29 January 1999 GST/HST Ruling HQR0000645 - Application of the GST/HST to Payments Made For Business Development, Research and Development and Technology Upgrading

XXXXX

Thank you for your letter of April 11, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below. We apologize for the delay in responding.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

•   The predecessor to the XXXXX. For GST purposes, the Board operated as a XXXXX[.]

•   Through the XXXXX the functions of the Board were transferred to the non-profit Association XXXXX[.]

•   The mandate of the Board and now the Association is to support the development of a XXXXX. As such, the Board (and now the Association) is empowered by regulations under the XXXXX regulations to collect a fee of XXXXX[.]

•   XXXXX[.]

•   The fees collected form part XXXXX, "are used to provide or pay for any or all of the following:

a) establishing and administering a XXXXX;

b) education programs for the purpose of the XXXXX[;]

c) expenditures incurred in the XXXXX[;]

•   In accordance with these objectives, the Association makes various payments XXXXX[.]

•   There are essentially two kinds of payments made by the Association:

4. The Association reimburses XXXXX incurred for business development, research and development and technology upgrading. In this case the recipient must provide documentation of the costs before the Association makes payment.

5. Alternatively, when XXXXX, the Association will pay amounts to XXXXX. In this case the recipient must document the number XXXXX before the Association makes payment.

•   XXXXX[.]

Ruling Requested

You have requested confirmation that the payments made by the Association do not constitute consideration for a supply.

Ruling Given

Based on the facts set out above, we rule as follows with respect to the two types of payments:

1. The payments made by the Association which reimburses XXXXX of certain costs incurred for business development, research and development and technology upgrading do not constitute consideration for a supply.

2. The payments made by the Association to XXXXX do constitute consideration for a taxable supply and are subject to the GST.

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 transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9577 or Duncan Jones at (613) 952-9210.

Yours truly,

Marilena Guerra Rulings Officer
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
Policy and Legislation Branch