Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number : 119345
Attention: XXXXX XXXXX
December 8, 2009
Subject:
GST/HST INTERPRETATION
PROPOSED LAW/REGULATION
Application of the transitional rules for the HST in Ontario to
supplies made by golf course owners and operators
Dear XXXXX:
Thank you for your email of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by owners and operators of golf courses located in Ontario.
As announced in the 2009 Ontario Budget, the Government of Canada and the Government of Ontario have signed a Memorandum of Agreement that provides the framework for the imposition of the HST in Ontario. The HST is proposed to come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part. The HST will use the same tax base and structure as the GST, with some exceptions.
The draft legislation regarding the HST in Ontario has not yet been released. However, the Ontario Ministry of Revenue has announced general transitional rules. The following interpretation is based on the transitional rules as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Government of Ontario on October 14, 2009. This Notice can be found at www.rev.gov.on.ca/en/notices/hst/03.html. This interpretation should not be taken as a statement by the Canada Revenue Agency (CRA) that the transitional rules for the HST in Ontario will be enacted in their current form.
Interpretation Requested
You would like to know how the transitional rules announced by the Government of Ontario on October 14, 2009, will apply to the following supplies made by owners and operators of golf courses located in Ontario (the Suppliers):
1. Please confirm the following: Golf green fees that are charged on the day of play until June 30, 2010 will incur only GST (5%). As of July 1, 2010, the Suppliers must charge HST (13%) on these fees.
2. Please confirm the following: For any multi-packs of golf green fees for the 2010 golf season that are sold before July 1, 2010, the Suppliers would only charge GST since the Supplier does not know at the time of the actual sale when the green fee vouchers will be redeemed during the 2010 golf season (i.e., it could be before or after July 1, 2010). As of July 1, 2010, the Suppliers must charge HST on the total consideration for the multi-packs. You indicated in our telephone conversation that the multi-packs contain vouchers for several rounds of golf that are paid for in advance, and usually at a discount compared to the green fee for a single round of golf.
3. Please confirm the following for 2010 golf memberships (annual golf dues):
(a) If the Supplier invoices and is paid from today until April 30, 2010, the Supplier will only need to charge GST on the amount owed.
(b) For invoices generated and payments received from May 1, 2010 to June 30, 2010 inclusive, the Supplier will need to prorate the annual golf dues and charge HST for the portion of the membership on and after July 1, 2010.
(c) From July 1, 2010, the Supplier will charge HST on the amount owed.
4. Regarding the pro-rating mentioned above in question 3, is this based on a 12-month calendar year or is this based on the length of the golf season (typically 6 months - from May to October)?
5. Initiation Fees: The initiation fee is an up-front cost for a new member to join a private golf club; applies to both an equity membership and a non-equity membership. This fee is usually (but not always) paid in full at time of joining and is in addition to the annual golf membership dues.
(a) Please confirm the following: If a new member joins a golf club before July 1, 2010, the Supplier will continue to charge only the GST on the initiation fee, but if a new member joins a golf club after July 1, 2010, the Supplier would charge the HST on this amount.
(b) If the initiation fee is paid over a multi-year arrangement (i.e., $XXXXX a year for the next XXXXX years), on what portion would the Supplier charge GST and on what portion would the Supplier charge HST?
6. Lifetime golf memberships:
(a) Please indicate which is correct: For any lifetime golf memberships sold from today forward, the Supplier would need to charge HST as the majority of the membership will come into play after July 1, 2010, or if this lifetime membership is paid in full before July 1, 2010, should the facility charge GST on 25% of the value and HST on 75% of the value?
(b) If a lifetime golf membership is paid over a multi-year arrangement (e.g., $XXXXX a year for the next XXXXX years), on what portion would the Supplier charge GST, and on what portion would the Supplier charge HST?
7. Lifetime golf memberships and initiation fees:
(a) Is a "lifetime membership" the same as an initiation fee or entrance fee? If so, please confirm if HST applies to initiation fees charged from this point on.
(b) Assuming that a lifetime membership and an initiation fee are the same, what would be the tax implications of the following scenario: A club has a $XXXXX initiation fee. A member can elect to pay the entire $XXXXX at once or he can elect to pay $XXXXX ($XXXXX per year billed over XXXXX years with XXXXX interest of $XXXXX). A member who joins in 2008 elects to pay by instalments and pays his first two $XXXXX instalments in 2008 and 2009 (only GST is charged on these amounts since the HST doesn't exist yet). In late 2009 or early 2010 (prior to the implementation of the HST), the club offers the member the opportunity to be charged the remaining $XXXXX balance on the basis that HST will not apply (it would actually be slightly less than $XXXXX because it would be discounted due to the prepayment). Does the HST apply?
8. Membership Assessment (for private golf clubs): A club undertakes a significant capital improvement in XXXXX and finances it with debt. In order to cover its loan payment, the club assesses its members $XXXXX per month until the loan is paid off. This $XXXXX charge is subject to GST. With the HST announcement, the monthly $XXXXX charge would be subject to an additional 8%. Prior to the implementation of the HST, the club gives members the opportunity to pay the present value of their future $XXXXX billings in a lump sum on the basis that HST will not apply. The club will use the proceeds from those members who elect to do so, to pay down its debt. Does the HST apply?
9. Please confirm the following: For golf tournaments or any special events that occur at a Supplier's facility before July 1, 2010, the Supplier will only charge GST on the green fees. From July 1, 2010 and going forward, the Supplier must charge HST on the green fees.
10. In addition to golf memberships, the Suppliers also charge for both locker rentals and club storage fees, which are currently subject to GST. Would the Suppliers follow the same parameters listed above for question 3 (golf memberships) such that if the Supplier invoices and receives payment for the locker rental and club storage fees from today until April 30, 2010, the Supplier would only charge GST on the amount owed? But if the fees are invoiced and paid for from May 1 to June 30, they will be prorated? If the fees are invoiced after July 1, 2010, then the Supplier will need to charge the full HST on them? You confirmed in our telephone conversation that the locker rentals and club storage fees are usually for the same period as the golf memberships in question 3.
11. Service charges: Currently some Suppliers charge a service charge (typically XXXXX% of the total price, e.g., for food and beverages) and are required to charge GST on the service charge. The service charge may be charged on the day of play or charged on the monthly membership invoice (issued at the end of the month). Should the Suppliers continue to charge GST on this service charge for all transactions up to and including June 30, 2010? As of July 1, 2010, would the Suppliers be required to charge HST on this service charge?
Interpretation Given
Based on the information provided,
1. We confirm that green fees that are charged on the day of play before July 2010 will incur only the GST. As of July 1, 2010, the Suppliers would charge HST on these fees.
Golf green fees are consideration for supplies of property for GST/HST purposes, specifically, a right to use a golf course. As such, the transitional rules for leases and licences of property would apply to the green fees.
2. For a multi-pack of golf green fees in respect of the 2010 golf season, where the consideration payable for the multi-pack becomes due or is paid without having become due after October 14, 2009 and before May 2010, a Supplier would only charge the GST.
For a multi-pack of golf green fees in respect of the 2010 golf season, where the consideration payable for the multi-pack becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010, a Supplier would charge the HST to the extent that the consideration is attributable to that part of the 2010 golf season that occurs on or after July 1, 2010. For purposes of determining the portion of the consideration on which the HST would apply, we would generally take into account that portion of the 2010 golf season that remains as of the date the multi-pack is sold.
For a multi-pack of golf green fees in respect of the 2010 golf season, where the consideration payable for the multi-pack becomes due or is paid without having become due on or after July 1, 2010, a Supplier would charge the HST.
3. Your interpretation of how the transitional rules will apply to the 2010 golf memberships is essentially correct. However, the application will depend on the date that either the consideration becomes due (for example, the date on the invoice or the date it is issued, whichever is earlier) or the date it is paid without having become due.
(a) If the golf membership fees become due, or are paid without having become due, by April 30, 2010, the Supplier will only need to charge GST on the amount charged.
(b) If the golf membership fees become due, or are paid without having become due, from May 1, 2010 to June 30, 2010 inclusive, the Supplier would prorate the golf fees based on the membership period and charge HST for the portion of the membership that occurs on and after July 1, 2010.
(c) From July 1, 2010, the Supplier would charge HST on the amount charged.
4. The pro-rating of the golf membership period in the answer 3(b) above would depend on the actual golf membership supplied. If the Supplier indicates that the golf membership provides rights for the full calendar year (for example, the clubhouse is open to members year-round), then the Supplier would prorate the membership period on that basis. If the Supplier indicates that the golf membership only provides rights for certain months (for example, the membership is valid from May to October 2010), and there are no benefits associated with the membership outside of those months, then the Supplier would prorate the membership period on that basis.
Where the membership period is for the golf season, but the exact length of the period is not known when the membership is sold, the Supplier could prorate the membership period based on a typical golf season at that Supplier's golf course using historical information.
5. We require more information on the specific transactions involving initiation fees before we can confirm how the transitional rules would apply in either of the cases described. An initiation fee may be consideration for a membership, which may or may not be a lifetime membership, or the initiation fee may be consideration for some other right.
6. We confirm that:
(a) For any lifetime golf memberships sold after October 14, 2009 and before July 2010, where the consideration in full becomes due or is paid without having become due at that time, the Supplier would charge GST on 25% of the consideration and HST on 75% of the consideration.
(b) For a lifetime golf membership that is paid over a multi-year arrangement (e.g., $10,000 a year for the next 3 years), the Supplier would charge HST on any portion that becomes due or is paid without having become due after October 14, 2009 and before July 2010, that exceeds 25% of the total consideration. In the example provided, the total consideration for the lifetime membership is $30,000, and 25% of that amount is $7,500. If the first $10,000 becomes due or is paid without having become due after October 14, 2009 and before July 2010, the Supplier would charge GST on $7,500 and HST on the remaining $2,500. The two remaining payments would be subject to HST as they would become due or be paid without having become due after July 1, 2010.
7. Under the ETA, "membership" is a defined term: "membership" 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, and also includes such a right that is conditional on the acquisition or ownership of a share, bond, debenture or other security. However, "lifetime" and "lifetime membership" are not defined in the ETA. Generally, we consider the general dictionary meaning of terms that are used but not defined in the ETA. In the case of a lifetime membership, we would consider that "lifetime" means for the life of the person acquiring the membership.
Whether an initiation fee or entrance fee is part of the consideration for a lifetime membership would depend on the specific facts, and we would require more information on the specific transaction before we can confirm how the transitional rules would apply in the scenario described.
8. The membership assessment described in this scenario would likely be viewed as additional consideration for the supply of the membership. If the lump sum payment of the membership assessment becomes due, or is paid without having become due, by April 30, 2010, the Supplier generally would only need to charge GST on the amount. The Supplier would likely be required to prorate any lump sum payments that become due, or that are paid without having become due, from May 1, 2010 to June 30, 2010 inclusive, based on the original period and charge HST for the portion of the period that occurs on and after July 1, 2010.
9. We confirm that for green fees for golf tournaments and special events that occur at a Supplier's facility before July 1, 2010, the Supplier will only charge the GST on the green fees for the event regardless of when they become due or are paid. For golf tournaments and special events that occur at a Supplier's facility on or after July 1, 2010, the Supplier would charge the HST on any green fees for the event that become due, or that are paid without having become due, on or after May 1, 2010.
10. Both the locker rentals and the club storage are viewed as supplies of real property by way of lease, licence or similar arrangement, and the transitional rules for leases and licences would apply. Where the rental period for a locker or the storage period is the 2010 golf season and one amount is payable for the entire rental or storage period, we confirm that:
(a) If a locker rental fee or club storage fee for the 2010 golf season becomes due, or is paid without having become due, after October 14, 2009 and before May 2010, a Supplier would charge the GST on the fee.
(b) If a locker rental fee or club storage fee for the 2010 golf season becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010, a Supplier would prorate the fee based on the rental or storage period which would end on the last day of the 2010 golf season and charge the HST for the portion of the period that occurs on and after July 1, 2010.
(c) If a locker rental fee or club storage fee for the 2010 golf season becomes due, or is paid without having become due, on or after July 1, 2010, a Supplier would prorate the fee based on the rental or storage period which would end on the last day of the 2010 golf season and would charge the HST for the portion of the period that occurs on and after July 1, 2010.
If the rental period or storage period is shorter or longer than the 2010 golf season, please refer to GST/HST Notice 244, Harmonized Sales Tax for Ontario - Questions and Answers on Housing Rebates and Transitional Rules for Housing and Other Real Property Situated in Ontario, which is available on the CRA Web site for more information on the transitional rules for leases and licences of non-residential real property.
11. The service charges are likely additional consideration for the supply made by the Supplier. As such, the transitional rules that apply to the supply would also apply to the service charge. For service charges related to food and beverages, the Suppliers would continue to charge GST on any supplies made before July 2010. For any supplies that are made on or after July 1, 2010, the Supplier would charge HST on the service charges that become due, or that are paid without having become due, on or after May 1, 2010. You or your members may want to provide examples of daily or monthly membership invoices to confirm how the transitional rules would apply to specific service charges.
The foregoing comments represent our general views with respect to the transitional rules for the HST in Ontario as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Ontario Ministry of Revenue on October 14, 2009, as they relate to the subject matter of your request. Any change to the wording of the transitional rules or any future proposed legislation regarding the HST in Ontario, if enacted, could have an effect on the interpretation provided herein. 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.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-7909. 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,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
XXXXX
UNCLASSIFIED
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