Nonprofit Article GST

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(Monday, December 28, 2009)

GST applies to most goods and services that non-profit organizations supply except when they are sold under specific conditions. Like a for profit business, a non-profit organization can be a small supplier, if it supplies GST taxable goods or services under the threshold. However, the threshold for a non-profit organization is $50,000 of taxable supplies in any four consecutive calendar quarters, not $30,000. Even if a non-profit organization qualifies as a small supplier, it may still wish to register for GST, for instance if it pays out a substantial amount of GST and wishes to recover the GST paid out. On the other hand, the non-profit organization may feel that its clients would prefer not to pay GST unless they have to.

Certain types of supplies made by a non-profit organization are exempt from GST. If an organization supplies exempt goods and services only, they cannot register for GST. If a mix of taxable and exempt supplies are made, the organization can only claim GST paid out that relates to the taxable supplies.

Exempt supplies include:

· Admissions to a place of amusement are exempt if the maximum amount charged to the customer is $1 or less.

· Admissions to athletic events are exempt if 90% of the athletes are not directly or indirectly paid for their participation. When all or substantially all (90% or more) of the supplies of goods and services are free of charge the supplies are exempt.

· Fund-raising activities are exempt, except alcoholic beverages and tobacco products, when you are not in the business of selling those goods, all salespersons are volunteers, the sale price of each item is $5 or less and the goods are not sold at an event where similar goods are sold by persons in the business of selling such goods.

· Admissions to gambling events are exempt if 90% or more of the administrative functions and taking bets are carried out by volunteers and games, for a bingo or casino event, are not held in a place used primarily for gambling activities.

· Goods and services that are sold for direct cost or less are exempt if the goods and services are bought for resale and you did not charge GST to your customer.

· Public library cards are exempt.

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

· Some recreational program membership fees are exempt if offered by non-profit organizations. These fees are exempt if the program is provided to children 14 years old or younger, a large part of the program does not involve overnight supervision and the program is primarily provided to underprivileged individuals or those with disabilities.

· Memberships sold by non-profit organizations can be exempt from GST depending on the type of benefits the members are entitled to, which include, but are not limited to, the right to vote or participate in meetings or the right to acquire goods and services for an additional fee equal to the fair market value. Election GST23 can be filed to make these membership fees taxable.

· Memberships in a professional organization are exempt if the members are required by law to be members in order to keep their professional status. Election GST24 can be filed in order to make the membership in a professional organization taxable. Memberships in a registered party are always exempt.

Qualifying non-profit organizations are eligible for a Public Services Bodies’ GST rebate by filing form GST66. To be considered a qualifying NPO, at any time during the fiscal year, the percentage of government funding for the fiscal year must be at least 40% of total revenue. All organizations who are eligible for this rebate, except registered charities and registered Canadian amateur athletic associations, must file Form GST523 each year to demonstrate that the percentage of government funding test is met and to support the calculation of the percentage. The rebate factor for qualifying NPO activities is 50% of the GST paid or payable.

The GST rules for non-profit organizations are complex and subject to change from time to time. Consult your accountant if you need further assistance.