Starting July 1, 2010 the harmonized sales tax will come into effect in Ontario and British Columbia. What does this all mean for your charity? There aren’t many changes but double check with your finance and legal department before July 1 to make sure you are prepared.

First, determine if your organization is a charity for GST/HST purposes. A registered charity for income tax purposes is also a charity for GST/HST purposes. However, a charity for GST/HST purposes does not include a public institution – registered charity that is also a school authority, a public college, university, hospital authority or a local authority determined to be a municipality.

Second, determine if your charity is making taxable supplies. The tax status of your charity’s supplies (for example, its sales, leases, rentals and services) has to be determined. Most of a charity’s supplies are tax-exempt; some of its supplies can be taxable at 5% or 13%.

Exemptions for charities
The following are examples of goods and services that are exempt when charities provide them:

  • Most services
  • Supplies of used or donated goods
  • Meals-on-wheels program
  • Facility rentals
  • Catering services

Fundraising Activities
Most goods and services you sell or provide for a fundraising activity are exempt unless

  • You sell these goods or services regularly or continuously throughout the year or a significant part of the year
  • Your clients are entitled to receive these goods or services regularly or continually throughout the year or a significant part of the year.

Examples of sales that are exempt under this exemption include:

  • Greeting card sales in the Christmas season
  • Chocolate bar in an eight-week fundraising drive

Fundraising Events
The full amount you charge for admission to a fundraising event is exempt if part of the admission qualifies as a charitable donation for income tax purposes.

Donations and Gifts
GST/HST does not apply to donations and gifts. A donation or gift is a voluntary transfer of money or property for which the donor does not receive any benefits in return. If the donor receives property having nominal value such as a key ring, pin or envelope seal, the donation is still not subject to GST/HST. However, if the donor receives a good or service having more than nominal value in the exchange for the donation, the payment will be subject to tax, unless the good or service is otherwise exempt.

Sponsorships
Sponsorships may not be subject to GST/HST depending on the nature and the extent of the promotional benefits you give to the sponsor. Two examples of sponsorships that are not taxable are:

  • Sponsorships when a business financially supports your activity in return for which you promote the business
  • Sponsorship when you receive funding in return for allowing the sponsor the right to use your charity’s logo.

For more information about these changes, please visit http://www.cra.gc.ca.