4 July 2000 GST/HST Ruling 26837 - Application of GST/HST to the Supply of Membership

Dear XXXXX

Thank you for your letter of December 2, 1999, wherein you asked us to reconsider the ruling of XXXXX issued by the XXXXX XXXXX. In that letter, the Tax Services Office concluded that the fee payable by individuals in order to be members of XXXXX (the "Fund") is subject to tax. You have asked us to reconsider this ruling on the basis that the supply of the membership may be an exempt supply in accordance with section 189 of the Excise Tax Act (ETA).

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. The XXXXX is a corporation established under the Canada Corporations Act.

2. The Letters Patent identify the objects of the Fund as the following:

1. To act as a non-profit organization through which funding may be provided for:

(a) actions to bring a resolution of issues between members of XXXXX and Revenue Canada or the Government of Canada;

(b) actions taken collectively or individually with respect to matters which affect the dignity or welfare of a member or members of the XXXXX Fund which are not funded under benefit programs, including any XXXXX[;]

(c) researching, investigating, exploring, analysing, examining, collecting of information or data and hiring outside counsel or organizations to do any of the foregoing in respect of issues described in (a) and (b) above.

2. Generally to do things and transact all business which any person or individual may lawfully do, not inconsistent with the foregoing purposes or with the rights and purposes of a non-profit organization.

3. The Fund operates nationally and at local levels; members of the Fund, in XXXXX, may establish and organize local boards (i.e., "XXXXX Boards") to deal with concerns or issues raised at the local level.

4. XXXXX details some of the cases for which funding may be available to members:

•   disciplinary procedure or dismissal;

•   when suspended without pay;

•   when facing suspension without pay for the loss of a basic requirement;

•   when facing a civil action;

•   when facing a criminal action;

•   when facing a duty-related public complaint;

•   when frivolous and vexatious allegations are filed against a member.

5. XXXXX details some of the specific matters that are funded by the Fund or are being considered for funding, including:

•   XXXXX[;]

•   a civil action against a newspaper which slandered a member of the Fund.

6. Pursuant to the bylaws, membership in the Fund is limited to members XXXXX who,

•   are eligible to vote for the election of Representative;

•   are interested in furthering the objects of the XXXXX Fund;

•   have received approval of the Board of their application for admission as a member;

•   have paid their annual fees to the XXXXX Fund.

7. The annual fee to be a member of the Fund is XXXXX.

8. In the bylaws, it provides that members may withdraw from the Fund upon giving 8 weeks notice. Members are liable for payment of fees and other amounts which were payable by the member prior to receipt of the withdrawal notice.

9. XXXXX[.]

10. The Fund is separate and distinct from the XXXXX, but it is administered by the XXXXX[.]

Ruling Requested

The dues payable by members of the Fund are not subject to tax as the supply of the membership is exempt in accordance with section 189 of the ETA.

Ruling Given

Based on the facts set out above, we rule that the supply of membership in the Fund is not an exempt supply in accordance with section 189 of the ETA.

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

Paragraph 189(a) of the ETA provides that where an amount is paid by a person to "an association of public servants the primary purpose of which is to promote the improvement of the members' condition of employment or work," the amount is consideration in respect of an exempt supply. For purposes of meeting the condition for exemption under paragraph 189(a), the primary object of the Fund must be "to promote the improvement of the members' condition of employment or work."

It is your opinion that the Fund is an association of public servants. The focus on XXXXX[.] The fund, you submit, which assists with the legal costs of defending legal actions arising out of employment, would be considered to be improving the conditions of employment or work. Further to your letter of April 21, 2000, you submit that being subject to verbal, physical or legal harassment in the workplace or as a result of what happens at the workplace is also a condition of work or employment. You contend that of the various issues the Fund has been involved with, most have dealt with some form of harassment or some rights which the individual has as an employee XXXXX[.] It is our view that in order for an association of public servants to qualify under paragraph 189(a) the association must undertake on behalf of its members, activities normally associated with trade unions or such other employee associations. That is, the association should be working to improve the conditions of its members through negotiation and collective bargaining with employers with respect to salaries, hours of work, job security, pension and other benefits, and other items normally covered by a contract of employment.

Based on the information you have provided, it is our opinion that the primary object of the Fund is to financially assist members, either collectively or individually, with respect to legal actions against third parties including the employer. It does not engage in the activities we consider as representative of an organization whose object is to promote the improvement of the members' conditions of employment or work. Therefore, membership in the Fund does not qualify for exemption under section 189.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4206.

Yours truly,

Dwayne Moore
Charities, NPOs, and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate