Case No.: HQR0000448
Dear XXXXX
This is in reply to your facsimile addressed to Lorrie Grannary, dated November 29, 1996, to which you attached a letter from the XXXXX XXXXX concerning the GST application to voluntary contributions made by lifetime members of the Club, and a ruling letter to the Club dated July 11, 1996, stating that such contributions are supplies taxable at the rate of 7%. We believe that a letter should be issued to the client revoking the July 11, 1996 ruling regarding the tax status of voluntary contributions.
Statement of Facts
1. The XXXXX XXXXX is a non-profit organization registered for the purposes of the GST under registration number XXXXX[.]
2. XXXXX persons belonging to the Club are considered "lifetime members" and are offered free memberships to the Club.
3. Lifetime members receive a solicitation to voluntarily contribute to a capital improvement fund. These funds are placed into a separate account for designated capital projects.
4. The Club will formulate a XXXXX plan that will include all aspects of the Club, including the clubhouse, lodge, docks, tennis courts, junior sailing, and boats and related equipment. Immediate projects selected are upgrading the snack bar to improve service and profitability, and a dock to satisfy XXXXX.
5. Contribution is not mandatory and lifetime members can choose to give whatever amount they want; although the Club has suggested a contribution equal to half of the current dues (i.e., XXXXX Some lifetime members contribute more, some less, and some nothing at all.
6. The lifetime member's status in the Club is not affected by whether or not they make a contribution.
Issue
1. Is XXXXX XXXXX making a supply in return for the voluntary contributions made by the life members?
2. Are the voluntary contributions consideration for a supply?
Analysis
To determine if a voluntary contribution is consideration for a supply, it must first be established whether the recipient has, or will, make a supply as a result of having received the contribution. For instance, will the payers receive any property or services in return for the contribution? If no, the contributions will not be consideration for a supply since there is no activity involved that can be considered to be a supply.
In this particular case, lifetime members are encouraged to voluntarily contribute an amount to cover the cost of capital improvements to the facilities of the XXXXX XXXXX[.] Membership in the Club is not conditional on making these contributions. Lifetime members have the choice of whether or not to make a contribution and lifetime members who choose not to make the contribution are conferred the same rights and privileges as those who choose to make it.
Since there is no activity present that can be considered to be a supply by the Club, that is, lifetime members do not receive any property, services, or rights or privileges beyond those that occur as a result of their already existing membership, the amounts contributed are not regarded as consideration for a supply (in other words, those rights and privileges conferred to lifetime members are conferred by reason of their membership). Consequently, the 7% GST would not apply to these voluntary contributions.
If you would like additional information, please do not hesitate to contact me at (613) 952-6761.
Susan Eastman
Charities, NPOs, and Educational Services
GST/HST Rulings and Interpretations Directorate
File No. 11930-7
| b.c.c.: |
S. Eastman
J. Houlahan
J.A. Venne |
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