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I'm launching a business that helps other people/organizations to fundraise. In some ways it is similar to GoFundMe or Kickstarter in a sense that much of the intention of the business is to pass the collected money along and not to keep it, while still being a for-profit business.

To be concrete, the business sells tea mugs for $30. $10 goes to the person who makes the mug. $10 goes as a donation. $10 goes to my business.

How do I charge HST? Am I able to charge HST only on the $20 dollars because the $10 donation is not actually the price of the mug? Must the donation be optional to be exempt from HST?

Please let me know if my question is not clear and what details to add. Thank you.

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  • I found this article but it still didn't give me the clarity I'm hoping for thangtaxlaw.com/blog/is-crowdfunding-taxable-gst-hst-canada
    – Anton
    Commented Oct 28, 2023 at 14:30
  • Are you prepared to allow people to buy the mugs for $20 without making the donation? I.e. is the donation optional?
    – DJClayworth
    Commented Oct 28, 2023 at 22:14
  • @DJClayworth no, in many ways it's the whole point of the platform
    – Anton
    Commented Oct 29, 2023 at 15:31
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    Then I can't see any way you can reasonably argue that the $10 "donation" isn't simply a part of the price of the mug, whoever you decide to give it to afterwards. The customer has to pay it, whether they like it or not, thus it can't be considered a donation in any legal sense. Thus you are going to have to charge tax on it.
    – DJClayworth
    Commented Oct 30, 2023 at 0:34
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    Kickstarter isn't selling anything. The entire payment is a donation, and you get an incidental reward. And no, if you meet the criteria for HST then you legally must charge HST. You can't claim it's up to customer. (If your sales are small enough then you don't have to charge HST, but that's your only way out.) The fact that you've read an article by a tax lawyer and still don't have clarity on the issue (and nor do I, for your individual situation) means you should definitely consult a lawyer yourself.
    – DJClayworth
    Commented Oct 30, 2023 at 15:04

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Consult a professional.

On the face of it you are selling a product for $30, so you must charge HST on $30. You cannot avoid charging HST, unless you are exempt in some way (the usual way to be exempt is that your sales are too small to meet the HST threshold).

The fact that you then pass on $10 to somebody as a donation makes no difference to the HST rules. You might get some relief for your business by making the donations, provided they are qualified donations.

It is possible that there is some legal way round this, but you are only going to find this out by consulting a professional.

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    Further, if the person who sold you the mug charged you HST then you can subtract that from the HST you send along. So in effect you only send HST on 20, since you paid HST on the "raw materials".
    – Kate Gregory
    Commented Oct 30, 2023 at 15:33

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