The Canada Revenue Agency (CRA) publishes two guides for not-for-profit organizations (NFP): GST/HST Information for Non-Profit Organizations and GST/HST Information for Charities.
CRA’s rules about GST/HST registration are at best complex for NFP organizations who are exempt from income tax—and even more so for registered charities. The goal of this article is to highlight some key points.
Small Suppliers Exemptions
Small Suppliers, as defined by CRA, are exempt from the requirement to register to collect and remit GST/HST.
CRA has three definitions who is a small supplier:
- Businesses must register if their “sales” of goods and services exceeds $30,000 in a year
- NFP’s, who are not registered charities, must register if their “revenue” exceeds $50,000 within a year; there is an exemption for some professional organizations: “Memberships sold by a professional organization are exempt if any membership in the organization is required by law to maintain a professional status, such as a provincial law society membership. However, you can choose to have your memberships treated as taxable”
- Registered charities must register if their “revenue” exceeds $250,000 within a year, except if their “taxable supplies” exceed $50,000 (e.g. conference registration fees are a taxable supply)
How Long is a Year?
The definition of a “year”, for the determination of exemption from the collection of GST/HST, is based neither on an organization’s fiscal year nor a calendar year; CRA’s “year” is four consecutive calendar quarters.
What is Revenue?
The following are several examples of where the sale of goods and services for NFPs and charities are not considered revenue:
- Memberships, if most of the benefits of membership have limited monetary value (e.g. up to 30% on goods and services being discounted like discounts on admission fees and publications) Warning: if your organization is considering tactics to increase members, and it is not registered for GST/HST, incentives to become a member that are greater than 30% may make all revenue, previously exempt from GST/HST taxable—retroactively
- Sponsorships may be exempt from GST/HST depending on what services and/or services are provided in exchange for them by NFPs (e.g. being named the “sponsor” of a reception is exempt, but receiving trade show booths at a reduced cost may not be exempt)
- All “services” provided by a registered charity are exemption from GST/HST
CRA provides a more complete list, but not necessarily complete list of exemptions, which can be found at http://www.cra-arc.gc.ca/E/pub/gp/rc4081/rc4081-e.html#xmptfnpr.
Small suppliers can choose to “voluntarily” register to collect GST/HST. The benefit is that they can use the GST/HST paid on the goods and services (Input Tax Credits or ITCs) purchased to off-set the sales tax that they collect.
If a substantial percentage of an NFP’s members can use the GST/HST they pay to your organization (Input Tax Credits), then it may wise for your organization to consider to voluntarily register to collect GST/HST (note that most membership fees are paid by a business which can use the GST/HST).
Recovery of Tax
Some organizations do not have to register to recover a portion of the GST/HST that they pay on the purchase of goods and services—plus, a rebate is available to all registered charities.
NFPs, who are not registered charities, do qualify for a rebate if 40% or more of their funding comes from one or more of the three levels of government.
Calculating the Recovery of Tax
If all your organization’s purchases were made within one province, then you can complete CRA Form GST 66, Application for GST/HST Public Services Bodies’ Rebate and GST Self-Government Refund.
If your purchases were made in more than one province, then you must also complete Form RC7066-SCH Provincial Schedule – GST/HST Public Service Bodies’ Rebate.
Warning: CRA requires that the maximum period you apply to recover the tax you and paid is six- months, per application, i.e. you must submit two sets of forms for a 12-month period.
Need to Know More?
CRA has a GST/HST call centre, 1 (800) 959-8287, that can provide “general answers” to questions about your organization’s unique set of circumstances.
Warning: any information provided by a CRA call centre is not “guaranteed” to be correct, the call centre can advise you on how to obtain a no-cost ruling from CRA.
“For more information about requesting an advance income tax ruling, a pre-ruling consultation, or a technical interpretation, please refer to Income Tax Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.”
As an association management company and as event managers, we present the above article for information purposes only. It constitutes general information and does not constitute legal, income tax, or other professional advice.