19 December 2003 GST/HST Ruling 45842 - /INTERPRETATION Professional Membership Dues

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

XXXXX meets the definition of non-profit organization in subsection 123(1) of the Excise Tax Act (the ETA).

The XXXXX comprises the following organizations:

XXXXX

XXXXX

Ruling Requested

Will an election made under section 18 of Part VI of Schedule V to the ETA for membership dues in the XXXXX affect the tax status of the amount collected by the XXXXX?

Ruling Given

Based on the facts set out above, we rule that the XXXXX is unable to make an election under section 18 of Part VI of Schedule V to the ETA.

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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

In order to make an election under section 18 of Part VI of Schedule V to the ETA, XXXXX membership must be required to maintain a professional status recognized by statute. As the XXXXX membership has not met this requirement, an election under section 18 is not possible.

The tax status of the memberships in a XXXXX is a question of fact and must be determined on a case-by-case basis by each XXXXX.

Interpretation

Even though we have been able to provide a ruling on the XXXXX inability to make an election under section 18 of Part VI of Schedule V to the ETA, we are unable to provide a ruling on the specific nature of the status of the funds paid to the XXXXX by the XXXXX. Therefore, we are providing you with our comments in regards to the status of the funds paid by the XXXXX to the XXXXX and an interpretation on the XXXXX eligibility to claim ITCs.

From the information that you have submitted the nature of the relationship between the parties in regards to the transfer of the funds is not evident. In what capacity are the XXXXX collecting the funds? Is the amount collected by the XXXXX from its members solely for membership dues in the XXXXX (and not partly for the XXXXX)? To what extent, if any, are the XXXXX acting as agent of the XXXXX? Are the funds collected by the XXXXX for a supply by the XXXXX to the XXXXX? Is the XXXXX making a supply of memberships for no consideration?

It is also unclear from the information submitted what the nature of the funds transferred from the XXXXX is for. We have not been provided any documentation to demonstrate a clear link that the funds paid by the XXXXX are consideration for a supply of a membership by the XXXXX. The By-laws of the XXXXX indicate that the funds are to be remitted to the XXXXX to fund XXXXX.

Generally, a registrant is entitled to an input tax credit (ITC) for the GST/HST paid on property or services acquired for consumption, use or supply in the course of the registrant's commercial activities. Commercial activity does not include the making of exempt supplies. Consequently, no ITCs are allowed with respect to inputs to exempt supplies made by a GST/HST registrant. Generally, where goods or services are used partly for making exempt supplies and partially for making taxable supplies, registrants are entitled to partial ITCs to the extent that the inputs are for use in making taxable supplies.

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/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-954-4206.

Yours truly,

Carol A. Gaudet
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate