GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, Ontario
XXXXX K1A 0L5
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Subject:
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GST/HST INTERPRETATION
Application of GST to Golf Club Memberships
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Dear XXXXX
Thank you for your letter of October 17, 1997 (with attachments) concerning the application of the Goods and Services Tax (GST) to golf club memberships.
Interpretation Requested
XXXXX a limited partnership of which you are an equity unitholder, has provided you with a year end (December 31, 1996) assessment for what they determined to be your proportionate share of their net loss from operations. The members of the club approved the year end assessment at the club's annual general meeting. The total amount on the invoice sent to all of the equity unitholders included the Goods and Services Tax (GST). In your letter, you have asked the Department to clarify whether or not this amount should be subject to the GST.
Interpretation Given
Based on the information provided, it is the Department's position that the payment of a capital contribution or assessment to a golf club would be subject to the GST.
In order to join the XXXXX , a member must purchase a "unit" which entitles them to become "equity unitholders" with all of the benefits of share ownership. The value of these "units" varies depending upon when they were purchased. In the situation described, the amount for which you are being invoiced represents the recovery of a portion of the debt of the club from each equity unitholder. In order to fulfill your obligations as an equity unitholder, the organization requires that you remit the assessed amount.
Section 140 of the Excise Tax Act (ETA) provides that where:
"(a) a person makes a supply of a share, bond, debenture or other security (other than a share in a credit union or in a cooperative corporation the main purpose of which is not to provide dining, recreational or sporting facilities) that represents capital stock or debt of a particular organization, and
(b) ownership of the security by the recipient of the supply is a condition of the recipient's, or another person's, obtaining a membership, or a right to acquire a membership, in the particular organization, the supply of the security shall be deemed to be a supply of a membership and not a supply of a financial service."
In accordance with section 140 of the ETA, as an equity unitholder , your contribution to cover your proportionate share of the club's 1996 net loss is considered to be a supply. Under subsection 165(1) of the Excise Tax Act (ETA), every recipient of a taxable supply made in Canada is, in respect of the supply, required to pay tax equal to 7 per cent of the consideration for the supply. The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST Memoranda Series.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8806.
Yours truly,
Robert Bowman
A/Rulings Officer
General Operations Unit
General Operations & Border Issues Division
GST/HST Rulings and Interpretations Directorate
Legislative References: ETA 140, 165(1)
NCS Subject Code(s): 11935-6, 11930-7
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