17 October 2000 GST/HST Ruling 31020 - Contributions to the

Dear XXXXX:

Thank you for your April 25, 2000 fax concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain payments made to the XXXXX.

All statutory references are to the Excise Tax Act, RSC 1985, Chapter E-15, as amended, unless otherwise noted.

Statement of Facts

Our understanding of the background based on your incoming correspondence and our telephone conversation on August 9, 2000, is as follows:

1. The XXXXX is a federally-incorporated not-for-profit organization without share capital.

2. XXXXX is a "non-profit organization" within the meaning of subsection 123(1).

3. XXXXX is a GST/HST registrant.

4. XXXXX is a membership organization where members pay an annual fee in exchange for certain benefits. Different types of memberships are available.

5. Members are generally businesses engaged in the XXXXX industry. Members are separate legal entities from XXXXX.

6. XXXXX 's mandate is to represent the interests of the XXXXX industry. Its four (4) main activities are: membership services, trade shows, research and government affairs (which includes lobbying).

7. Occasionally XXXXX identifies and coordinates projects ("Special Projects") that are outside the scope of the day-to-day government affairs activity. A typical Special Project involves a specific issue in a particular geographic area for a limited time duration.

8. Special Projects are not funded from the government affairs budget. Instead, contributions are sought from organizations in the XXXXX industry who may be directly affected by the particular issue, including both XXXXX members and non-members ("Contributors"). Contributions to Special Projects are not a requirement of membership. The XXXXX also contributes to Special Projects in various forms, including human resources and funding. All contributions not used specifically for the Special Project are returned to those who contributed.

 9. Current examples of Special Projects include:XXXXX.

Ruling Requested

Whether XXXXX is required to charge GST/HST on contributions received by XXXXX from Contributors in respect of Special Projects?

Ruling Given

Based on the facts set out above, we rule that the contributions received by XXXXX from Contributors in respect of Special Projects are subject to GST/HST. It is our view that the XXXXX is supplying a service of project management, which includes such activities as: project design; coordination of project activities; collection, allocation and reimbursement of contributions; procurement of advertising; and, engagement of professional services such as consultants and lawyers.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Subsection 165(1) is the general taxing provision that is relevant to the Contributors. It reads (emphasis added):

Subject to this Part, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 7% on the value of the consideration for the supply.

The mirroring provision containing the obligation on XXXXX to collect tax is subsection 221(1) which provides that, every person who makes a taxable supply shall, as an agent of Her Majesty in right of Canada, collect the GST/HST.

A "supply" is broadly defined as "... the provision of property or a service in any manner, including sale, transfer, barter, exchange, license, rental, lease, gift or disposition" (All definitions referred to in this ruling are found in subsection 123(1).).

The provision of project management services by XXXXX is a supply. The services provided include: project design; coordination of project activities; collection, allocation and reimbursement of contributions; procurement of advertising; and, engagement of professional services such as consultants and lawyers.

The next issue is whether the supply of services provided by XXXXX to the Contributors is a "taxable supply". A "taxable supply" is defined as a supply made in the course of a commercial activity.

"Commercial activity" is defined, in part, as a business ("includes a profession, calling, trade, manufacture or undertaking of any kind whatever, whether the activity or undertaking is engaged in for profit ...") carried on by a person, except to the extent to which the business involves the making of exempt supplies.

An "exempt supply" is defined to mean a supply included in Schedule V. Schedule V is generally organized into eight parts. For the purposes of this interpretation, the only relevant part is Part VI, entitled Public Sector Bodies.

XXXXX is a public sector body by virtue of a series of definitions. "Public sector body" means a "government" or a "public service body". In turn, a "public service body" is defined to mean a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university. Since XXXXX is a non-profit organization, it is a public service body and thus a public sector body for GST/HST purposes.

A review of the paragraphs in Part VI of Schedule V discloses that none of the exempting provisions apply to the supply by XXXXX of project management services to the Contributors. It follows that this supply is a taxable supply.

If you have questions or require clarification, please do not hesitate to contact me at 952-0329.

Yours sincerely,

Aurelia I. Mauro
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate