Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Client Address]
Case Number: 246890
Dear [Client]:
Subject: GST/HST interpretation - Application of GST/HST to membership dues which include a charge for a mandatory […] program
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to membership dues which include a charge for a mandatory […] Program […] ([…][Program]). We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that you were a[n] […][individual] that carried on business in […][Province X].
[…]
[…] Membership
You were a member of […] […][a provincial association] ([…][Association]) […].
[…]
According to […] the [Association] By-law, […] a “[…] Member” is any [individual] […] who […]:
(a) has fully paid their [Association] Dues […];
(b) […];
(c) […].
[…]
[…] the [Association] Dues (including all applicable taxes) for Individual Members include […] costs […] for the [Program] and are payable at least annually by each Individual Member […].
[…]
Under […] the [Association] By-law, if the [Association] Dues are not paid by the Individual Member, the membership of that Individual Member […] will be terminated.
[Program]
You advised that in [mm/yyyy], [Association] introduced the mandatory [Program] for its members. […].
[…]
[Association]’s website indicates that participation in the [Program] is a condition of membership in [Association], and that it is funded through [Association] Dues, which include the costs for the [Program]. […].
[…] [Association] invoiced you for the period of [mm/dd/yyyy] to [mm/dd/yyyy]. The invoice […] indicates [Association] Dues of $[…] and that the [Association] Dues are comprised of [Association] Annual Dues […], and [Program] dues […]. It shows that [GST/HST] was charged on the full amount of the [Association] Dues […].
[…]
Other benefits of membership
According to [Association]’s website, [Association] members also get various benefits of their membership in [Association], including access to […][various benefits] and [Association] advocacy on behalf of the […][members].
INTERPRETATION REQUESTED
You would like to know if the charge for the [Program] […] is subject to GST/HST.
INTERPRETATION GIVEN
A supply of property or service made in Canada is taxable unless it is exempt under Schedule V of the ETA. A supply of a financial service is exempt under Part VII of Schedule V of the ETA unless it is specifically zero-rated under Part IX of Schedule VI.
A GST/HST registrant who makes a taxable supply of a membership is generally required to charge the GST/HST on the consideration (e.g., membership dues) payable by the recipient for the supply. For more information, see Guide RC4081, GST/HST Information for Non-Profit Organizations.
An insurer’s supply of issuing an insurance policy is generally an exempt supply of a financial service. A licensed insurer who makes an exempt supply of a financial service to a recipient is not required to charge GST/HST on the consideration (e.g., insurance premiums) payable by the recipient for the supply.
Subsection 123(1) of the ETA defines “recipient” of a supply of property or service to mean, under paragraph (a) of the definition, where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration.
For example, the recipient of an insurer’s supply of a group insurance policy is the person who is liable under the policy to pay the premium to the insurer, although the policy may also insure other persons in the group who are not liable to pay the premium to the insurer.
Single/multiple supplies
Where a transaction includes several elements of property and services, it must first be determined if a person is making a single supply or two or more supplies to the recipient for the consideration. This distinction is important in cases where a combination of elements is supplied, some of which would be taxable and some of which would be exempt if supplied separately.
If it is determined that multiple supplies are being provided by a person, the possible application of sections 138 and 139 should be considered.
The single/multiple supplies analysis must be confined to the transaction at issue and should not involve artificially splitting something that commercially is a single supply. A single price does not automatically mean that there is one supply and separately identified prices for certain elements do not necessarily mean that there are two or more supplies. On the other hand, if there are two or more suppliers, it generally indicates that multiple supplies are being made, even if the various supplies are provided together.
Two or more elements are part of a single supply when the elements are integral components, are inextricably bound up with each other, are so intertwined and interdependent that they must be supplied together, or one element of the transaction is so dominated by another element that the first element has lost any identity for fiscal purposes.
As mentioned above, for the payment of the [Association] Dues by the member, the member receives multiple elements such as the [Program], access to [various benefits], and [Association] advocacy on behalf of the [members].
Based on the facts mentioned above, it appears that [Association] may be making a single supply to each Individual Member. The participation in the [Program] is mandatory and necessary to keep a membership in [Association] […]. The other elements ([various benefits]) are also automatically included in the membership at no additional cost. Members are invoiced for a single consideration (the [Association] Dues) for the membership, which is non-refundable. […] the provision of the [Program] is not offered separately from the membership; the two are inextricably bound. The other elements are also not offered separately from the membership.
GST/HST Policy Statement P-077R2, Single and Multiple Supplies, provides additional information on determining whether a single supply or multiple supplies are being provided.
Nature of the single supply
As it appears that [Association] is making a single supply to each member, the next step is to determine the nature and tax status of the supply.
A membership, pursuant to subsection 123(1), includes a right granted by a particular person that entitles another person to services that are provided by, or to the use of facilities that are operated by, the particular person and that are not available, or are not available to the same extent or for the same fee or charge, to persons to whom such a right has not been granted.
Based on the elements of [Association]’s supply described above, [Association] grants a right to its members that entitles its members to participate in the [Program] and provides access to all the other benefits which are only available to [Association] members. Thus, it appears that [Association] may be making a single supply of a membership to its members.
[Association]’s supply of a membership entitles the members to participate in the [Program] and get access to the other benefits. […] The [Program] and the other benefits are automatically included with the membership. The membership is the reason the members are paying the [Association] Dues (including the charge for the [Program]). As mentioned above, a GST/HST registrant is generally required to charge GST/HST on the consideration for a taxable supply of a membership. Furthermore, it appears that no exemption would apply to make [Association]’s supply of a membership exempt in the case at hand.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 819-665-8271.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287 or by fax to 1-418-566-0319.
Sincerely,
Kina Lynch
Rulings Officer
Insurance and ITC Allocation Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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