20 July 2000 GST/HST Ruling 30399 - Supplies of Advertising Services by the

Dear XXXXX

Thank you for your letter of March 9, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of advertising services by the XXXXX[.]

Statement of Facts

Our understanding of the facts is as follows:

1. The XXXXX ("Charity") is a registered charity under the Income Tax Act, and accordingly is a "charity" for GST/HST purposes.

2. The Charity operates a national XXXXX programming network in accordance with Canadian Radio-television and Telecommunications Commission approval.

3. The Charity has its administration office XXXXX and houses its main production center in XXXXX with uplink centers in XXXXX[.]

4. One of the Charity's activities is the sale of advertising services.

Ruling Requested

What is the GST/HST status of advertising services supplied by the Charity?

Rulings Given

Based on the facts set out above, we rule that the supply by the Charity of advertising services to a Canadian resident are exempt from GST/HST. Where the Charity makes a supply of advertising services to a non-resident, the supply is generally zero-rated.

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

Explanation

Generally a supply of a service made by a charity is exempt from GST/HST under section 1 of Part V.1 of Schedule V to the ETA. However, certain supplies of services made by a charity are specifically excluded from this exemption. Subsection 1(a) of Part V.1 of Schedule V to the ETA excludes a supply made by a charity of any service included in Schedule VI to the ETA. Schedule VI lists zero-rated supplies. A zero-rated supply is a taxable (as opposed to an exempt) supply, but the rate of tax is zero (0)%.

The provisions described above may have implications for the charity's entitlement to claim input tax credits and rebates. No GST/HST is charged on either a zero-rated or an exempt supply. The difference is the tax treatment of the related purchases. If a supplier is a GST/HST registrant, the GST/HST paid on the purchases used in making taxable supplies is fully recoverable by claiming input tax credits. For purchases used to make exempt supplies, no input tax credits may be claimed, although certain persons may claim rebates (e[.]g. charities are entitled to a 50% rebate).

Under Part V of Schedule VI to the ETA, a supply of a service of advertising to a non-resident person is generally zero-rated. Section 8 of Part V of Schedule VI to the ETA zero-rates a supply of a service of advertising that is made to a non-resident person who is not registered for the GST/HST at the time the service is performed. Section 7 of Part V of Schedule VI to the ETA provides that a supply of an advertising service made to a non-resident person who is registered for the GST/HST at the time the service is performed is also zero-rated. There are certain exceptions to Section 7. For example, Section 7 does not apply when the non-resident person is an individual who is in Canada at any time when the individual has contact with the supplier in relation to the supply of the service, or, when the advertising service is supplied to an individual while that individual is in Canada.

In summary, a supply of an advertising service made by the Charity to a non-resident is generally zero-rated; other supplies of advertising services by the Charity will be GST/HST exempt.

For further information, please find enclosed the guide entitled "GST/HST Information for Charities".

If you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0329.

Yours truly,

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