Fund Raising and Portfolio Building
Fundraising activities are an important source of income for Not-for-Profit Institutions and Charities which can be gained through the sale of tickets or Sales of Goods in certain circumstances. In most cases, if the company is a for profit company then there would be a sales tax added to such event sales, but in case of Not-for-Profit Companies, Public Institutions and Charities these activities are non taxable under certain circumstances. The Excise Tax Act treats such activities of charities; NPOs and public institutions differently based on the sales and ticket proceed earned through different methods than regularly earned through the normal circumstances.
Let us look at different definition of such entities:Charities and Public Institutions
The ETA defines charities as entities that are a registered charity or an amateur sports establishment as defined by laws lay down by the Canadian Federal. A public institution is a public school, college or university, a government organization, a public hospital or local authority can be considered in such public institution. For sales or purchase of ticket for charity events or public institution are the same for both organizations under the ETA Act. If a part of the proceed of the ticket sale is given for a charitable cause as defined by the ETA then the total ticket price is exempted from Tax as may be chargeable to the charities and public institution.
As the services and good provided sold at such activities will be free from GST/HST hence there can be no credit which can be recovered from the cost of setting up the event or any other event related expenditures. The charity or public institution to claim on event-related expenditures will claim rebate from the Public Service Bodies and will recover only a portion of the expenditures incurred.Sales of Goods and Services as Fundraisers
Most goods and services sold by Charities and Public Institutions are sold on a non-regular basis and require little to no HST/GST payment, the clause to consider is that this goods and services need to be sold on a non-regular basis as the sales of goods and services in such kind are not exempt from HST/GST exemptions.NPO’s
Nonprofit Organizations are entities which are used for fundraising purposes on a regular basis for purposes other than profits and are not considered a public institution, Charities or other such companies. Apart from holding events for fundraising purposes it can be seen that NPO’s are not exempt from HST/GST, but are able to recover all the tax paid by applying for a tax credit for such activities and event on basis of cost incurred.
Even though NPO’s are not exempt from HST/GST in certain circumstance they are exempted from paying this tax if the sales of services or goods is less than $5 in cost. These exemptions are considered if all the following criteria are met
- The entity is not in the business of selling of such goods and services on a regular basis
- The salespersons are volunteer
- The goods are non tobacco or non alcohol items
- The goods are not sold by a person who is in the business of selling such goods and services on a regular basis