4 October 2000 GST/HST Ruling 30400 - Supplies of Administrative Services by the

Dear XXXXX:

This is in reply to your request for a ruling on the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of administrative services by the XXXXX to regional associations of the XXXXX.

All statutory references are to the Excise Tax Act, RSC 1985, Chapter E-15, as amended, unless otherwise noted.

Statement of Facts

Our understanding of the facts, based on your correspondence dated March 7, August 2, August 17 and August 29, 2000, and our telephone conversations on August 17 and September 13, 2000, is as follows:

1. The XXXXX is a federally-incorporated non-share capital corporation and is a "registered charity" under the Income Tax Act, RSC 1985, Chapter 1 (5th Supplement), as amended.

2. XXXXX is a "charity" for GST/HST purposes, as defined in subsection 123(1).

3. XXXXX is a GST/HST registrant.

4. XXXXX is a national organization with its head office located in the Regional Municipality of Ottawa-Carelton, in the Province of Ontario.

5. XXXXX, authorises a national general meeting of the XXXXX to recognise a regional association of the XXXXX. A regional association is required to meet certain conditions, including: to be a membership based XXXXX association using the same membership criteria as the XXXXX; to be governed by a board; and, to have a business plan.

6. There are a number of regional associations located in each province of Canada. Each regional association is a separate corporation.

7. One of the activities of the XXXXX is to support the operations of regional associations by providing certain administrative services. The XXXXX charges a fee for the administrative services based on a regional association's percentage participation in XXXXX's core activities of memberships and XXXXX, as well as the financial requirements of the XXXXX.

Ruling Requested

What is the GST/HST status of the administrative services supplied by the XXXXX to the regional associations?

Ruling Given

Based on the facts set out above, we rule that the supply by the XXXXX of administrative services to regional associations is exempt from GST/HST.

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 our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

The obligation on XXXXX to collect tax is found in subsection 221(1) which provides (emphasis added):

Every person who makes a taxable supply shall, as an agent of Her Majesty in right of Canada, collect the GST/HST.

XXXXX has the obligation to collect GST/HST on the supply of administrative services to regional associations if this supply is a taxable supply. A "taxable supply" (All definitions in this ruling are found in subsection 123(1).) is defined as a supply made in the course of a commercial activity. "Commercial activity" is defined, in part, as a "business" ("includes a profession, calling, trade, manufacture or undertaking of any kind whatever, whether the activity or undertaking is engaged in for profit ...") carried on by a person, except to the extent to which the business involves the making of exempt supplies.

An "exempt supply" is defined to mean a supply included in Schedule V. Schedule V is organized into eight parts. For the purposes of this ruling, the only relevant part is Part V.1, entitled Supplies by Charities. Part V.1 of Schedule V contains six (6) sections. The issue is whether the supply of administrative services by the XXXXX to the regional associations falls within the language of one of the sections of Part V.1 of Schedule V.

The opening words of section 1 of Part V.1 of Schedule V provide that (emphasis added):

A supply made by a charity of any property or service, but not including ...

In short, the general rule is that any supplies made by charities are exempt, unless specifically excluded in paragraphs 1(a) to (m) of Part V.1 of Schedule V. It is our view that the supply of administrative services by the XXXXX to the regional associations is not described in any of the exclusions to section 1. (Although not applicable in this case, we note that where a supply is excluded from section 1 of Part V.1 of Schedule V, it may fall under another exempting provision in Schedule V.)

Thus, the supply of administrative services by the XXXXX to the regional associations is an exempt supply under section 1 of Part V.1 of Schedule V. XXXXX is not obligated to charge and collect GST/HST.

If you have questions or require clarification, please do not hesitate to contact me at 952-0329.

Yours sincerely,

Aurelia I. Mauro
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate