DO NON-PROFITS PAY GST/QST?

Non-profit organizations (NPOs), registered charities, foundations, and community groups often assume they are exempt from GST and QST. In reality, most non-profits must still charge, collect, remit, and file GST/QST unless they qualify for very specific exemptions. In addition, charities follow special rebate and filing rules that differ from regular businesses. This guide explains when a non-profit in Quebec must pay or charge GST/QST, what exemptions may apply, and how charities can recover part of these taxes.

Understanding these rules helps protect your organization from penalties, incorrect filings, and avoidable audit risk.

LEGAL AND REGULATORY FRAMEWORK

The GST rules for charities and non-profits come from the Excise Tax Act, while QST rules come from the Quebec Taxation Act. These laws define:

• when an NPO or charity is required to register
• which activities are taxable, exempt, or zero-rated
• how to calculate input tax credits (ITCs) and input tax refunds (ITRs)
• when rebates apply instead

An NPO is an organization operated solely for:
• civic improvement
• social welfare
• pleasure or recreation
• any purpose except making profit

A charity has a stricter definition and must be registered with the CRA.

KEY COURT DECISIONS

Courts have clarified important points:

• charities and NPOs are not automatically exempt from GST/QST
• tax treatment depends on the type of supply, not the organization itself
• organizations must prove eligibility for rebates or exemptions
• fundraising banquets, memberships, and events may be taxable
• improper GST/QST charges must be corrected and refunded
• lack of documentation leads to denied credits or rebates

Judges have emphasized that non-profits must follow the same documentation rules as businesses.

WHY GST/QST FOR NON-PROFITS IS OFTEN MISUNDERSTOOD

Common reasons include:

• assuming “non-profit” means “tax-exempt”
• misunderstanding of exempt supplies
• incorrect invoicing for memberships or events
• missing out on rebates that charities are entitled to
• confusion between charity status and NPO status
• failure to track taxable vs. exempt activities separately

Misinterpretation can lead to overpaying tax or receiving reassessments.

DO NON-PROFITS PAY GST/QST? THE REAL ANSWER:

1. YES, If the organization sells taxable goods or services

NPOs and charities must register and charge GST/QST if they exceed the $30,000 small supplier threshold from taxable supplies.

Examples of taxable activities:

• merchandise sales
• conferences and paid workshops
• event tickets
• recreational programs
• room or facility rentals (in many cases)
• fundraising activities involving taxable supplies

2. NO, If the organization ONLY provides exempt supplies

Certain activities are exempt, meaning no GST/QST is charged and no ITCs/ITRs can be claimed.

Common exempt supplies include:

• most educational services
• certain healthcare or social services
• some childcare programs
• certain memberships in NPOs
• volunteer-run activities with minimal compensation

3. YES, If an NPO exceeds $30,000 in taxable supplies

Even if the organization is non-profit, registration is mandatory once the threshold is exceeded.

4. YES, Charities must follow special GST/QST rules

Charities do not generally claim ITCs/ITRs.
Instead, they claim public service body rebates, which refund part of the tax paid.

5. NO, If revenue is strictly exempt and under the threshold

Organizations with purely exempt activities and under $30,000 do not need to register or charge tax.

GST/QST RULES FOR NON-PROFITS VS. CHARITIES

NON-PROFITS (NPOs)

• Must register if taxable supplies exceed $30,000
• Can claim ITCs/ITRs if registered
• Must charge tax on taxable activities
• Must file GST/QST returns according to their frequency

REGISTERED CHARITIES

• Generally do NOT claim ITCs
• Instead claim charity rebates (federal and Quebec)
• Certain fundraising events may be exempt
• Many supplies are partially exempt
• Still must register if taxable supplies exceed $30,000

EXAMPLES OF TAXABLE ACTIVITIES FOR NPOs/CHARITIES

• selling branded merchandise (shirts, mugs, etc.)
• running paid workshops or classes
• charging for recreational or cultural programs
• renting facilities to the public
• selling tickets to events or shows
• certain fundraising dinners

EXAMPLES OF EXEMPT ACTIVITIES

• volunteer-run events where 90%+ of work is unpaid
• many memberships in recreational or community organizations
• childcare and certain social assistance programs
• religious services
• long-term residential rents

WHAT ABOUT FUNDRAISING?

Fundraising is a complex area. Tax treatment depends on factors such as:

• what is being sold
• whether volunteers run the event
• whether the activity is “commercial”
• whether the organization is a registered charity

Many fundraising sales are taxable, especially in cases where goods or meals are exchanged.

INPUT TAX CREDITS (ITCs) AND REFUNDS (ITRs)

• NPOs can claim ITCs/ITRs if registered.
• Charities generally cannot — they must use rebates.

CHARITY REBATES: A SPECIAL RULE

Registered charities may claim:

• 50% rebate of GST paid
• 50% rebate of QST paid (varies by category)
• Rebates claimed quarterly, annually, or by period

This is a significant financial benefit for charities.

MACKISEN STRATEGY

Mackisen CPA helps non-profits and charities determine:

• whether they must register for GST/QST
• whether their supplies are taxable, exempt, or zero-rated
• how to organize mixed supplies
• how to claim rebates or ITCs properly
• how to structure fundraisers tax-efficiently
• how to comply with documentation and filing rules

We also prepare GST/QST returns, charity rebate applications, and audit-ready folders for grant documentation.

REAL CLIENT EXPERIENCE

A community organization assumed all their classes were exempt. Mackisen identified taxable activities and helped them register and correct invoices.

A charity overpaid QST by claiming no rebates. Mackisen filed rebate claims and recovered thousands.

A non-profit recreational club charged tax incorrectly on exempt memberships. Mackisen corrected filings and communicated with Revenue Québec.

COMMON QUESTIONS

Are non-profits automatically exempt from GST/QST?
No. It depends on what they sell and whether they exceed the threshold.

Do charities collect GST/QST?
Yes if they make taxable supplies above the threshold.

Can charities claim input tax credits?
Usually no they use rebates instead.

Are fundraising events taxable?
Sometimes. It depends on how the event is structured.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal guides non-profits and charities through Quebec’s complex GST/QST rules. We help protect funding, maximize rebates, and ensure full compliance.