Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 169081
[…]
Dear [Client]:
Subject: GST/HST RULING
GST/HST application to membership fees
This letter refers to […] letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax / Harmonized Sales Tax (GST/HST) to membership fees charged by the […] ([…][the Organization]). We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand:
1. Pursuant to section […] of the […]([…][provincial act]), […][the members] entered into […] (the Agreement), dated [mm/dd/yyyy], respecting the establishment of a […].
2. […]
3. The founding [members] were: […]
4. […][of] the Agreement provides for the establishment of [the Organization]. [The Organization] will consist of […] members, […].
5. [The Organization] is a “municipality” under paragraph (b) of the definition of municipality found in subsection 123(1) of the ETA. Given this fact, [the Organization] is a “public sector body” for GST/HST purposes.
6. Article […] of the Agreement states that the initial objectives of [the Organization] are to: […]
7. [The Organization] charges membership fees to each [member]. As set out in article […] of the Agreement, the membership fee is based on […].
8. […][Information on when membership fee will be established].
9. […][More information on membership fee calculation].
10. According to the information provided, the [members] receive several benefits by reason of their membership in [the Organization]. These benefits are described in your letter dated [mm/dd/yyyy], as follows:
[…] [Describes the membership benefits]
RULING REQUESTED
You would like to know if [the Organization]’s supplies of memberships are taxable.
RULING GIVEN
Based on the facts set out above, we rule that [the Organization]’s supplies of memberships are taxable; therefore, the membership fees payable by the [members] are subject to GST.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
Most supplies of property and services made in Canada are subject to GST/HST, unless the supply is an exempt supply under a provision in Schedule V. Supplies of memberships by a public sector body, such as a municipality, can be exempt or taxable depending on the type of benefits the members are entitled to receive.
Section 17 of Part VI of Schedule V exempts a supply of a membership in a public sector body (other than a membership in a club whose main purpose is to provide dining, recreation or sporting facilities) where each member does not receive a benefit by reason of the membership, other than the allowable benefits listed in paragraphs (a) to (f) of that section.
If the memberships sold by the public sector body allow for the following benefits but nothing more, the supplies of memberships are exempt:
* an indirect benefit that is intended to accrue to all members collectively;
* the right to receive services in the nature of investigating, conciliating, or settling complaints or disputes involving members;
* the right to vote or participate in meetings;
* the right to receive or acquire property and services for an additional fee equal to the fair market value;
* the right to receive a discount for property or services sold by the organization when the total value of all the discounts is insignificant (less than 30%) in relation to the membership fee. For example, a $100 membership fee provides members with a $5 discount for each of 10 admissions to the theatre ($50 discount). This membership would be taxable since the total value of the discounts is significant (30% or more) in relation to the membership fee whether or not the discounts are used; or
* the right to receive periodic newsletters, reports, or other publications if:
* the value of the newsletters, reports, and publications is insignificant (less than 30%) in relation to the membership fee or
* the newsletters, reports, and publications provide information on the organization's activities or financial status except if their value is significant in relation to the membership fee and a fee is ordinarily charged to non-members.
A "benefit" is the right to any property or service of value regardless of the extent to which the right is actually exercised by individual members. All possible benefits accruing to members must be taken into consideration in determining the tax status of a membership.
The [members] receive significant direct benefits by reason of their membership in [the Organization], including […]. These benefits exceed the allowable benefits listed in paragraphs 17(a) to (f). Therefore, [the Organization]’s supplies of memberships are not exempt under section 17 of Part VI of Schedule V.
As no other exempting provision in Schedule V applies, [the Organization]’s supplies of memberships are taxable. Therefore, [the Organization] must charge GST on the membership fees payable by the [members].
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613)952-9592. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Heather Reardon
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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