GST and Membership Fees for Nonprofits

Written for CCVO by Guest Blogger David Crawford, National Indirect Tax Leader, Achen Henderson

If your nonprofit organization or charity collects membership fees, it's important to be aware of regulations related to the GST system in Canada. The Canada Revenue Agency (CRA) actively reviews the GST treatment of nonprofits and charities, and a significant number have been found to be non-compliant.  This article discusses the rules for nonprofits, but charities also have similar rules.

For a nonprofit to treat its membership revenues as exempt from GST, the organization must qualify as a public sector body as defined by the GST legislation. Secondly, the organization must both establish and operate the programs or activities for which memberships are sold. Lastly, the programs or activities must primarily cater to children primarily (> 50%) aged 14 and under and are dependant on the nature and skill level of the activities.

Failure to meet any of these conditions means GST applies, and if the nonprofit’s total taxable supplies from memberships or other taxable sources exceeds $50,000 in any rolling four consecutive calendar quarters, the nonprofit must register and collect GST on all taxable revenue sources going forward.

Once registered and collecting tax on memberships and other taxable revenues, nonprofits can claim back as refunds, some or all GST paid on taxable operating and possibly capital costs directly related to the taxable revenues. If the nonprofit only makes taxable supplies, it can generally claim the full amount of GST paid. However, if the nonprofit has some amount of GST exempt revenues, it cannot claim any GST directly related to such revenues. Expenditures related to both types of revenues may be partially claimable.

Additionally, nonprofits should consider whether they are eligible for GST rebates and whether separate divisions within the organization may qualify as separate entities, with each having their own $50,000 taxable supply threshold to register for GST purposes.

It's important for nonprofits and charities to seek guidance from qualified tax advisors or consult CRA resources to ensure compliance with tax rules.

 About Achen Henderson

Achen Henderson is a modern, cloud-based CPA firm that works with Nonprofits and businesses across Canada to provide tax, accounting, bookkeeping, and fractional CFO solutions for less than the cost of a full-time accountant.  We handle most types of taxes, including GST/HST, PST, customs & trade as well as cross-border tax matters, US federal and state income and sales taxes as well.