess of $50,000 over the previous four calendar quarters.

In accordance with section 129, the charity applies to have its three branches whose taxable supplies are each under the $50,000 threshold to be designated as small supplier divisions. Please note that if it meets the conditions of the provision, the charity may also include the head office in the application so that it may be designated as a small supplier division. Once the application is approved, the charity would not be required to account for the tax on taxable supplies made by its head office and its branches that are designated, but would be required to account for the tax on taxable supplies of the remaining branches that are not small suppliers. However, with respect to the branches that are not small suppliers, the charity may apply to have them each file their own GST/HST returns under the provisions of section 239. In this situation, the designated small supplier divisions could then file separate rebate applications, pursuant to subsection 259(10).

Note that regardless of whether the charity makes the above-noted applications, only the body itself applies for registration. Accordingly, where the charity applies to have its branches file their own GST/HST returns and rebate applications, these should be filed using the reporting period of the charity. Also note that while subparagraph 129.1(1)(b) deems supplies made by a small supplier division designated under section 129 to be made by a non-registrant, that branch is still part of the charity.

In the situation where the charity makes the application under section 129 and all of its branches, including its head office, are designated as small supplier divisions, the charity is still required to register for the GST/HST if both the total taxable supplies and the gross revenue of the head office, its branches, divisions, and associates combined, exceed the small supplier thresholds described in sections 148 and 148.1. However, the charity would not be required to account for tax on its taxable supplies since all of its branches as well as its head office are designated small supplier divisions. Consequently, it would file "nil" GST/HST returns.

I hope this information clarifies the application of section 129 in respect of your case. If you need further assistance, please do not hesitate to contact me by e-mail or at (613) 952-6761.