17 September 2001 GST/HST Ruling 5840 - Memberships Supplied by the

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of training services and to the supply of memberships made to Aboriginal Canadians and organizations.

On XXXXX, the XXXXX Tax Services Office issued a GST/HST Interpretation addressing your question regarding training services. As indicated therein, your query about memberships was forwarded to this office for response. I apologize for the delay in this reply.

Statement of Facts

Based on the information contained in your letter of XXXXX, and provided during our telephone conversation of XXXXX, as well as that found on the Internet sites of the XXXXX and the XXXXX, our understanding of the facts, the transaction, and the purpose of the transaction are as follows:

1. The XXXXX is a non-profit organization funded only by its membership dues and course fees. XXXXX is a provincial/regional affiliate of the XXXXX.

2. XXXXX has XXXXX objectives XXXXX[.] With respect to training, XXXXX provides XXXXX courses at a reduced rate to its members. For example, the XXXXX is supplied to its members at a cost of XXXXX, including GST. This course is provided to non-members at a cost of XXXXX, including GST.

3. XXXXX. An XXXXX membership entitles its holder to all rights, privileges and services that pertain to the XXXXX such as:

a. newsletters

b. information on XXXXX

c. participation in XXXXX activities

d. reduced fees for seminars

e. referral services (for those who have completed sufficient training)

f. such other benefits as XXXXX procure for their members

g. voting privileges

h. hold office.

With the exception to the right to voting privileges and the right to hold office, a XXXXX are entitled to all rights, privileges and services of the XXXXX.

Members of XXXXX come from a wide variety of business and community backgrounds and experiences. While many have taken formal training in XXXXX in order to become practitioners, others who belong do not intend to actively practice XXXXX. They join XXXXX to gain a general knowledge of the XXXXX for their personal or business use.

XXXXX

4. The annual fee for XXXXX membership in XXXXX is XXXXX, including GST. The membership fee of XXXXX is composed of:

XXXXX - one-time administrative fee

XXXXX - for membership in XXXXX - for membership in XXXXX - GST

XXXXX collects XXXXX from each of its new XXXXX members and notifies XXXXX accordingly. XXXXX subsequently invoices XXXXX an amount for its new XXXXX members (i.e., XXXXX plus GST multiplied by the number of new members). XXXXX remits the amount owing to the XXXXX.

5. Members of XXXXX are automatically members of the XXXXX and are eligible for its services and benefits, some of which include:

XXXXX

6. XXXXX obtained recognition under the XXXXX for the designation:

XXXXX

All other groups and individuals are prohibited from adopting or using any of these marks without the consent of XXXXX.

7. These designations by XXXXX are to recognize the combined experience and formal training of senior XXXXX.

To be designated as XXXXX, an individual must be a member of the provincial/regional affiliate XXXXX and the XXXXX.

Each designation has eligibility criteria requiring applicants to have a specified level of XXXXX training, and experience gained through having participated in a designated number of XXXXX. To practice as a XXXXX, XXXXX member of XXXXX must make an application to XXXXX. Once the application has been reviewed and approved at various levels within XXXXX, it is then forwarded to XXXXX for review and approval. Once approved, XXXXX grants the designation. Holders of a XXXXX must pay, to XXXXX, an annual accreditation due of XXXXX plus GST. A holder of both designations XXXXX must pay an annual accreditation due of XXXXX plus GST. The holder of a XXXXX designation identifies the holder as a XXXXX XXXXX.

8. Two individuals who are members of the XXXXX each have XXXXX membership in XXXXX. These individuals have taken the XXXXX XXXXX offered by XXXXX. This course was provided off reserve. XXXXX paid XXXXX in full plus GST for the course taken by these two individuals. XXXXX has invoiced, or will be invoicing, the XXXXX for the XXXXX membership dues owing for its two members. The XXXXX is located in XXXXX.

Ruling Requested

Is XXXXX required to charge GST on the supply of the XXXXX memberships to the two individuals who are members of the XXXXX?

Ruling Given

Based on the facts set out above, we rule that XXXXX is required to charge GST on the supply of the XXXXX memberships to the two individuals who are members of the XXXXX[.] 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

Technical Information Bulleting B-039R "GST Administrative Policy - Application of GST to Indians" (TIB-039R) summarizes the Canada Customs and Revenue Agency's administrative policy concerning the application of GST/HST to purchases by Indians, Indian bands and band-empowered entities. The treatment of purchases by Indians and Indian bands for GST/HST purposes is consistent with the Indian Act.

Paragraph 87(b) of the Indian Act states:

"87. Notwithstanding any other Act of the Parliament of Canada or any Act of the legislature of a province, but subject to section 83, the following property is exempt from taxation, namely ...

(b) the personal property of an Indian or a band situated on a reserve;"

Property on a reserve or delivered to a reserve may be acquired by an Indian, an Indian band or a band-empowered entity without the payment of GST/HST provided that the conditions described under TIB-039R are met. For ease of reference, TIB-039R is enclosed.

A membership is comprised of various rights to property or services. As a membership confers rights, it is intangible personal property. Because a membership is intangible personal property and not a physical object that can be delivered to a reserve, it must be situated on a reserve for tax relief to apply.

It is the Canada Customs and Revenue Agency's position that where the rights to property or services in respect of a membership can be used or exercised exclusively on a reserve, that membership will be situated on a reserve. An Indian, an Indian band or a band-empowered entity may acquire an otherwise taxable membership on a tax-relieved basis where the membership rights can be used or exercised exclusively on a reserve and all other conditions set out under TIB-039R are met.

While some of the rights in respect of a membership in XXXXX may be used or exercised on reserve, others may be used or exercised off reserve. For example, as a benefit of membership in XXXXX, members are given the opportunity to use their experience through the provision of XXXXX services to the public. Further, members of XXXXX are entitled to receive the services and benefits of XXXXX (e.g., the right to attend XXXXX conferences; the right to receive a XXXXX designation and practice as a XXXXX XXXXX). Since the rights in respect of a membership in XXXXX are not exercisable exclusively on a reserve, an Indian, an Indian band or a band-empowered entity cannot acquire an Individual membership in XXXXX without the payment of GST.

As requested in your letter of XXXXX a copy of this letter has been sent to:

XXXXX

Should you have any further questions or require clarification on the above matter, please call me at (613) 954-7952.

Yours truly,

Lynn Fournier Renner
Technical Officer
Aboriginal Affairs Unit
Excise and GST/HST Rulings Directorate