The HST Place of Supply Rules for Conferences May Not Apply to Sponsorships
Many associations hold their conferences or meetings in Canada and/or HST provinces (Ontario, British Columbia, New Brunswick, Nova Scotia and Newfoundland/Labrador). For example, the American Bar Association recently hosted their annual meeting in Toronto, Ontario. I was asked whether a sponsorship by a U.S.-based law firm would be subject to harmonized sales tax ("HST").
The answer is "It all depends". There are two HST place of supply rules that need to be considered. In section 28 of Part I of the New Harmonized Value-Added Tax System Regulations, there is a specific rule for "location specific events" (like a conference). For this rule to apply, there must be a direct connection between the service being performed (e.g. the service of giving recognition) by the supplier and the event (e.g., the conference).
Depending on what exact services are being provided in return for the sponsorship, the Canada Revenue Agency may not consider the connection to be direct. An example of an indirect service is advertising services (such as including the firm's name in promotional materials). If this is the case, the general place of supply rule would apply and not the specific rule relating to location specific events. The general place of supply rules for services is found in section 13 of Part I of the New Harmonized Value-Added Tax System Regulations.
In the example given, the U.S. law firm (if it does not have any offices in Canada) would not receive a service in an HST province. As a result, HST would not apply to the consideration paid for the sponsorship.
If the U.S. law firm had offices in the united States and an office in Canada, an analysis of the location "most closely connected with the supply" would be required.
If the U.S. law firm received admission tickets to the event as part of the sponsorship package, it may be that the CRA would consider that the supplier provided a multiple supply and a portion of the consideration paid would be subject to HST.
For more information, please contact Cyndee Todgham Cherniak, a sales tax lawyer in Ontario at 416-760-8999.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
