18 January 1999 GST/HST Interpretation HQR0001353 - Association Memberships

This is concerning a GST/HST interpretation letter you forwarded to us for review on September 3, 1998, addressed to the XXXXX (the "Association") regarding memberships supplied by that Association. We generally agree with the content of your draft reply, including your conclusions. However, we would like to offer the following comments.

Although the headings of your reply indicate that the letter is an interpretation, you in fact, on page 3, provide a ruling, and your summation on page 4 also provides rulings. We agree that there is not sufficient information for you to issue an application ruling, and thus the ruling that the memberships are exempt should not have been made.

It appears that the only missing information required to provide a ruling concerns the right to transfer and register XXXXX, whether this right is provided for a discounted fee to members, and whether the discount is insignificant in relationship to the membership fee. Therefore, you may wish to obtain this information to provide a ruling. Otherwise, an interpretation should be provided outlining this requirement.

Provided that the administration fee charged to the members for the supply of registering and transferring XXXXX is equal to fair market value of the supply, or is provided to members for a discount that is insignificant in comparison to the membership fee, the supply is an allowable benefit under paragraph 17(d) and the memberships would remain exempt.

With regard to the interpretation of section 17, we note that you have listed the allowable benefits without the paragraph references. We suggest including the paragraph references since you make reference to some of them in the body of your letter. Furthermore, the letter should explain that the Association has the option of electing to make their exempt memberships taxable.

Also, we suggest that the letter include a discussion on the fact that the Association, which is a registrant, is required to apportion its input tax credits in respect of purchases related to taxable (which includes zero-rated) and exempt supplies.

Finally, with respect to the discussion on the zero-rating provision provided in section 7 of Part V of Schedule VI, you need only cite and explain the relevant paragraphs, i.e., 7(a) and 7(e). You have discussed paragraph 7(e), but paragraph 7(a) should also be discussed as it may apply in this situation. Thus, a clearer explanation might be to simply mention the three scenarios noted in section 7 of Part V where the supply of the registration and transferring of XXXXX would not be zero-rated:

1. when the service is made to an individual and the individual is in Canada when the individual contacts the supplier {paragraph 7(a)};

2. when the XXXXX are in Canada at the time the service is performed {paragraph (7(e)};

3. when both the individual and the XXXXX are in Canada when the individual contacts the supplier and when the service is performed {paragraphs 7(a) and (e)}.

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