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: 8483r
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
[…][A charity’s eligibility for a public service bodies’ rebate of the tax paid or payable on the acquisition of alcoholic beverages]
As part of our regular monitoring activities, we have recently conducted a review of rulings and interpretations issued on the subject of the eligibility for a public service bodies’ rebate of the tax paid or payable by a charity on the acquisition of alcoholic beverages. […]. We are issuing this interpretation to correct the inaccuracies in the […] ruling [dated] [mm/dd/yyyy].
The HST applies in the participating provinces at the following rates: 13% in Ontario; 14% in Prince Edward Island; and 15% in New Brunswick, Newfoundland and Labrador and Nova Scotia. The Government of Prince Edward Island has proposed to increase the rate of the HST in that province from 14% to 15% effective October 1, 2016. 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.
[…]. The Organization is a charity for purposes of the ETA and is registered for purposes of the GST/HST.
[…]
The Organization maintains and operates the facilities located at […][Location A] in […][City 1]. The Organization’s [Location A] is home to […][the Facility] which has venue space for corporate events, cocktail parties, small and large meetings, weddings, conferences, trade shows, and concerts. The Organization offers catering for these events.
The […] Catering Menu makes the following statement with respect to its Bar Menu:
[…]
RULINGS REQUESTED
The GST/HST Application Ruling issued to you dated [mm/dd/yyyy], listed the following two questions under the heading Rulings Requested:
“Is the supply of alcoholic beverages that form part of a catering service exempt under section 1 of Part V.1 of Schedule V to the Excise Tax Act (the ETA)?
Is [the Organization] entitled to claim a rebate in accordance with section 259 of the ETA with respect of the GST paid on alcoholic beverages?”
INTERPRETATION GIVEN
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 (e.g., food, 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. 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 50/50 bar (that is, 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 (that is, a no-host bar), 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 (e.g., exempt supplies of alcoholic beverages, 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).
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 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 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.
Email this Content