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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of the GST/HST to the supply of memberships by a non-profit organization.
Thank you for your facsimile transmission of [mm/dd/yyyy], concerning our ruling letter to […] (the Association) dated [mm/dd/yyyy]. You have provided additional information for us to consider in determining the application of the goods and services tax/harmonized sales tax (GST/HST) to the Association’s supply of memberships.
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%.
We understand
1. The Association’s website states:
“The [Association] was founded in [yyyy] to […], and to advance and promote […][Profession A]."
2. You have stated that the Association is a non-profit organization as that term is defined in subsection 123(1) of the Excise Tax Act (ETA). The Association is not registered for purposes of the GST/HST.
3. Section […] of the Association’s by-laws states:
[…][the Association’s objectives]
4. Section […] of the Association’s by-laws states:
[…][a description of the council of the Association]
5. […]. Section […] of the Association’s by-laws states:
[…][a description of a Member of the Association]
6. Section […] of the Association’s by-laws states:
[…][a description of a direct benefit of being a Member of the Association related to the intangible property of a third party]
7. Section […] of the Association’s by-laws states:
[…][a description of the voting and other rights of a Member of the Association]
8. Sections […] of the Association’s by-laws describe the other membership categories of the Association […].
9. Section […] of the Association’s by-laws states:
[…][a description of the right of members in all categories to receive documents from the Association ]
10. Section […] of the Association’s by-laws states:
[…][a description of the dues and fees payable by all categories of members]
11. Section […] of the Association’s by-laws states:
[…][a description of the annual and any other general meetings of the Association]
12. Section […] of the Association’s by-laws states (in part):
[…][a description of the voting rights of Members]
13. […][Additional information about Profession A]
14. Section […] of the […] (the Society’s) by-laws states:
[…][District] means a provincial or territorial association of [Profession A] recognized by the Society as a class of membership]
15. Section […] of the Society’s by-laws states:
[…][the definition of a member of the Society]
16. Section […] of the Society’s by-laws states:
[…][a description of the annual fee the provincial/territorial associations must pay to the Society]
17. Section […] of the Society’s by-laws states:
[…][all the membership classes of the Society and who is entitled to vote]
18. Section […] of the Society’s by-laws states:
[…][the provincial/territorial associations (including the Association) that will make up the [District] membership classes and the members of each class that will be recognized by the Society]
19. Section […] of the Society’s by-laws states:
[…][a description of who can vote at member meetings of the Society]
20. In [yyyy], the Association’s total revenues were projected at $[…]. Of this amount, a figure of $[…] was projected to be remitted to the Society by the Association. The Association contends that this [amount of] $[…] was collected on behalf of the Society and includes GST collected.
21. The Association has not made an election under section 17 of Part VI of Schedule V to the ETA or section 18 of Part VI of Schedule V to the ETA in respect of its memberships.
22. In your letter of [mm/dd/yyyy], you […][stated why you believe membership in the Association should be exempt]
23. There is no statute that requires membership in the Association.
24. In your letter of [mm/dd/yyyy], you made the following statement with respect to a possible agency relationship between the Association and the Society: […]
25. In the Association’s list of […] [annual dues, fees and charges on their website], it states: […]
RULING REQUESTED
You would like to know:
1. Is the supply of a membership by the Association to a Member an exempt supply because Members are required by law to have a membership in order to keep their professional status?
2. Is the Association acting as an agent of the Society when, pursuant to Section […] of the Society by-laws, “On behalf of the Society membership, […] [Districts, such as the Association,] shall pay to the Society an annual fee based on a per capita rate for each of its […] Members.”?
3. Is the Association required to include the amount of a membership due collected from an individual Member, “on behalf of the Society membership and paid out to the Society”, in determining their total revenues from taxable supplies with regard to the small supplier threshold for PSBs?
RULING GIVEN
1. The supply of a membership by the Association granted under Section […] the Association’s by-laws is not an exempt supply pursuant to section 18 of Part VI of Schedule V to the ETA.
2. The Canada Revenue Agency (CRA) will not issue a ruling when it considers that it would be inappropriate to do so. Circumstances in which the CRA may not issue a ruling include when a request is for a determination of fact, and the circumstances are such that all of the pertinent facts cannot be established this includes the existence of an agency relationship.
3. The Association is required to include the total value of the consideration for the world-wide taxable supplies made by the Association (or an associate) that became due or was paid without becoming due, in the previous four calendar quarters in determining whether or not the Association is a small supplier during any particular calendar quarter. This would include the entire amount of a membership due collected from an individual Member ($[…] in [yyyy]).
EXPLANATION
Membership
Section 18 of Part VI of Schedule V to the ETA exempts:
A supply of a membership made by an organization membership in which is required to maintain a professional status recognized by statute, except where the supplier has made an election under this section in prescribed form containing prescribed information.
You have provided information with respect to […]. However you have not provided, and the CRA was unable to find, any evidence that supports your claim that membership in the Association is required to maintain a professional status recognized by statute. A person may offer or provide services similar to those offered or provided by […][Profession A] in […][Province X] even though they are not a member of the Association […].
Section […] of the Society by-laws
In our ruling letter dated [mm/dd/yyyy], we provided you with information on “Agency vs. resupply”. Specifically, we stated,
“Notwithstanding that you have stated that [the Association] is agent of the [Society] in relation to the collection of the [Society] membership dues, the bylaws of the [Society] provide no liability to the individual members to pay membership dues to [Society]. In particular, pursuant to section […] of the [Society]’s bylaws, the [District] organizations have the obligation to pay an annual fee to the [Society]. Although the amount of this fee is calculated based on the number of individual members, the individual members are not liable to pay this fee to the [Society]. There is no mention elsewhere in the [Society]’s bylaws of any membership fee payable to the [Society] by the individual members; rather, this is an amount payable by [the Association] to the [Society]. Therefore, the value of the consideration for [the Association]’s supplies of memberships is the entire amount charged by [the Association] to the individual members.
As the supplies of memberships to Members are taxable supplies, the full amount of consideration for the membership fees is included in determining the small supplier threshold for PSBs.”
The information in the [mm/dd/yyyy] letter effectively explains our thoughts on your argument of agency. We do not feel it is necessary to rule on the matter because section […] of the Society’s by-laws clearly indicates that the Association is the recipient of the supply made by the Society.
Value of consideration
Subsection 165(1) of the ETA states,
Subject to this Part, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply.
Subsection 153(1) of the ETA states,
Subject to this Division, the value of the consideration, or any part thereof, for a supply shall, for the purposes of this Part, be deemed to be equal to
(a) where the consideration or that part is expressed in money, the amount of the money; and
(b) where the consideration or that part is other than money, the fair market value of the consideration or that part at the time the supply was made.
Consideration is defined to include any amount that is payable for a supply by operation of law.
According to the Association’s list of […][annual dues, fees and charges], the amount that is payable for a membership granted under Section […] of the Association’s by-laws is $[…].
The Association is required to include the entire amount of a membership due collected from an individual Member ($[…] in [yyyy]) in determining their total revenues from taxable supplies with regard to the small supplier threshold for PSBs.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7941. 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
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