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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 126175
Business Number: [...]
August 10, 2011
Dear [Client]:
Subject:
GST/HST RULING
Application of GST/HST to services of performing artists supplied by a charity
Thank you for your letter of July 15, 2010 , concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to services of performing artists supplied by [...] ([the Organization]). Your case was transferred to us by the [...] GST/HST Rulings Centre. We apologize for the delay in providing our response.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand that:
1. [The Organization] is a registered charity for income tax purposes and, as such, it is a charity for GST/HST purposes. [The Organization] is registered for GST/HST.
2. [The Organization] brings professional world performing artists into hundreds of [...] [Participating Province X] schools and communities each year, introducing young people to [...] music, song, dance [...]. [The Organization] contracts with [...] professional artists and arts groups to provide these services.
3. In [Participating Province X], teachers are responsible for developing appropriate instructional strategies to help students achieve curriculum expectations and may utilize a variety of resources and approaches to support student learning. As such, teachers may request through their schools, the services of [the Organization's] performing artists to give an interactive performance and/or workshop for their students as a way of enriching their learning.
4. Performances are interactive sessions of [...] to [...] minutes delivered by [the Organization's] professional artists. These performances can take place in gymnasiums or theatres in front of large audiences [...] or in smaller classroom settings ([...] classes at one time). [The Organization] charges program fees that vary depending on the number of performances to be given, whether the performance is for a large audience or for a small group, and whether a solo artist, duo, trio or quartet is booked.
5. Workshops are hands-on sessions for a single class with the teacher that incorporates performance, story and appreciation for traditions, skills and the art form. Workshops are generally a minimum of [...] minutes. Artists can also be booked to provide a series of workshops over several days (can be up to [...]) as a way to integrate the arts with school curriculum strands or for a student showcase. Program fees are charged for a half-day solo artist or duo ([...] sessions in a half day) or full-day solo artist or duo ([...] sessions in a full day). There is a program fee for a performance and [...] hands-on workshop as well as program fees for [...] workshops given by a solo artist or duo.
6. Prior to an artist delivering a performance or workshop at a school, the artist and the teacher discuss the overall objectives and expectations for the program as well as the composition of the class/audience (size, grade level) and any special needs. These details help to inform the artist about selecting appropriate content and approach for the program in order to respond to child and classroom needs and support professional development in the arts for the classroom teacher. Teachers are always present in the classroom while the artist is giving a performance or workshop.
7. [The Organization's] [...] program fees are more than what [the Organization] pays the particular artists. [The Organization] generally adds $[...] to the artist's fee to determine the amount it charges for its supply of the services of the artist. However, as [the Organization] receives funding from the [...] and also undertakes its own fundraising activities, it frequently discounts its program fees [...] for selected schools in under-resourced areas of [Participating Province X].
8. The following are a few of the services of performing artists [the Organization] supplied in [yyyy] to various schools in [Participating Province X]:
(a) [...]
[The Organization] supplied the services of [...] [(Performer 1)] to provide [...] interactive performances on [mm/dd/yyyy], to [...] School, for students in [...] and grades [...]. There were approximately [...] students attending each performance ([...] minutes per performance). Through the use of song, story and interactive exercises, the children were exposed to the three C's of music; choir, conductor and composer. Prior to the performances, [Performer 1] met with the teachers to discuss expectations and any specific objectives so that the content of the performances would relate to at least one aspect [...] of the [Participating Province X] curriculum [...] for grades [...]. The school did not charge any admissions in respect of these performances.
(b) [...]
[The Organization] supplied the services of [...] [(Performer 2)] to provide [...] interactive performances on [mm/dd/yyyy], to [...] School for students in [...] and grades [...]. There were approximately [...] students attending each performance ([...] minutes per performance) and the students were divided by grade division [...] to accommodate skill level and expectations. Students played percussion instruments and learned about traditional [...] dance and singing responses as the artist, [Performer 2], gave a performance and shared the music and stories of his homeland [...]. The content of these performances were relevant to the music and dance strands of the [Participating Province X] curriculum [...] for grades [...]. The school did not charge any admissions in respect of these performances.
(c) [...]
From [mm/dd/yyy], [the Organization] provided the services of [...] [Performer 2] to provide a series of [...] workshops to [...] School for students in grade [...]. Each workshop was a [...]-minute session and there were [...] students per workshop. There were [...] workshops per day over [...] days, plus [...] workshops as an ensemble in preparation for the student showcase the [...] day. In total, [...] students were involved in the workshops. Playing percussion instruments [...], [Performer 2] and the students prepared [...] songs, learned the accompanying dance steps, and learned a story that was integral to the music they were playing. On the final day, the students presented their performance for the rest of the school. The content of these workshops were relevant to the music and dance strands of the [Participating Province X] curriculum [...] for grades [...]. The school did not charge any admissions in respect of these workshops.
(d) [...]
[The Organization] supplied the services of [...] [(Performer 3)] to provide [...] performances [...], on [mm/dd/yyyy], to [...] School for students in grades [...] (a performance each for grades [...]). There were [...] students attending each performance ([...] minutes per performance) for a total of [...] students. [Performer 3] selected stories from a repertoire of folktales, legends and history representing the [...]. [Performer 3] invited audience participation by posing questions to the students regarding their perceptions of the topic and understanding of the lesson/moral of the story, as well as [...]. Prior to the performances, [Performer 3] discussed specific requests from the teacher contact regarding the grades/ages of the students attending the performances and the selection of stories relevant to the oral communication strand of the [Participating Province X] curriculum [...] for grades [...]. For younger students, stories of shorter lengths were selected and for older students, the stories were generally longer and combined with opportunities for reflection and discussion. The school did not charge any admissions in respect of these performances.
(e) [...]
From [mm/dd/yyyy], [the Organization] provided the services of [Performer 2] to provide a series of [...] workshops to [...] School for [...] classes of students in grade [...]. Each workshop was a [...]-minute session and there were [...] students per workshop. There were [...] workshops per day over [...] days, plus the student showcases on the [...] day. [Performer 2] incorporated traditional [...] choreography, chants and rhythms in a simple dance repertoire. Students learned up to [...] dances and showcased their dance repertoire on the final day. In total, [...] students were involved in the workshop. The content of these workshops were relevant to the music and dance strands of the [Participating Province X] curriculum [...] for Grades [...]. The school did not charge any admissions in respect of these workshops.
(f) [...]
[The Organization] supplied the services of [(Performer 4)] to provide [...] performances, [...], on [mm/dd/yyyy], to [...] School for students in grades [...]. The [...] performances were presented as part of the school-wide [...]. There were [...] students attending each performance ([...] minutes per performance) for a total of [...] students. [Performer 4] told humorous and fanciful tales and legends from traditional oral stories [...] to students attending each performance. Students were given a brief introduction about the importance of storytelling in [...] society and they could ask questions after [Performer 4's] performance. Prior to [Performer 4's] performances, [Performer 4] discussed with the teacher the level of [...] to be used in presenting [Performer 4's] stories. The [...] performances were relevant to the oral communication strands of the [Participating Province X] curriculum [...] for grades [...] and for grades [...]. The school did not charge any admissions in respect of these performances.
(g) [...]
[The Organization] supplied the services of [...] [(Performer 5)] to provide [...]
workshops on [mm/dd/yyyy] to [...] School for students in grades [...]. Each workshop was [...] minutes and, in total [...] students were involved. [Performer 5] introduced the students to [...] by providing a demonstration performance. Students then participated in a series of interactive activities, oral and written, geared to teach the basic patterns of [...]. Working in groups of [...], using relevant subject matter addressing current cultural, socio-political and personal issues that had been preselected, students experimented with various rhythms using [...] combination together with the voice as an effective tool for expressing various emotions and to demonstrate the rhythmic flow of [...]. In subsequent workshops, students created and performed their own [...] pieces. The [...] workshops were relevant to various strands of the [Participating Province X] curriculum [...] for grades [...] and for grades [...]. The school did not charge any admissions in respect of these workshops.
(h) [...]
[The Organization] supplied the services of [...] [(Performer 6)] of [...] to provide a
[...]-minute demonstration workshop of [...] on [mm/dd/yyyy], to [...] School, for [...] students in grade [...]. Students were introduced to [...] traditions around the world and simple [...] techniques were demonstrated for classroom follow-up activities. Prior to the school visit, the artist held a discussion with the teacher contact to ascertain the interests and abilities of the involved age/grade group in order to select the appropriate [...] styles and [...] techniques for the demonstration. The workshop was relevant to the visual arts strand of the [Participating Province X] curriculum [...] for Grades [...]. The school did not charge any admissions in respect of this demonstration workshop.
9. You confirmed with the above-mentioned schools that they did not make taxable supplies of admissions to the performances and workshops given by [the Organization's] performing artists and the schools have never charged anyone for admission to these performances and workshops.
RULINGS REQUESTED
Are the services of performing artists supplied by [the Organization] to the schools as described in fact 8(a) to 8(h) exempt from GST/HST?
Is [the Organization] required to be registered for GST/HST?
We acknowledge your request for a ruling on [the Organization's] requirement to be registered for GST/HST. However, as noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency's (CRA's) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person. As the circumstances are such that all of the facts pertinent to determining [the Organization's] requirement to register cannot be established at this time, we are unable to rule on this issue. Rather, following our ruling, we are providing general information on registration which we trust will be of assistance.
Ruling Given
Based on the facts set out above, we rule that the services of performing artists supplied by [the Organization] to the schools as described in fact 8(a) to 8(h) are exempt from GST/HST under section 1 of Part V.1 of Schedule V.
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 their validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Most supplies of property or services made by a charity are exempt supplies under section 1 of Part V.1 of Schedule V unless the supply is excluded from exemption under paragraphs (a) to (n) of that section. However, there are other provisions under Schedule V that may apply to exempt certain supplies of property or services made by a charity.
In particular, paragraph 1(h) of Part V.1 of Schedule V excludes from exemption a supply made by a charity of services of performing artists in a performance where the supply is made to a person who makes taxable supplies of admissions in respect of the performance.
We consider [the Organization's] supplies of services of its performing artists who deliver interactive performances and interactive workshops that incorporate performances to be services of performing artists in a performance. As you advised that [the Organization's] supplies of services of its performing artists as described in fact 8(a) to 8(h) were made to schools that did not make taxable supplies of admissions in respect of the artists' performances, those particular supplies are not excluded from exemption under paragraph 1(h) of Part V.1 of Schedule V. As a result, these particular supplies are exempt supplies that are not subject to GST/HST.
Please note that we have only ruled on the tax status of the supplies made by [the Organization] as described in fact 8(a) to 8(h). It will be a question of fact whether any particular supply made by [the Organization] meets the same conditions for exemption as explained above.
ADDITIONAL INFORMATION
GST/HST charged in error
Under subsection 232(1), where [the Organization] has charged an amount as GST/HST in error on an exempt supply made to a school 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 Organization] chooses to adjust, refund, or credit the excess amount of GST/HST, it must issue a credit note containing prescribed information. It 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.
If [the Organization] chooses not to adjust, refund, or credit amounts of GST/HST collected in error, it is not required to issue a credit note, and there will be no corresponding adjustment to its net tax. In this situation, the person who has paid the tax in error may be able recover this amount by filing a general rebate application with the CRA within two years after the day the amount was paid or remitted by the person.
For more information, including the prescribed information to be included on a credit note, please refer to GST/HST Memoranda Series 12.2, Refund, Adjustment, or Credit of the GST/HST Under Section 232 of the Excise Tax Act, available on CRA's website.
Direct cost
In your incoming letter, you enquired about the application of the "direct cost exemption" to [the Organization's] supplies of services of performing artists.
In part, section 5.1 of Part V.1 of Schedule V exempts a supply by way of sale made by a charity to a recipient of a service purchased by the charity for the purpose of making a supply by way of sale of the service, if the total charge for the supply is the usual charge by the charity for such supplies to such recipients, and where the charity does not charge GST/HST on the supply, the total charge for the supply does not, and could not reasonably be expected to, exceed the direct cost of the supply. Where the charity charges an amount as GST/HST on the supply of the service, it will be exempt where the consideration for the supply does not, and could not reasonably be expected to, equal or exceed the direct cost of the supply determined without reference to GST/HST or Quebec Sales Tax (for QST registrants). Please note that this direct cost exemption has very limited application to services, applying only to those that are purchased and resold in the same form to the recipient. Also, direct cost does not include administrative or overhead expenses, or employee salaries that the charity incurs to provide the services.
Where a charity charges a discounted fee for a service to a recipient, then it must determine if that discounted fee is the usual charge for such supplies to such recipients and whether that fee exceeds direct cost to ascertain whether the direct cost exemption could apply to the sale of the service.
Registration
A charity that makes a taxable supply of property or services in Canada in the course of a commercial activity engaged in by the charity in Canada is generally required to register for GST/HST purposes, unless the charity is a small supplier. A charity is a small supplier if it meets either of the two following scenarios:
• if its total revenues from taxable (i.e., not exempt) supplies of property and services (other than sales of capital property, supplies of financial services and certain payments for goodwill), and those of associated persons, has not exceeded $50,000 in the current calendar quarter and the previous four consecutive calendar quarters; or
• if it is the charity's first fiscal year, it does not have to register; or if the charity is in its second fiscal year, its gross revenue from its first fiscal year was $250,000 or less; and if it is neither the charity's first fiscal year, nor its second fiscal year, its gross revenue for either of its two preceding fiscal years was $250,000 or less. Gross revenue includes business income, donations, grants, gifts, property income, investment income and any amount considered a capital gain less any amount considered a capital loss from the disposal of property for income tax purposes.
If a charity makes taxable supplies, but is a small supplier, the charity is not required to be registered for GST/HST but may choose to register voluntarily. If a charity is not a small supplier and it makes taxable supplies, including zero-rated supplies (i.e., supplies taxable at 0%), then the charity is required to register for GST/HST. If a charity makes only exempt (i.e., not taxable) supplies of property or services, or is not making any supplies of property or services, the charity is not eligible to be registered for GST/HST.
A charity that is not required to be registered may request cancellation of its GST/HST registration by filing form RC145, Request to Close Business Number (BN) Accounts, or by contacting Business Enquires at 1-800-959-5525.
The foregoing comments in the additional information section of our letter 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 CRA 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,
Nadine Kennedy
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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