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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 170009
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
Alcoholic beverages supplied by a charity that provides catering services and the eligibility to claim the public service bodies’ rebate.
Thank you for your letter of April 28, 2014, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to sales of alcoholic beverages by a charity. We apologize for the delay in our 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.
Based on your letter and its attachments, including a sample catering contract and related invoices for catering services, as well as information on your organization’s website […] and your telephone conversation with […] of the Canada Revenue Agency on [mm/dd/yyyy], we understand the facts to be as follows:
1. […] (the Society) is an incorporated organization located in […][City 1, Province A]. The Society is a registered charity for purposes of the Income Tax Act and is a charity for GST/HST purposes. The Society is registered for purposes of the GST/HST.
2. The Society operates […][the Establishment], […].
3. The Society generates revenue from a number of activities, including the supply of […] sales of food and beverages at public events (e.g., brunch, dinner, bar sales). These sales of food and beverages are all made for amounts that exceed the direct cost of the food or beverage. The Society collects the GST/HST at 5% on these sales and reports 60% of that tax on its return for the appropriate GST/HST reporting period in accordance with the net tax calculation for charities.
4. The Society also rents out a number of facilities at [the Establishment] to third parties for private special events, such as weddings and company Christmas parties. In many of these cases, the Society provides catering services in conjunction with the facility rental.
5. […]
6. When a potential client is interested in booking an event at [the Establishment], the client meets with the Society’s catering manager to plan the event. Once the details have been finalized, a catering contract is entered into with the client in respect of the event. The catering contract identifies the client and the purpose of the event, the specific location of the event along with details regarding set up, the estimated number of guests, the price list for alcoholic beverages and soft drinks, and the amount of the deposit required to be paid by the client. The catering contract also sets out the terms and conditions that the Society and the client are to adhere to.
7. […]. If alcoholic beverages and soft drinks are to be provided at a particular private event, the catering client has the choice of three separate options:
(a) The Society charges the client an additional amount on the catering invoice for the total specific beverages consumed by guests during the event (a host bar).
(b) Guests purchase their own beverages at a strictly cash bar.
(c) Beverages are sold on a 50% host, 50% cash basis where the guest pays for half the cost of a beverage and the catering client is billed for the other half on the catering invoice (a 50/50 bar).
8. The Society charges an […]% service fee on top of the final catering bill for all functions. It does not charge the GST/HST in respect of any amounts billed (e.g., facility, food, beverages, service fee) for its supplies of catering services provided at its private special events.
9. The Society claims a public service bodies’ rebate (PSB rebate) for 50% of the GST that it pays or owes on property and services acquired for consumption, use or supply in the course of its taxable and exempt activities, apart from any amounts that it is eligible to claim as an input tax credit.
RULING REQUESTED
Is the Society required to collect the GST/HST on its supplies of beverages made during its catered private events?
INTERPRETATION GIVEN
A ruling is a written statement the Canada Revenue Agency (CRA) provides to a taxpayer that sets out the CRA's position on how the relevant provisions of the legislation apply to a clearly defined fact situation of the taxpayer. An interpretation is a written statement the CRA provides to a taxpayer that sets out the CRA's view of how the legislation applies to a generic fact situation. In this case, as the question asked involves alternative fact situations and alternative transactions we believe that an interpretation will provide you with the most appropriate information in order to assist you in fulfilling the Society’s obligations under the law.
Alcoholic beverages supplied by a charity under a contract for catering.
For GST/HST purposes, most supplies of property and services that are made in Canada are taxable supplies unless the supply is specifically identified in Schedule V as being an exempt supply (not subject to the GST/HST). Where the supply is a taxable supply, it will either be subject to the GST/HST at the rate applicable in the province where the supply is made (as noted on page 1) or be a zero-rated supply (taxable at 0%).
Section 1 of Part V.1 of Schedule V exempts most supplies made by a charity, including a supply of a catering service, but some supplies of property (for example, food or beverages) made by a charity may be taxable. For instance, a supply of tangible personal property that was acquired by the charity for the purpose of making a supply of the property where the property was neither donated to the charity nor used by another person before being acquired by the charity is specifically excluded from exemption pursuant to paragraph 1(d) and would generally be a taxable supply. In other words, the supply of new tangible personal property purchased or produced by a charity would generally be taxable, which would be the case with most sales of food and beverages at a public event. However, food or beverages supplied by a charity under a contract for catering remain exempt of the GST/HST. Where a charity sells beverages (alcoholic or otherwise) to guests at a private event hosted by a catering client, the sale of those beverages are exempt as long as the sales are made under a contract for catering.
The conclusive determination of whether food or beverages are provided under a contract for catering in a particular case requires consideration of all relevant facts. Generally, to be considered “supplied by a charity under a contract for catering,” the sale of the beverages must be required pursuant to terms in the catering contract at the direction of the client and all or a portion of the consideration payable for the beverages must be billed to the catering client as part of the invoice for the catering supply. Therefore, a beverage sold by a charity at a private special event through either a host bar (that is, total amount for the beverages is charged to the catering client) or a partial payment host bar (for example, only 50% of the total amount for the beverages is charged to the catering client and the remaining 50% is charged to the guests) is generally considered to be supplied by a charity under a contract for catering and would be an exempt supply.
Alcoholic beverages supplied by a charity otherwise than under a contract for catering.
As noted above, when a charity acquires property for the purpose of resale, the sale of that property by the charity will generally be taxable. However, if the supply is made under a contract for catering, the supply made by the charity will be exempt. Where the supply of alcohol is made at a cash bar to a guest at an event that is catered and the guest bears the full cost of the beverage, the supply is generally not made under a contract for catering and therefore would be a taxable supply.
Claiming PSB rebates
A public service body (PSB) that is a charity is entitled to claim a PSB rebate of 50% of its federal non-creditable tax charged on property and services that are not prescribed. In general terms, “non-creditable tax charged” means the GST/HST paid or payable on property or services for which the charity cannot claim an input tax credit (Footnote 1) , rebate, refund or remission other than a PSB rebate. A charity resident in a participating province may also be entitled to claim a PSB rebate of its provincial non-creditable tax charged on property and services that are not prescribed.
Prescribed property and services are listed in section 4 of the Public Service Body Rebate (GST/HST) Regulations (the Regulations). In particular, paragraph 4(1)(e) of the Regulations excludes from the PSB rebate the tax paid or payable on the purchase of “an alcoholic beverage or tobacco product that is acquired by the particular person for the purpose of making a supply of the beverage or product for consideration that is not included as part of the consideration for a meal supplied together with the beverage or product, except where tax is payable in respect of the supply by the particular person of the beverage or product.”
Therefore, a charity cannot claim a PSB rebate in respect of the GST/HST paid or payable on purchases of alcoholic beverages that the charity supplies independent of a meal where it is not required to collect the GST/HST on those supplies (such as, exempt supplies of alcoholic beverages or taxable supplies made by a charity that is a small supplier not registered for GST/HST purposes).
For example, a charity would not be entitled to claim a PSB rebate in respect of the GST/HST it paid on purchases of alcoholic beverages to the extent that the beverages are exempt supplies under a contract for catering (regardless of whether the consideration is paid in full or in part by the catering client). The supply of an alcoholic beverage made by a charity under these circumstances is independent of a meal and no tax is payable by the recipient in respect of the supply.
However, a charity may be able to claim a PSB rebate in respect of GST/HST paid or payable on purchases of alcoholic beverages and tobacco products when the alcoholic beverages or tobacco products are supplied by the charity together with, and the consideration for the beverages or products are included as part of the consideration for, a meal.
Where the supply of an alcoholic beverage independent of a meal made by a charity is a taxable supply and GST/HST is payable by the recipient, the alcoholic beverage acquired for the purpose of making that supply is not prescribed property under the Regulations. A charity would generally be eligible to claim a PSB rebate in respect of the GST/HST paid or payable on the purchase of those alcoholic beverages (e.g., cash bar at private events or sold at a public event).
For additional information on what is considered prescribed property and services for PSB rebate purposes, please refer to the section “Non-eligible purchases and expenses” in GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate, which is available on our website.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretations given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretations 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 613-952-0420. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Trent MacDonald
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 In limited circumstances a charity may be eligible to claim an input tax credit. See GST/HST Info Sheet GI-066 – How a Charity Completes its GST/HST Return for more information.
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