21 November 2002 GST/HST Interpretation 36506 - Access to a Database

Dear XXXXX:

Thank you for your facsimile of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of access to a database of information. Your request was sent to the XXXXX Regional Office, GST/HST Rulings and forwarded to us for reply. We apologize for the delay in providing you with this response.

Our understanding of the operations of XXXXX is based on your facsimile and your subsequent discussions with XXXXX Regional Office and our telephone conversation of XXXXX is a company located in the United States that supplies books by mail or courier to recipients in Canada and as a result is registered for purposes of the GST/HST. In addition to the supply of books, XXXXX creates and maintains numerous databases that are published on-line. Upon receipt of payment, a subscriber is provided with a password which allows access to a database containing specialized information (e.g., medical, educational, scientific).

XXXXX does not have an office or any customer representatives based in Canada. However, XXXXX, the parent company of XXXXX, has an office in Canada which handles the processing of payments by XXXXX to persons in Canada (e.g., the remittance of GST/HST).

Interpretation Requested

What is the tax status of the supply of the access to a database made to subscribers?

Interpretation Given

The supply of a right to access a database and to use the information stored on that database is considered to be a supply of intangible personal property (IPP) for purposes of the GST/HST.

Pursuant to paragraph 142(1)(c) of the Excise Tax Act (ETA) a supply of IPP, that is not related to real property, tangible personal property, or a service is considered to be made in Canada, if the property may be used in whole or in part in Canada.

Generally, the Canada Customs and Revenue Agency (CCRA) considers that a supply of IPP may be used in whole or in part in Canada if there are no restrictions on the allowable use of the property. In order to determine whether there are any restrictions on the allowable use of the IPP, reference may be made to the written agreement between the supplier and customer (if applicable), or to the general terms of use posted on the supplier's Web site.

As such, where the recipient of a supply of IPP is physically located outside of Canada, the supply of the IPP is still considered to be made in Canada unless there are conditions in the agreement restricting the use of the IPP to outside Canada.

For example, where the agreement for the supply does not restrict access to the database to a specific location or jurisdiction and there is no other evidence of any restrictions, the supply will be considered to be made in Canada regardless of the location of the recipient. However, if the agreement for the supply restricts the access to the database to a particular location or jurisdiction that is outside of Canada, the supply will be considered to be made outside of Canada. In this case, the supply of the access is not subject to the GST/HST.

A taxable supply of IPP that is made in Canada is subject to the GST/HST calculated on the value of the consideration for the supply at a rate of 7% or 15% where the supply is deemed to be made in a participating province (i.e., Nova Scotia, New Brunswick, or Newfoundland and Labrador), unless the supply is zero-rated (taxed at 0%).

Note, under the current circumstances, the supply by XXXXX of the right to access and use the information stored on its databases is not considered to be made in a participating province and thus is not subject to tax at the HST rate of 15%. Furthermore, a supply of a right to access a database and to use the information on that database is not a zero-rated supply for purposes of the GST/HST. Consequently, the supply by XXXXX of the right to access and use the information stored on its databases is subject to the GST at a rate of 7% given that there are currently no restrictions with respect to the place of use of the supply.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of GST/HST Technical Information Bulletin B-090: GST/HST and Electronic Commerce which provides information on the application of the tax to supplies made by electronic means.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8530.

Yours truly,

Dwayne Moore
Electronic Commerce Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate