XXXXX
Dear XXXXX
Thank you for your letter of January 17, 1995, in which you questioned the application of the Goods and Services Tax (GST) to professional membership fees paid for by federal or provincial government departments, agencies or Crown corporations, on behalf of their employees.
It is your understanding that Revenue Canada has indicated that under certain conditions such government employees could be exempt from paying GST on the purchase of professional memberships. As most of your administrative practices differ from this position, you have asked for clarification in this regard.
As a specific fact situation is not the subject of your enquiry, the following is a general explanation as to how the Excise Tax Act (ETA) applies to the issue at hand.
As you may be aware, supplies made to the federal and provincial governments are not treated in the same manner for purposes of GST.
Under the ETA the federal government is required to pay GST on its taxable purchases and is therefore required to pay GST on taxable professional membership fees paid for its employees.
However, as a result of constitutional freedom from taxation, provinces are only bound as suppliers under the ETA and are entitled to tax relief at point of purchase when taxable purchases are made with Crown funds. For GST purposes, supplies made to a provincial government entity that would otherwise be taxable at seven percent are treated as zero-rated supplies.
With respect to the purchase of professional memberships by a provincial government entity on behalf of its employees, it is Revenue Canada's position that a provincial government entity is not required to pay GST on membership fees charged by a professional association in respect of memberships acquired by its employees provided that all of the following three conditions are met:
1) a valid employee-employer relationship exists between the provincial government entity and the employee and under the terms and conditions of employment (for example, under a collective agreement), the provincial government entity is required to pay the professional membership fee on the employee's behalf,
2) the professional association is paid directly with Crown funds, (Please note that where an employee pays the membership fee directly to the professional association, GST is payable on the supply of the membership even if he or she is subsequently reimbursed by the provincial government entity) and
3) an agreement between the provincial government entity and the professional association is in place which provides that the provincial government entity will pay membership fees in the professional association for those individuals identified in the agreement.
Therefore, if all three conditions are met, otherwise taxable professional membership fees paid by a provincial government entity, on behalf of its employees, would not be subject to GST.
In your letter, you asked that we provide you with a copy of a January 14, 1994 GST letter issued to the XXXXX (Ministry of Revenue) on this subject. As you may be aware, client-specific information is confidential and protected by section 295 of the ETA. As such, we are unable to release this letter to you without authorization from the Ministry of Revenue.
The foregoing comments represent our general views with respect to the subject matter of your letter. Unannounced proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in GST Memorandum 100-3, do not bind the Department with respect to a particular situation.
We hope our comments are of assistance to you. Should you wish to discuss this matter further, please call Marilyn Viger, Manager, Governmental Sector and Federal/Provincial Relations at (613) 954-3551 or Lynn Renner, Policy Officer at (613) 952-9262.
Yours truly,
J.A. Venne
Director
Tax Policy - Special Sectors
GST Policy and Legislation
c.c.: M. Viger
L.F. Renner XXXXX
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