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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5XXXXX
XXXXX
XXXXX
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Case Number: 62066XXXXX
XXXXXJuly 20, 2006
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Dear XXXXX:
We are writing in response to the request XXXXX from your representatives XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by the XXXXX (the Society).
We apologize for the delay in our response.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the CRA Web site.
Statement of Facts
We understand that:
1. The Society was incorporated to XXXXX.
2. Your representative has indicated that the Society meets the definition of non-profit organization, as that term is defined in subsection 123(1).
3. The Society is a GST/HST registrant XXXXX.
4. The Society has entered into various agreements with a variety of businesses to be recognized as sponsors of the XXXXX.
Sponsorship Agreements
5. The Society has Sponsorship Agreements XXXXX.
6. The consideration (in cash and/or value-in-kind) provided by a sponsor of the XXXXX at the different levels covered in the Sponsorship Agreements are as follows:
- XXXXX
- XXXXX
- XXXXX.
7. You have provided us with a generic Sponsorship Agreement and also a signed XXXXX level Sponsorship Agreement. Although the specific terms of each Sponsorship Agreement will vary in respect of the level and value of the sponsorship, the nature of the value in kind supplied by the sponsor, and some of the XXXXX (see fact #13), the nature of the supplies (as described below) made by the Society under each level of Sponsorship Agreement is the same.
8. Under XXXXX the Sponsorship Agreement, the Society grants to a XXXXX sponsor the following rights, privileges, options and opportunities as a XXXXX sponsor:
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX.
9. The sponsor does not have the right to grant or sub-license in any form whatsoever its rights and status as a XXXXX sponsor to any third party or affiliate without the prior express written consent of the Society.
10. XXXXX.
11. The sponsor agrees that any XXXXX or XXXXX on which there is a XXXXX shall not be sold at any time after XXXXX.
12. XXXXX the Sponsorship Agreement, XXXXX, details the conditions under which the right to use the XXXXX are granted. This XXXXX provides
- The general conditions of use,
- How the XXXXX are to be used on XXXXX,
- The use of XXXXX in advertising and promotion, and
- The protection of the XXXXX.
13. XXXXX the Sponsorship Agreement provides the details of the XXXXX. We understand that there are differences in the benefits received at the three sponsor levels covered in the Sponsorship Agreements; these are summarized in Appendix 1 to this letter.
Memorandum of Agreement
14. You have provided us with the Memorandum of Agreement for the XXXXX. We understand that all contracts for sponsors at the XXXXX levels are similar in nature, and include the following sponsor levels:
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX.
15. The consideration provided by a sponsor of the XXXXX at the different levels of XXXXX is as follows:
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX.
The chart in Appendix 2 to this letter describes the various rights and benefits provided by the Society to the sponsors falling under the various XXXXX levels.
16. The consideration provided to the Society by the recipient of the Sponsorship Agreement and the Memorandum of Agreement includes both cash and value-in-kind.
Ruling Requested
1. You would like to know if the supply by the Society under the Sponsorship Agreement to the following sponsors is a taxable supply:
- XXXXX
- XXXXX
- XXXXX.
2. You would like to know if the supply by the Society under the Memorandum of Agreement to the following sponsors is deemed not to be a supply under section 135:
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX.
3. You would also like to know if the goods and services provided to the Society as consideration for the sponsorship at the XXXXX levels are deemed not to be a supply for GST/HST purposes under section 135.
Ruling Given
1. Based on the facts set out above, we rule that the supply by way of licence of the use of the copyright, trade-mark, trade-name or other similar property of the Society to sponsors at the
- XXXXX
- XXXXX
- XXXXX,
is to a person who is the sponsor of an activity of the Society for use by the sponsor exclusively in publicizing the sponsor's business. As a result the supply by the Society shall be deemed not to be a supply under section 135 and is therefore not subject to GST/HST.
2. Based on the facts set out above, we rule that the supply of the service by the Society to sponsors at the
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX
- XXXXX,
is to a person who is the sponsor of an activity of the Society for use by the sponsor exclusively in publicizing the sponsor's business. As a result the supply by the Society of the service shall be deemed not to be a supply under section 135 and is therefore not subject to GST/HST.
3. Based on the facts set out above, we rule that the deeming provision in section 135 only applies to supplies made by the Society, it does not apply to any supplies of goods and services provided to the Society as consideration for the sponsorship at the XXXXX levels.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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
Under section 135 where a public sector body (which includes an NPO such as the Society) makes
(a) a supply of a service, or
(b) a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property of the body,
to a person who is the sponsor of an activity of the body for use by the person exclusively in publicizing the person's business, the supply by the body of the service or the use of the property shall be deemed not to be a supply, except where it may reasonably be regarded that the consideration for the supply is primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically or for a prescribed service.
The XXXXX Agreement's dominant and principal purpose is to set the parameters for the sponsor to use the Society's copyright, trade-mark, trade-name or other similar property. Therefore, it is our view that the supply being made under these Agreements is the supply of the right to use these properties.
Although XXXXX the Sponsorship Agreement does provide for the Society to provide some goods and services to the Sponsors, we find that these goods and services are elements that are part of the single supply of the right to use the Society's copyright, trade-mark, trade-name or other similar property. As the supply has met the requirements of section 135 it is deemed not to be a supply and is therefore not subject to GST/HST.
With respect to the Memorandum of Agreement, we find that this agreement is for the supply of a promotional service by the Society to its sponsors. The supply is not primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically or for a prescribed service and therefore is deemed not to be a supply in accordance with section 135 and therefore is not subject to GST/HST.
Section 135 deems certain supplies by a public sector body to a sponsor not to be a supply, but it does not deem any property or service provided by a sponsor to a public sector body not to be a supply.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4206.
Yours truly,
Carol A. Gaudet
Charities, Non-profit organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Appendix 1
XXXXXX
Appendix 2
XXXXXX
2006/06/30 — RITS 62564 — GST/HST Registration of XXXXX [Re Application of Subsection 240(1) of the Act]
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