RST Information Notice, December 2004

• This notice explains how retail sales tax (RST) applies to destination marketing fees charged by vendors who provide transient accommodation, and outlines a new condition for exemption.

Background

Transient accommodation is lodging for less than a month in hotels, motels, tourist homes, lodging houses, and similar establishments. In Ontario, a number of these establishments charge a destination marketing fee (DMF) to fund promotional
campaigns to boost their municipality's tourism trade. RST applies at a rate of 5 per cent to the total fair value of the transient accommodation, including the DMF, whether it is included or shown separately from the accommodation charges on the customer's invoice.

The May 2004 Ontario Budget proposed to exempt the DMF from RST for a one-year period.

On November 22, 2004, the Minister of Finance introduced Bill 149, the Budget Measures Act, 2004 (No.3), which included amendments to the Retail Sales Tax Act to implement the temporary exemption for DMFs, and a new condition for the
exemption. This Bill received Royal Assent and became law on December 16, 2004.

Conditions for Temporary Exemption

A temporary exemption is in effect for DMFs billed on or after May 19, 2004 and before May 19, 2005, provided all of the following conditions are satisfied:

• the fee is forwarded by the vendor to a non-profit agency to be used for the exclusive purpose of promoting tourism in Ontario or the municipality in which the accommodation is located
• the fee is shown as a separate item on the purchaser's invoice or receipt
• the fee does not exceed 3 per cent of the fair value of the accommodation.

Effective January 1, 2005, the fee must be labelled on the purchaser's invoice or receipt as "Destination Marketing Fee" in order to qualify for the temporary exemption.

Combination Packages

The temporary exemption from RST for the DMF applies only to transient accommodation and does not extend to food, beverage or other types of travelrelated charges (e.g., admissions).

Where a customer purchases a combination package that includes accommodation and meals for one price, the DMF for the period of accommodation that is billed on or after May 19, 2004 and before May 19, 2005 is exempt from RST only if the DMF portion is listed separately on the customer's invoice or receipt and the DMF qualifies for the exemption from RST, as outlined above.

For More Information

For more information, please contact the nearest Ontario Ministry of Revenue Tax Office listed under Taxes - Provincial (Retail) Sales Tax in the blue pages of your telephone directory, or visit our website at www.ontario.ca/revenue.

© Queen's Printer for Ontario, 2004

ISBN 0-7794-7434-1