July 17, 2012 Leave a comment
Charities and other not-for-profit organizations (NPO’s) rely on fundraising to generate significant dollars towards their annual operating budgets. Often, the application of GST/HST to these events is overlooked or improperly executed. Risks involve not collecting GST/HST on taxable revenue sources and/or over claiming input tax credits (ITC’s) for GST/HST paid on expenses related to tax-exempt fundraising activities.
Fundraising could include admissions to events like concerts, dinners or golf tournaments as well as the sale of goods, like chocolate bars, or rain barrels. Determining whether you should be collecting GST/HST on your revenues depends first and foremost on whether you are a registered charity. GST/HST legislation provides a broader range of exemptions for fund raising events carried on by a charity than for other NPO’s.
A charity hosting a golf tournament, for example, would not have to charge GST/HST on the admission as long as the charity is able to issue a charitable donation receipt in respect of at least a portion of the admission proceeds. If the admission to the event is exempt of GST/HST, then the charity will not be able to claim ITC’s in respect of GST/HST paid on the underlying expenses, although partial rebates may be available. The admission price to a concert hosted by an organization that is not a registered charity will, however, likely be taxable with ITC’s available in respect of GST/HST paid on underlying expenses.
The sale by a charity of used goods, or goods being sold on a “break even” basis, as well as the sale of goods that were donated to the charity will be exempt of GST/HST. The sale of new goods being sold at a profit, that were not donated to the charity will be taxable, as will the sale of most goods sold by other not-for-profit organizations unless, among other factors, the selling price is less than $5, and all the salespersons are volunteers.
Compliance with the GST/HST legislation in this area can be very complex. Our indirect tax group is glad to help you review the application of the law to your specific situation.