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: 147778
Business Number: [...]
July 19, 2013
Dear [Client]:
Subject: GST/HST RULING AND INTERPRETATION
Children's [...][sport] programs
Thank you for your letter of October 1, 2012, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to children's [...][sport] programs provided by [...]([...][the Corporation]).
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand
1. [The Corporation] was incorporated as a corporation without share capital under [...] on [mm/dd/yyyy], and [...].
2. [The Corporation] is registered for GST/HST purposes with GST/HST account number [...].
3. [The Corporation] has stated that it is a non-profit organization as that term is defined in subsection 123(1). Given this fact, [the Corporation] would also be a public sector body for GST/HST purposes.
4. [The Corporation] operates a private membership-based [sport] club in [...][City 1, Province 1].
5. [The Corporation] provides various [sport] programs for the children of members of [the Corporation]. The fees for these programs are separate from [the Corporation] membership fees.
6. [The Corporation]'s programs were established by [the Corporation]'s head coach, following guidelines set by [...][Organization X] and [...][Organization Y].
7. [The Corporation] employs coaches and other support staff to carry out its [sport] programs.
8. Two such programs are the [...][Program A] and the [...][Program B]. The [Program A] is for children ages 12 and 13 and the [Program B] is for children ages 14 and 15. The [...][Programs A and B] each consist of a series of training sessions where the athletes receive supervised instruction in [sport] from [the Corporation]'s coaches.
[Program A]
9. [...][Description of Program A and its fees]
10. [...].
11. In addition, all [Program A] athletes must attend [...] pre-season camp. The athlete must choose one of the following camp options listed on the registration form: [...]
12. On the [Program A] registration forms, an athlete must add the cost of their chosen camp to the program cost to arrive at the total amount owing. [...].
13. According to the [...][Organization X guidelines].
[Program B]
14. [...][Description of Program B and its fees]
15. In addition, all [Program B] athletes must attend [...] pre-season camp. The athlete must choose one of the following camp options listed on the registration form: [...]
16. On the [Program B] registration forms, an athlete must add the cost of their chosen camp to the program cost to arrive at the total amount owing. [...]
17. According to the [...][Organization X guidelines].
18. [...][A small number of] athletes enrolled in the [Program B] were 15 years of age during the [yyyy-yyyy] [sport] season. [The Corporation] expects approximately the same age distribution next season.
19. [...]
20. The [Programs A and B] offer between [...] days of training in [Province 1], with the remainder being out of region, overnight stays.
21. The pre-season camp options are conducted off-site by [the Corporation]'s coaching staff. During the [...] camps, overnight supervision is provided by [the Corporation]. The coaches and athletes stay in [...][accommodations] at the off-site location. The off-site camps include [sport] coaching, accommodation, meals, transportation and afternoon activities (e.g. [...])
22. [The Corporation] considers the off-site camps to be part of [Programs A and B]. Since it is not possible to offer the required number of [...] days in [Province 1], pre-season training is a mandatory component of the [Programs A and B] and is offered in the format of off-site training camps.
23. [...][Direct quote from Organization X documents]
24. Participants in the [Programs A and B] must also occasionally travel out-of-province to attend [...][events]. [...]. These out-of-province [events] involve overnight stays, where the participants are supervised by [the Corporation]'s coaches.
25. The [...][XYZ] pre-season camp operates as a day-camp. [The Corporation] provides supervision and training from [...][time period] daily and then the children stay overnight with their parents for the remainder of the time away. The [XYZ] camp is open to athletes of all skill levels. Generally, [#] participants attend the camp, most of who are 14 and under. [...].
Ruling Requested
You would like to know
1. Is [Program A] provided by [the Corporation] exempt from HST under paragraph 12(a) of Part VI of Schedule V?
2. Is [Program B] provided by [the Corporation] exempt from HST under paragraph 12(a) of Part VI of Schedule V?
3. Is the off-site pre-season day camp provided by [the Corporation] exempt from HST under paragraph 12(a) of Part VI of Schedule V?
Ruling Given
Based on the facts set out above, we rule that
1. [The Corporation]'s supplies of services supplied as part of [Program A], including the off-site camps, are exempt from GST/HST under section 12 of Part VI of Schedule V. Therefore, the [Program A] fees and the off-site camp fees are not subject to GST/HST.
2. [The Corporation]'s supplies of services supplied as part of [Program B] in the [yyyy-yyyy] season, including the off-site camps, are exempt from GST/HST under section 12 of Part VI of Schedule V. Therefore, the [Program B] fees and the off-site camp fees are not subject to GST/HST.
3. [The Corporation]'s supplies of services supplied as part of the [XYZ] day-camp are exempt from GST/HST under section 12 of Part VI of Schedule V. Therefore, the [XYZ] day-camp fees are not subject to GST/HST.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
A "non-profit organization" is defined under subsection 123(1) to mean a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada.
It is a question of fact whether, at any particular time, [the Corporation] meets the definition of a non-profit organization for ETA purposes. In particular, whether [the Corporation] meets the criterion of operating solely for a purpose other than profit must be determined on an ongoing basis.
In general, supplies of property and services made by a non-profit organization are taxable for GST/HST purposes unless the supply is an exempt supply under a provision in Schedule V. Section 12 of Part VI of Schedule V exempts the following:
A supply made by a public sector body of a membership in, or services supplied as part of, a program established and operated by the body that consists of a series of supervised instructional classes or activities involving athletics, outdoor recreation, music, dance, arts, crafts or other hobbies or recreational pursuits where
(a) it may reasonably be expected, given the nature of the classes or activities or the degree of relevant skill or ability required for participation in them, that the program will be provided primarily to children 14 years of age or under, except where the program involves overnight supervision throughout a substantial portion of the program; or
(b) the program is provided primarily for underprivileged individuals or individuals with a disability.
A supply will be exempt under section 12 of Part VI of Schedule V where:
* The supplier is a public sector body (which is defined to include a non-profit organization);
* The supply is of a membership in a program or services supplied as part of a program;
* The program is established and operated by the public sector body;
* The program consists of a series of supervised instructional classes or activities involving athletics, outdoor recreation, music, dance, arts, crafts or other hobbies or recreational pursuits;
* One of the following circumstances applies:
* The program is provided primarily to children 14 years of age or under and it does not involve overnight supervision throughout a substantial part of the program; or
* The program is provided primarily to underprivileged individuals or individuals with a disability.
The term "program" is not defined in the ETA. The determination as to whether [the Corporation] supplies one or more programs is a decision for [the Corporation] itself - that is, [the Corporation] itself may define its own programs provided it is done on a reasonable basis. [The Corporation] considers the pre-season off-site camps to be part of the same program as the on-site training at [the Corporation]. The off-site camps are added to [Programs A and B] to enable the athletes to receive the required number of [...] training days. The off-site camps are an extension of the regular on-site training.
Some of the participants in [Program B] are not 14 and under. However, based on the information provided, it may reasonably be expected that [Program B] will be provided primarily to children 14 years of age or under in the [yyyy-yyyy] season. Therefore, all of [the Corporation]'s supplies of services supplied as part of [Program B] in the [yyyy-yyyy] season will be exempt, including supplies made to children who are 15. If the age ratio in [Program B] remains the same, so that it may reasonably be expected that [Program B] will be provided primarily to children 14 years of age or under, [the Corporation]'s supplies of services supplied as part of [Program B] will continue to be exempt in future seasons.
[Programs A and B] do involve some overnight supervision; however, the overnight off-site camps and occasional out-of-province [events] do not occur throughout a substantial portion of these Programs.
Interpretation
[Event] entry fees
Section 12 of Part VI of Schedule V only applies to supplies of memberships in, or services supplied as part of, a program. This exempting provision does not apply to other types of supplies, such as the right to participate in [...][an] [event]. The right to participate in [an] [event] is a supply of intangible personal property. There is no exempting provision that would exempt such a supply of intangible personal property made by a non-profit organization, regardless of the age of the participants. Therefore, a non-profit organization that is a GST/HST registrant must collect GST/HST on [event] entry fees [...].
GST/HST collected in error
Any amounts [the Corporation] collects as or on account of GST/HST, including GST/HST collected in error (e.g., tax collected in error on an exempt supply), must be included in its net tax calculation for the reporting period in which the tax became collectible or was collected.
Under subsection 232(1), where [the Corporation] has charged an amount as GST/HST in error on an exempt supply made to a participant in [Programs A or B] or other person, it has the option to adjust, refund or credit the excess tax to the person within two years after the day the amount was so charged or collected. If [the Corporation] chooses to adjust, refund, or credit the excess amount of GST/HST, a credit note containing prescribed information must be issued to the person within a reasonable time by [the Corporation]. [The Corporation] may also make an adjustment to its net tax calculation to account for any adjustment, refund or credit of an amount of tax paid in error to the extent that the amount was included in determining the net tax for the reporting period or a prior reporting period.
Alternatively, persons that paid an amount as GST/HST on supplies that are exempt may file an application for a rebate of amounts paid in error. Form GST 189, General Application for Rebate of Goods and Services (GST)/Harmonized Sales Tax (HST), is used to apply for the rebate. The time limit to apply for this rebate is within two years after the day the amount was paid.
Additional information concerning tax collected in error may be found in GST/HST Memorandum Series 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act. Additional information concerning the claiming of rebates of tax paid in error may be found in Guide RC4033, General Application for GST/HST Rebates.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9592. 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,
Heather Reardon
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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