Words and Phrases - "sponsor"

The Organization has created a new Web platform to produce and distribute videos and, in this regard, will enter into partnering agreements with other public sector organizations (“partners”) for the purpose of providing visibility to them on such website, in exchange for local visibility provided by them for the Organization’s benefit on the sites for events of the partner organizations.

CRA summarized three such sponsorship arrangements, the third of which is summarized below. Under a partnering agreement and broadcast licence:

• the partner committed to grant the status of major partner of the event to the Organization, authorize partner representatives to be on the premises, provide a non-exclusive and irrevocable licence to reproduce and distribute listed videos on the Organization's digital platforms, disclose the partnering with the Organization and display the Organization's logo on its website, social networks and event posters and programs, etc.; and
• the Organization undertook to produce one or more vignettes on the partner's event or activities to be broadcast on the Web site, provide bargain-basement space on television for a commercial produced by the partner, disclose the partnering on Facebook, Twitter, etc., pay the partner stipulated amounts based on the visibility given and award a prize.

In its preliminary comments, CRA referred to the ordinary commercial meaning of “sponsor” as being one “who supports or accepts responsibility for another, or more commonly in the commercial sense, one who agrees to provide financial support with respect to another's activities or events while, or by, acquiring advertising or certain promotional rights,” and, regarding the exclusion for the specified types of advertising, stated:

[T]he presence of an advertising department is not determinative … . For example, we had a file where the sponsorship agreement included inter alia television advertising. Even though, in monetary terms, the advertising represented a substantial part of the sponsorship, we considered that the reason a sponsor would want to sign an agreement and pay the funds was for the recognition of being a partner in the [...] [events] and being able to use the logos associated with them. […].

Regarding Example 3, CRA stated:

We consider the partner's commitment described above to be a one-time supply of promotional services. Assuming that …[the Organization] sponsors the partner's event (we believe that it does in a general sense), the services offered by the partner would be deemed not to be a supply under section 135.

We consider that [the Organization's] undertaking includes a one-time supply of promotional services and monetary contributions. The consideration paid by the partner for the services offered by [the Organization] could be considered to be for "primarily a television advertising service". If the value of the television advertising is greater than the other elements of [the Organization's] commitment, section 135 would not apply.

We are more comfortable saying that Example 3 would be a sponsorship (i.e., the sponsoring partner [the Organization]) rather than Example 1 and that the consideration paid by the partner to [the Organization] is not primarily for a television advertising service. In our view, the advertising service is only one element of the overall supply of promotional services. The television advertising service is not the main reason why a partner would want to sign the agreement.