The Canada Revenue Agency (CRA) has a published a guide GST/HST Information for Non-Profit Organizations; however, its section on sponsorships does not offer clear-cut information about sales tax on sponsorships.
As an association management company, we add GST/HST to all sponsorships sold by our association clients, except under very special circumstances. We urge you to consider doing this too.
But We Never Charged Sales Tax Before!
CRA regulations about the charging of GST/HST on sponsorships has not changed—unfortunately, the regulations remain unclear.
What has changed is that CRA has allocated more human resources to reviewing and auditing GST/HST returns
“But we never charged sales tax on sponsorships before” may be true, but it is does not mean the CRA will not assess GST/HST on them—plus interest and possibly penalty interest—on unremitted sales tax.
When in doubt, charge the sales tax.
Subject/Not Subject to Sales Tax – Confusion Reigns
CRA explains sponsorship sales rules as follows: “Non-profit organizations often receive sponsorships from businesses to fund their activities. In return, the non-profit organization may provide promotional services to the sponsor or may allow the sponsor the right to use its logo, trade name, or any similar intellectual property.
“The above sponsorship is not subject to sales tax, for example, the display of a sponsor’s name and logo at a meeting on materials for such meeting, or the placement of the sponsor’s logo on a website.
“If the payment by the sponsor is made primarily (more than 50%) for advertising on television or radio, or in a newspaper, magazine, or other publication issued periodically, we do not consider the payment you receive to be payment for a sponsorship, but rather for advertising services. Therefore, the payment is subject to the GST/HST.”
However, in another example, CRA notes that the naming rights, i.e. payment to an organization in return for the right to have the sponsor’s name on a building, is subject to sales tax.
Associations, at their conferences, often market a range of naming rights from title sponsorship (where the name of the sponsor is included in the name of the event.)
Another challenge is that rarely do sponsorship packages include only one benefit. The greater the value the sponsorship investment, the greater the likelihood that number of benefits offered increases, the greater the likelihood that the package may be subject to sales tax.
If you want to know an answer with certainty, then you can request a written ruling at no-cost by writing to CRA; CRA tries to reply to these requests within 45-days. Ideally, you could submit details of all of your sponsorship opportunities before you begin to market them.
You should not charge the GST/HST on exhibition space to non-Canadian exhibitors “who will use the space exclusively as a site to promote their business, services, or property” and are not registered with CRA to collect GST/HST.
The operative word is “promote”; as long as the exhibit is not selling anything, then there is no GST/HST.
If you have a non-Canadian exhibitor, then you could suggest that they read CRA’s guide, Doing Business in Canada – GST/HST Information for Non-Residents.
“Place of Supply” and Sales Tax Rate
The amount of sales tax to be collected is based on where the conference is taking place—not where the exhibitor’s place of business is located and not where the conference organizer’s office is located.
The Canada Revenue Agency (CRA) calls the “place of supply”: “The rate of tax to charge for a supply is determined by the province or territory in which the supply is made, which is referred to as the place of supply.”
If the place of supply is in the Province of Québec, then the organizer must register with Revenu Québec and collect Québec Sales Tax (QST) whose rate is 14.975%-even if your association is not registered with CRA to collect GST/HST.
For more information on registered and collecting QST please refer to the following two articles GST/HST and QST – Do You Know What to do for Québec Events and Members? and Sales Tax Tips for Meeting Planners and Association Managers.
As an association management services company and as event managers, we present the above article for informational purposes only. It constitutes general information and does not constitute legal, insurance, or other professional advice.