31 January 2002 GST/HST Ruling 34418 - Tax Status of Arena Tickets to National Championships

Dear XXXXX:

Thank you for your letter of January 23, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of arena tickets at your national championships and other events. We apologize for the delay in our response.

Statement of Facts

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

1. XXXXX is a Canadian registered amateur athletic association and a registered charity (XXXXX). It is registered for GST/HST purposes.

2. The XXXXX holds XXXXX national championships each year. At each of these national championships, twelve teams representing all provinces and territories compete for the Canadian title.

3. Local volunteer host committees organize the Canadian championships on behalf of the XXXXX in XXXXX different venues each year.

4. The expenses for the staging of the championships are covered by revenue generated from ticket sales and sponsorships. The organizing committees are non-profit organizations.

5. Team members competing in a championship receive no cash remuneration for their participation in the championship. Their travel, accommodation and meals are either paid for or provided. Teams also receive clothing, team outfits for the women and team jackets for the men. The host committees usually present small gifts to the players (generally some local memento costing XXXXX or less per person).

6. The top three teams in each championship receive trophies, each worth approximately XXXXX. Each member of the men's winning team also receives a ring and watch and the members of the women's team each receive a ring, worth approximately XXXXX in total per person.

7. All the teams receive funding from the XXXXX to assist with their training prior to reaching the national competition. Women's teams receive XXXXX per team, men's teams receive XXXXX per team. The training expenses would greatly exceed these amounts.

8. Some events are held by the XXXXX, some by various non-profit organizations on behalf of the XXXXX.

9. The XXXXX also holds an Olympic qualifying event every XXXXX years. The organization of this event is identical to that of the annual championships.

Ruling Requested

The sales of arena tickets at XXXXX national championships and Olympic qualifying events are exempt supplies for GST/HST purposes.

Ruling Given

Based on the facts set out above, we rule that, provided the reimbursement of expenses and prizes and gifts given to competitors are a reasonable amount, the above supplies are exempt pursuant to section 11 of Part VI of Schedule V to the Excise Tax Act (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 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

Section 11 of Part VI of Schedule V to the ETA provides that ticket sales to spectators are exempt if certain conditions are met. One of these conditions is that substantially all (90% or more) of the competitors involved in the event must not be remunerated, either directly or indirectly for their participation in the event "other than a reasonable amount as prizes, gifts, compensation for travel or for expenses incidental to the competitors' participation in the event."

To be considered reasonable, the value of the compensation paid to a competitor should not significantly exceed the costs actually incurred by the competitor in entering the event (i.e., travel and incidental expenses). In other words, a competitor may not receive material or financial gain from his or her participation in the event(s) if this exemption is to apply. Reasonable incidental expenses may include accommodation, food, travel, laundry, tips, telephone and equipment costs.

The determination of whether a prize or gift is considered reasonable must be made on a case-by-case basis. Factors to consider include the type and value of the prizes awarded. A ring valued at XXXXX would generally be considered a reasonable prize whereas a brand new car would not.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9592.

Yours truly,

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