8 February 2000 GST/HST Interpretation 13547 - Registered Charity Voucher Ruling Request

This is in response to your E-mail message, and attachment, dated November 23, 1999, regarding the above-referenced matter.

Your E-mail and subsequent telephone conversations provided the following facts, based on information received from the correspondent:

•   The Charity is currently registered for the HST.

•   The Charity is a registered charity for purposes of the Income Tax Act of Canada, and is therefore required to report its net tax in accordance with section 225.1 of the Excise Tax Act (the Act).

•   Each year the Charity organizes a XXXXX held in City X in a participating province which includes participants from around the world. The participants are unpaid volunteers.

•   The Charity provides each participant with meal "vouchers", which can be used at various restaurants.

•   The vouchers are printed by a sponsor of the Charity. Separate vouchers for lunch and dinner in different denominations are printed.

•   The value of the vouchers is XXXXX for lunch and dinner respectively.

•   The vouchers are coded in such a manner that the Charity is able to determine how many vouchers have been redeemed by various branches of the XXXXX.

•   All participants must sign for all vouchers issued to them.

•   The participant will use the voucher as partial consideration for a meal at a participating restaurant. For example, if a lunch meal is $12.00 including HST, the participant will provide the restaurant with a voucher for XXXXX and pay the remainder in cash. If the meal is less than the voucher amount, cash is not provided to the participant by the restaurant.

•   Once the shows have been completed, the restaurant will then be reimbursed by the Charity for the amount of vouchers accepted by the restaurant, less an administration fee retained by the Charity. For example, if the restaurant has accepted 100 lunch vouchers, the Charity will pay the restaurant XXXXX less an administration fee.

•   Those vouchers which have been used by XXXXX are then totaled and the Charity is reimbursed this amount by the XXXXX[.]

•   Vouchers used by participants who are not employed by the XXXXX XXXXX are a pure cost to the Charity. That is, the Charity cannot seek reimbursement for these vouchers from third parties.

Given that the Charity is a registered charity, the correspondent is seeking a ruling on the proper application of the HST to the above situation. In particular, the following questions have been asked:

1. Is the Charity able to include within its 50% charity rebate application an amount on account of the payment made to the restaurants which relate to vouchers for which the Charity will be reimbursed by the XXXXX? For example, the reimbursement of a lunch voucher appears to include $0.75 in HST, can 50% of this $0.75 be included in the Charity's rebate application?

2. Is the Charity able to include within its 50% charity rebate application an amount on account of the payment made to the restaurants which relate to vouchers for which the Charity will not be reimbursed?

3. When the Charity invoices the XXXXX for the vouchers used by their personnel, has the Charity made a taxable supply and therefore has collected HST in this amount?

Our Comments:

Based on the information provided, we have the following comments on the above questions:

1. The meal vouchers issued by the Charity are considered to be coupons for the purposes of section 181 of the Act. This type of voucher appears to have the characteristics of a reimbursable coupon to which subsections 181(2) and 181(5) generally would apply. Subsection 181(5) addresses a transaction which is the redemption of a coupon. However, this subsection applies only where the person who redeems the coupon from the vendor does so in the course of a commercial activity of the person.

Section 11 of Part VI of Schedule V to the Excise Tax Act exempts admissions to performances, athletic or competitive events if 90% or more of the performers, athletes or competitors are not remunerated directly or indirectly for their participation. Based on the information provided, it appears that the supply of admissions to the XXXXX made by the Charity is exempt pursuant to this section.

In this case, since the coupons relate to the activity of presenting the XXXXX, which is an exempt activity, subsection 181(5) does not apply. As subsection 181(5) does not apply, the payment by the Charity for the redemption of the coupon appears to be a financial service (on the basis that the coupon is a right to be paid money, i.e., a debt security, which is a financial instrument), and therefore an exempt supply. Further, no taxable supply is being made by the restaurant to the Charity. Accordingly, the payment by the charity to the restaurants would not have included an amount of tax. With respect to the question as to whether a rebate may be available, since no portion of the amount paid by the Charity could be regarded as tax (nor as "non-creditable tax charged"), there is no entitlement to a rebate under section 259 of the ETA.

2. Same as answer to question 1.

3. In a similar manner, it appears that the transaction involving the reimbursement of the Charity by the XXXXX is also an exempt financial service. As there is no taxable supply, this amount does not include tax. However, this analysis is subject to the terms of the agreement between the Charity and the XXXXX.

If you wish additional information or clarification, please contact me at (613) 952-1512.

Mark Seigel
Corporate Reorganizations Unit
Financial institutions & Real Property Division