Implications for Ontario Soccer Association Members
We expect that the exemptions available under GST will now be available under HST. They are:
(1) An exemption is available on fees charged by non-profit organizations for provision of “supervised activities or classes involving athletics” primarily for children under 15 years old. Primarily is generally held to be more than 50%.
In the absence of other factors, this means that a Club which has a majority of participants who are below the age of 15 will not be required to charge HST on their athletic fees. Since the majority of OSA players are below the age of 15, OSA player fees will not be subject to HST.
(2) A “small supplier” exemption is available to non-profit organizations on all supplies (products and services) delivered where the organization’s gross annual taxable revenue is below $50,000.
It is important to note that where a Club’s fees are not subject to HST, that portion of its fee revenue would not be included in this calculation of gross taxable revenue. Typically, referees charging fees for their services would qualify as small suppliers, and consequently would not need to charge HST for their services.
(3) An exemption is available on fees charged by a recognized regulatory body supplying a program of certification.
The OSA provides qualifying programs of certification for referees and coaches. Where a Club provides such a program as an agent of the OSA, HST would not be required on the associated fees. However where a Club that is not a small supplier provides other types of non-athletic programs to individuals over 14 years old, they would be subject to HST.
Items subject to HST by organizations that are not small suppliers (these are currently subject GST)
HST will apply to sponsorship payments received by a Club in return for a benefit to the sponsor, such as advertising on radio, television or publications. The definition of what constitutes a “benefit” will depend on the circumstances. For example, placement of a local business name on a team uniform would most likely be recognition of a gift, rather than a benefit. However placement of a business name on all team uniforms of a particular category of program is likely to be a taxable benefit to the sponsor, and therefore subject to HST.
HST will apply to rental of facilities owned by an organization, excluding rental to an organization’s own teams, as supplies to oneself are not taxable.
Potential Impact on Clubs and Leagues
The OSA’s analysis indicates that there will be a mixed impact on clubs and leagues, depending on the mix of their membership:
· Clubs with predominately youth members (under 15), should have no change to their registration fees;
· The impact may be substantial for organizations over the small supplier exemption, where they are Clubs that own their own facility, or are Adult Clubs or Adult Leagues. In these cases we recommend consultation with a tax specialist.
· Note that organizations that collect HST are eligible to deduct HST on their purchases.
The OSA recommends that Members consult a tax specialist to determine the potential impact of HST in their particular circumstances!
Frequently Asked Questions
What does “taxable revenue” mean? Can you provide an example?
- Suppose a Club’s revenue consists of the following:
- House League fees 750,000
- Competitive fees 340,000
- Training programs 110,000
- Tournaments 82,000
- Field rentals 35,000
- Interest income 5,000
- Total Revenue 1,322,000
This Club controls two fields from which it rents surplus time. The Club serves all age groups and genders, but can show that 68% of its participants are under that age of 15.
Conclusions:
The Club fees for House League, Competitive, Training and Tournaments are non-taxable, as they are for supervised activities or classes involving athletics primarily to children under 15 years old. Its revenue for field rentals is taxable. Its interest revenue is non-taxable because interest is an HST exempt financial service.
Therefore in total the Club has gross annual taxable revenue of $35,000. Because this is less than $50,000, the Club qualifies as a “small supplier” and can be exempt from HST.
Would the OSA Associate Member fee include HST for adult leagues, discipline, player books, etc?
Because the clear majority of participants served by the OSA are below the age of 15 years old, in our view the OSA qualifies as “primarily” providing exempt supervised activities or classes involving athletics. The fees for leagues, discipline, player books and so on are an integral part of these activities, and we are therefore of the view that they are also exempt from HST (and previously GST).
Does an adult league or club need to charge HST on items such as discipline, player books, etc?
The league or club needs to determine whether it qualifies under one of the following exemptions:
· provision of “supervised activities or classes involving athletics” primarily for children under 15 years old; or
· a not-for-profit small supplier whose taxable revenue is less than $50,000 (note that the threshold for a for-profit organization is $30,000).
For example, if an independent not-for-profit adult league does not provide services to children, it will not qualify under the first exemption. If it charges fees greater than $50,000 each year, then cannot qualify as a small supplier, the second possible exemption. In this case, its fees for all its services would be subject to HST, (and currently to GST).
If we were supposed to charge GST in the past (for a facility we own for example) but have not, do we need to pay for previous years?
This is a discussion that you should have with your counsel. The club or league will need to analyze the risk and determine the appropriate approach. If a voluntary declaration is made and a decision is made to pay the previous three years’ GST payments, it is possible that the Canada Revenue Agency (CRA) will waive the fines and interest charges. We strongly recommend that you engage the services of a tax specialist if this is your situation.
Does a club that controls a facility and charges rent to its own teams need to charge HST on the rent?
As long as the club controls the teams, it does not need to charge HST on the rent, since “supplies” (in this case rent) to oneself are not taxable. Control of the team needs to be clear, and can be demonstrated by:
· the club can change the coach and/or manager at any time,
· the players, coach and manager are registered with the club,
· the club controls or has the immediate ability to control the bank account, if any, of the team
If the team is not controlled by the club, rentals to the team would be subject to HST.
Does a district facility need to charge HST to its clubs that rent the facility (the clubs which are members of the district).
The general answer to this is yes, it would need to charge HST on the rent.
If a district and its clubs were effectively “one” organization, then the rent would not be subject to HST as it would be providing a supply to itself. However to qualify as “one” organization, the district would need to have at least 90% voting control of each of its member clubs. We recommend that you consult with a tax specialist to see if there is any opportunity in your particular circumstance to create a structure that would remove the HST.
Should the OSA charge HST on rentals to districts (which are members of the OSA), leagues (which are associate members of the OSA) or clubs (which are members of districts, which in turn are members of the OSA)?
Yes the OSA must charge HST on rentals. The districts, leagues and clubs are separate organizations, although members in the association. Since by definition the OSA does not “control” its members, and in particular does not have 90% voting control of them, they will not together qualify as “one” organization.
Our club rents facilities from school boards, private schools and other organizations. Sometimes we are charged GST and sometimes not. Shouldn’t we always be exempt from GST / HST because we primarily serve children under 15 years old?
No. Whether you are charged GST or not is determined by whether the supplier of the facilities is a “small supplier” and has nothing to do with who you are. It is no different from asking a fast food outlet to exempt you from GST because the food will be eaten primarily by children under 15 years old. The answer is no.