Canada Revenue Agency (“CRA”) recently released two almost identical interpretations on whether certain supplies of alcoholic beverages supplied by charities pursuant to a catering contract were exempt from GST/HST and whether the GST/HST paid on purchases of alcoholic beverages by the charity were eligible to be claimed under the Public Service Bodies’ Rebate (“PSB”). Although GST/HST interpretations are fact specific and not binding on CRA, they can help charities that make supplies of alcoholic beverages in the context of providing catering services determine if they need to review how they are currently accounting for GST/HST.
GST/HST interpretation documents numbered 8483r and 6372r were released on September 6, 2016. Both interpretations specify the charity’s catering contract should contain terms which indicate the sale of alcoholic beverages is required “at the direction of the client and all or a portion of the consideration payable for the beverages must be billed to the catering client as part of the invoice for the catering supply.” Where the catering contract contains such terms and the charity sells the beverages through “a host bar (that is, total amount for the beverages is charged to the catering client) or a 50/50 bar (that is, only 50% of the total amount for the beverages is charged to the catering client and the remaining 50% is charged to the guests),” the supply of alcoholic beverages will generally be exempt. Supplies of alcoholic beverages made by the charity directly to guests, i.e. through a 100% cash bar, would generally be taxable.
Concerning whether charities can claim a PSB rebate for GST/HST paid on purchases of alcoholic beverages, the interpretations clarify that charities would generally “not be entitled to claim a PSB rebate in respect of the GST/HST paid or payable on purchases of alcoholic beverages that the charity supplies independent of a meal where it is not required to collect the GST/HST on those supplies.” On the other hand, it may be possible for charities who make taxable supplies of alcoholic beverages to claim a PSB rebate for GST/HST paid on those purchases of alcoholic beverages.