Exempt goods and services for charities

Most goods and services that charities (except for municipalities and designated municipalities who are also charities) provide are exempt from GST/HST. When goods or services are exempt, it means that, even if you are a GST/HST registrant, you do not charge GST/HST on them. Also, you cannot claim input tax credits for GST/HST you paid or owe on your purchases and expenses that relate to your exempt supplies.

Examples of goods and services that are exempt when charities provide them:

• most services;
• supplies of used or donated goods;
• short-term residential accommodation (less than one month of occupancy);
• meals-on-wheels programs. This exemption is for a supply of food or beverages to seniors, underprivileged individuals, or individuals with a disability, under a program established and operated to provide prepared food to such individuals in their places of residence. Any supply of food or beverages made to a charity for these programs is also exempt from GST/HST;
• facility rentals (e.g., halls for weddings); and
• catering services for private functions (e.g., wedding receptions).

Other exemptions

Fund-raising activities

Most goods and services you sell for a fund-raising activity, are exempt unless:

• you sell these goods or services regularly or continually throughout the year, or a significant part of the year; or
• your clients are entitled to receive these goods or services regularly or continually throughout the year, or a significant part of the year.

Examples of sales that are exempt under this exemption include:

• greeting cards in the Christmas season; and
• chocolate bars in an eight-week fund-raising drive.

Examples of supplies this exemption does not cover and that you will have to collect tax on, if you are a GST/HST registrant, include:

• goods sold year-round in a tuck shop; and
• subscriptions to a charity's magazine.

Fund-raising dinner
The full amount you charge for admission to a fund-raising dinner, ball, concert, or similar event is exempt if part of the admission qualifies as a charitable donation for income tax purposes.

Direct cost exemption

Property and services you supply for an amount that does not exceed your direct cost may also be exempt. The direct cost exemption applies to sales of personal property (other than capital property or designated municipal property) and services that are bought for resale.

The direct cost includes the GST/HST, Quebec sales tax (QST) and non-recoverable provincial taxes, duties, and fees you paid when you bought the property or service. The direct cost of a good also includes the cost of material directly used to manufacture, produce, process, or package the property.

Direct cost does not include administrative or overhead expenses, or employee salaries that you incorred to provide the property or services.

If you sell particular property or services for a price that is not more than your direct cost, and you do not charge the GST/HST (as you normally would if you were a GST/HST registrant), these sales are exempt.

If you sell particular property and services for a price that is equal to or greater than your direct cost (not including GST/HST or QST) and you charge an amount as GST/HST, these sales are taxable.

The sale of the T-shirt would be exempt if you sold it for less than $20, even if you charged the HST to your customer. In this case, the tax would have been collected in error.

As you can see from these two examples, if you only want to recover your direct cost, you can choose to have your sales either taxable or exempt depending on if the GST/HST is charged or not.

Gambling events

GST/HST does not apply to revenues you receive from sales of lottery, break-open, or raffle tickets. However, lottery tickets you sell for a provincial or interprovincial lottery corporation are taxable, and the tax is included in the price of the tickets. Lottery corporations will tell you how to treat the proceeds from these lottery tickets.

If you operate bingo games or casino nights, the fees you charge for the sale of bingo cards or the taking of bets during a casino night are exempt.

If you run a bingo game, casino night, or other gambling event and charge admission, the admission is exempt if you meet the following conditions:

• volunteers run the event and take the bets; and
• for bingo and casino nights, the event is not held in a commercial hall or temporary structure (such as a bingo tent put up on a fair ground) used primarily for gambling activities.

Recreational programs

Fees for recreational programs are exempt from GST/HST if the programs are provided primarily to children 14 years of age and under. However, if there is overnight supervision throughout a substantial part of these programs, the fee is taxable.

Recreational services provided primarily to underprivileged individuals, or individuals with a disability, are also exempt.

Free supplies

If substantially all (i.e., 90% or more) supplies of a good or a service are made free of charge by a charity, then all of the charity's supplies of that good or service are exempt, including those few (if any) for which an amount is charged. There is an exception for supplies of blood or blood derivatives, which remain zero-rated.

Memberships

A supply of a membership by a charity is exempt, unless the value of the following benefits is significant (generally considered to be 30% or more) in relation to the cost of the membership:

• free or reduced admission to a place of amusement;
• the use of recreational or athletic facilities at a place of amusement; or
• the right to participate in a recreational or athletic activity at a place of amusement.

A supply of a service, membership, or right by a charity is not exempt where it provides for supervision or instruction in any recreational or athletic activity. However, this service, membership, or right remains exempt if it is provided primarily to:

• children who are 14 years of age and under, and does not involve overnight supervision throughout a substantial portion of the program; or
• individuals who are underprivileged or who have a disability.

Admissions

Admissions to places of amusement, such as museums, recreational complexes, and theatres are exempt if the maximum admission charged is $1 or less, or if the admissions are made in the course of fund-raising events where charitable receipts for income tax purposes may be issued.

Admissions are also exempt when supplied to spectators of a performance, athletic or competitive event at which 90% or more of the performers, athletes, or competitors are not paid, directly or indirectly, for their participation other than by government grants, reasonable gifts, prizes, compensation for travel, and other incidental costs.

This exemption does not apply to events specifically advertised as featuring paid participants or events at which professional athletes compete for cash prizes.

See the exemption for admission fees to certain gambling events.

Relief of poverty, suffering or disaster

Food, beverages, or short-term accommodation provided to relieve the poverty, suffering, or distress of individuals are exempt.

Employment assistance to individuals with disabilities

Charities may regularly provide employment assistance to individuals with disabilities and supply services that are performed by such individuals to clients. These supplies would usually be exempt. However, a charity may apply to us in writing to have the services made taxable when provided to a GST/HST registrant (unless they are provided to a public sector body or to a board, commission, or other body established by a government or a municipality). We refer to these charities as "designated charities".

If you make this application, you cannot use the net tax calculation for charities. Instead, use the general rules to calculate your net tax. See Guide RC4022, General Information for GST/HST Registrants, for information on using the general rules.

You may also be eligible to use the Special Quick Method of Accounting to calculate your net tax on your GST/HST return. For information on this special method, see Booklet RC4247, The Special Quick Method of Accounting for Public Service Bodies.

To apply to be a designated charity, send you request in writing to:

Director, Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
320 Queen Street, 14th Floor, Tower A
Ottawa ON K1A 0L5

Forms and publications

• Guide RC4022, General Information for GST/HST Registrants
• Guide RC4082, GST/HST Information for Charities

Date modified:

2014-09-23