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TO:
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XXXXX
XXXXX
XXXXX
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FROM:
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Gabrielle Nadeau
Charities and Non-Profit Organizations Unit
GST/HST Rulings and Interpretations
Directorate
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XXXXX
This is concerning a memorandum you have addressed to the XXXXX [(]the Association). The memorandum was transferred to us for response.
Background Information
XXXXX
The Association collects and remits GST on all its taxable supplies related to the hockey team. These supplies include season tickets, play-off tickets, gate admissions, box seats, board and wall signs, program sales, concession sales and hockey camps for youths between 15 and 17 years of age.
The XXXXX Association receives municipal and provincial grants that are approximately 10% of all its revenues. It also receives revenues from bingo and video lotteries.
The Association claims ITC's with respect to all taxable purchases. These expenses include airline tickets and hotel rooms for the players, uniforms and hockey equipment, the printing cost of the tickets, programs and year books, food and supplies for the concessions.
For the period that you are reviewing, the players were provided with room and board through billets who are XXXXX the Association. The players also receive an "honorarium" of approximately XXXXX[.] In addition, as in previous years, the Association anticipates paying salaries of XXXXX to the better players.
You have asked for our opinion on whether the compensation received by the players is considered to be in excess of the "reasonable amount" described under section 11 of Part VI of Schedule V, with the consequence that this exempting provision would not apply. If the exemption does not apply, it appears that the Association will be entitled to the ITCs it has claimed related to the staging of the hockey games. You would also like to know if there is any limit to the dollar amount that would be considered "remuneration" under section 11.
Our Response
Section 11, of Part VI of Schedule V provides that ticket sales to spectators are exempt if certain conditions are met. One of these conditions is that substantially all (90% or more) of the athletes involved in the event must not be remunerated, either directly or indirectly for their participation in the event "other than a reasonable amount as prizes, gifts, compensation for travel or for expenses incidental to the competitors' ... participation in the performance or event."
Rather than focusing on a particular dollar amount, it is our policy that to be considered "reasonable compensation" for purposes of section 11, the amount should not significantly exceed the costs incurred by the individual related to (i.e., "incidental to") his/her participation in the event. In other words, the participant may not receive material or financial gain from his or her participation in the event(s) if this exemption is to apply. Reasonable incidental expenses may, for example, include accommodation, food, travel, laundry, tips, telephone and equipment costs.
It is our view that it is reasonable to conclude that the exemption under section 11 does not apply in this situation since the Association pays most of the incidental expenses that the players incur in relation to the hockey games, including airline tickets, hotel rooms, uniforms and hockey equipment, in addition to the room and board provided through billets. Accordingly, the XXXXX represents an amount over and above the compensation for incidental expenses, so that the supply of a right to be a spectator at the hockey games will not be exempt under section 11. It is even more evident, of course, that the salaries of XXXXX would be in excess of the amounts permitted under section 11.
Since it does not appear that any of the other supplies the Association are exempt either, it is our view that the Association will be entitled to full ITCs.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0329.
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