22 March 2000 GST/HST Interpretation 8300/HQR0001906 - Membership Fees Collected on Behalf of a National Organization

Dear XXXXX

Thank you for your letter of June 11, 1999, concerning the liability for the remittance of tax collected by the XXXXX XXXXX[.] Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

Background

It is our understanding, based on your letter and our subsequent discussions, that XXXXX is a non-profit membership organization and is a provincial/regional affiliate of XXXXX. XXXXX[.] The current practice of XXXXX is to separately identify on the invoice the amount of the fee that it will retain and the amount to be forwarded to XXXXX. XXXXX charges GST on the total fee billed to members (including the fee for membership in XXXXX. However, XXXXX has indicated to XXXXX that its membership fee is not subject to tax. Both XXXXX[.]

Interpretation Requested

You request clarification as to whether XXXXX should collect and remit GST on the portion of the fee that pertains to membership in XXXXX.

We are unable to provide a GST Application Ruling with respect to the above facts, since we have not been provided the details of the agreement between XXXXX and the tax status of XXXXX cannot be verified. However, for your assistance we offer the following general comments.

Interpretation Given

Pursuant to subsection 123(1) of the Excise Tax Act (ETA), a "supply" is defined as "... the provision of property or a service in any manner, including sale, transfer, barter ...", and a "supplier" is defined as "in respect of a supply, the person making the supply."

Normally, a registrant who makes a taxable supply of property and services in the course of its commercial activity will be required, pursuant to subsection 221(1) of the ETA, to collect tax on that supply. Pursuant to subsection 225(1) of the ETA, the amount of the tax collected is included in determining the net tax of the registrant for the reporting period in which the amount was collected or became collectible.

Where an organization makes a taxable supply on behalf of (i.e., as agent of) a principal who is a GST registrant, the GST/HST rules outlined above apply as if the supply were made by the principal directly. That is, the principal will be required to account for the tax collected by the agent on the principal's return, and may be entitled to input tax credits, subject to the input tax credit requirements and restrictions.

In the present situation, we understand that XXXXX is supplying XXXXX memberships and is collecting the appropriate fee, plus tax, on behalf of (i.e., as agent of) XXXXX. Accordingly, if XXXXX memberships were taxable, XXXXX should account for this tax on its returns. Whether or not XXXXX actually forwards the tax that it collects to XXXXX is a matter between those two parties. However, we would expect XXXXX to account for the tax on its returns. XXXXX could remit the tax to the XXXXX on behalf of XXXXX. In doing so, it should identify XXXXX business number on the remittance form, and identify the appropriate reporting period to which the payment pertains in order to ensure that XXXXX account is properly credited.

You have indicated that XXXXX maintains that its memberships are not subject to tax. If this is the case, it appears that XXXXX might be erroneously collecting tax on the membership fees that it is collecting on behalf of XXXXX. Please note that, in accordance with subsection 225(1) of the ETA, any amount collected as tax, regardless of whether it should have been collected, must be remitted to the CCRA. In this situation, if XXXXX fails to remit the tax to the CCRA, it is possible that XXXXX and XXXXX may be jointly and severally liable for the tax.

For your further information, please note that subsection 177(1.1) of the ETA provides that an agent (e.g., XXXXX acting on behalf of a registrant (e.g., XXXXX in making a supply of property and services may account for tax on behalf of the registrant. Pursuant to that subsection, the registrant and the agent must jointly elect to have the agent account for the tax. Both XXXXX and XXXXX would be required to complete and maintain a copy of GST form 506 "Election And Revocation Of An Election Between Agent and Principal" (this form may be downloaded from the CCRA web site, or obtained from the local CCRA office). Where an election has been made, the tax collected by the agent in respect of the supply will be included in the net tax of the agent rather than the principal. It is important to note that where this election is in effect, both the registrant and the agent are jointly and severally liable for all obligations arising under the ETA related to the collection and remittance of the tax.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the CCRA with respect to a particular situation.

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 and Non-profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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