the silver guide to non-monetary transactions

4.2. Sponsorship

Non-profit organizations often receive sponsorships from businesses to fund their activities. In return, the non-profit organization may provide promotional services to the sponsor or may allow the sponsor the right to use its logo, trade name, or any similar intellectual property.

Example

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An organization prints conference tote bags for delegates with the name of the company that sponsors them. The payments from the company are not considered payment for a good or service; therefore, they are not subject to the GST/HST.

Example

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You receive funding in return for allowing a corporation the right to use your organization's logo. The corporation uses your logo in its advertising campaign. The payments from the corporation are not considered payment for a good or service; therefore, they are not subject to the GST/HST.

In such cases, the CRA does not consider the amount received by the non-profit organization as a payment for goods or services. Sponsorship is therefore deemed not to be a payment for a supply. The GST and the PST therefore do not apply to this transaction.

If, however, the payment by the sponsor is made primarily (more than 50%) for advertising on television or radio, or in a newspaper, magazine, or other publication issued periodically, the payment received is not payment for a sponsorship but rather for advertising services. Therefore, the payment is subject to the GST/HST.

Example

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A radio station, which is a non-profit organization, received $1,000 from a sponsoring company. In recognition of the funds received, the organization will broadcast a 30-second advertisement for the company in question. This ad will run three times a day for the next four weeks. Such an advertising service is normally sold for $600. The cost of advertising represents 60% of the amount paid by the sponsor. Since the amount paid is for more than 50% of a radio advertising service, the GST and the QST apply to the entire $1,000 received under the sponsorship

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