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Attention: XXXXX
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March 1, 1994
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Dear XXXXX
This is further to your earlier telephone request for information concerning the application of the GST to political parties. We regret the delay in our response due to extensive consultations on this subject.
This interpretation is based upon our current understanding of the Excise Tax Act (ETA) and regulations thereunder in their present form and does not take into account the effects of any proposed or future amendments thereto or future changes in interpretation.
While we trust that these comments will be of assistance to you, they do not constitute a GST ruling and are therefore not binding upon the Department in respect of any particular fact situation.
The GST applies to candidates in a federal election, to candidate campaign committees and to federal political parties as follows:
1) Candidates
A candidate in a federal election is not considered to be engaged in a commercial activity as that term is defined in subsection 123(1) of the Excise Tax Act (ETA). Therefore, candidates or official agents acting on behalf of candidates, cannot register for the purposes of the GST and will not be able to claim input tax credits to recover any part of the GST paid on election expenses.
2) Candidate Campaign Committees
A candidate may establish a campaign committee to coordinate activities in the course of his or her election campaign. In our view, it is reasonable to conclude that a campaign committee is not a separate person in its own right for the purposes of the GST.
Activities carried on by a candidate's campaign committee prior to the issuance of the election writ are considered to be those of the local constituency association of the political party. Activities carried on by the campaign committee after the election writ has been issued will be regarded as those of the candidate. Therefore, regardless of the degree of organization and the number of persons involved in campaign activities on behalf of the candidate, a campaign committee is not an autonomous entity and is not a person in its own right. Accordingly, the candidate campaign committee will not be entitled to register and will not be able to claim input tax credits in respect of the GST paid on purchases made in the course of the campaign.
As mentioned above, if the candidate, or the official agent acting on behalf of the candidate, makes purchases in the course of the campaign, no portion of the GST paid may be recovered through input tax credits.
On the other hand, if purchases in the course of an election campaign are made by the political party, then the entitlement to input tax credits will depend on whether the party is a GST registrant and whether these acquisitions are incurred in the course of a commercial activity.
3) Political Parties
It will be a question of fact as to whether a political party will constitute a single person or a number of separate persons under the GST. The various divisions of a political party (i.e. national associations, constituency associations and other affiliated organizations) may, depending on the manner in which the party is constituted and the degree of control exercised by the national association, be considered to be a single person. However, if these divisions are sufficiently autonomous, they may constitute separate persons in their own right under the GST. Any division of a political party that is separately incorporated would also constitute a separate person for the purposes of the GST.
If the party is a single person, GST will not apply to any supplies of goods or services made between the various branches or divisions of that party. However, if the various branches and divisions of the party are themselves separate persons, then separate applications for registration must be made. Any transactions made in the course of a commercial activity between these branches and divisions will be subject to GST.
Registration and Input Tax Credits
A political party that is a single person may register for the GST if it conducts its activities on a regular and continuous basis and if it makes taxable supplies in the course of these activities such as admissions to conventions and fund-raising events and supplies of non-exempt memberships.
National associations, local constituency associations and other divisions of federal political parties that are separate persons under the GST must review their activities separately to determine if they are engaged in regular and continuous activities, and if they make taxable supplies in the course of these activities such as admissions to conventions, fund-raising events and supplies of non-exempt memberships. For example, a national association of a political party may perform different functions than those performed by a local constituency association. Each association must determine if it is engaged in a commercial activity and if it makes taxable supplies in the course of that activity in order to establish whether it may register for the purposes of the GST.
A political party that is a single person, or a national association that is a separate person, and any branch or division of the party that constitutes a person in its own right, may claim input tax credits in respect of purchases acquired for the purpose of making taxable admissions to fund-raising events or to conventions.
Political parties also acquire property and services in the course of activities such as research, strategic planning, policy development, advertising and election campaigns. In our view, these purchases are acquired for the purpose of making supplies of memberships in the political party. Input tax credits may be claimed if these purchases have been acquired for consumption or use by the person for the purpose of taxable supplies of memberships.
Finally, the GST paid on overhead costs must be apportioned between its use in exempt and non-exempt activities.
I hope that this information will be of assistance. If you have any further questions on this topic, please contact XXXXX[.]
Yours truly,
J.A. Venne
Director
Tax Policy - Special Sectors
Policy and Legislation
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