16 March 2018 Ruling 158124

Current arrangements

USco, which is not a registrant, supplies information services to businesses and individuals. A small portion of its customer base is individuals located in Canada ("Canadian Customers") subscribing for its information services via a website hosted on a U.S. web server for payment by credit card. The information services are delivered electronically to them from that server and do not involve direct human intervention. USco has no other business activities in Canada, although some of its employees visit Canada on an irregular basis.

USco acquires specific data from its Canadian resident affiliate ("Canco") for the purpose of packaging, marketing and selling the information services to Canadian Customers, as well as acquiring one-time services for a separate fee. Canco is not otherwise directly involved in the provision of the information services to Canadian Customers.

Canadian Customers are typically introduced to the availability of the information services by third party vendors ("TPVs") on commission who carry on business in Canada.

New Services

Canco and USco have entered into a new agreement ("Services Agreement") whereby Canco supplies additional services ("New Services") to USco, including:

• assisting in the development and implementation of a comprehensive sales plan and strategy to penetrate target verticals;

• performing weekly prospecting into key target accounts and sales calls both via phone and in person to present solutions;

• assisting in the preparation of term sheets and proposals for delivery to prospective clients;

• assisting in the negotiation of contract terms under specified guidelines and establishing baseline contracts for acceptance and execution by USco;

• use of the Canco website for the limited purpose of providing a portal for use in communicating with purchasers and prospective purchasers of USco information services that are located in Canada; and

• attending key trade events to promote the USco information services in Canada.

Under the terms of the Services Agreement, Canco is expressly precluded from acting as agent of USco in Canada. Canco does not have contact with USco’s customers and is not otherwise involved in the supplies of information services made by USco to Canadian Customers.

Ruling

USco is not carrying on business in Canada for GST/HST purposes.

As a small part of its business, a U.S. resident who is not registered for GST/HST purposes (“USco”) supplies information services to Canadian businesses and individuals, who subscribe by credit card through a website hosted on a U.S. web server and with the information services being delivered electronically to them from that server. USco will now receive expanded assistance respecting marketing to its Canadian customers from its Canadian resident affiliate ("Canco"). The "New Services" include much of the marketing work including strategy development, weekly “prospecting” of accounts, assistance in the preparation of term sheets and proposals for delivery to prospective clients and in the negotiation of contract terms and drafting contracts, use of the Canco website as a portal in communicating with current and prospective purchasers and attending key trade events to promote the USco information services.

The Services Agreement between Canco and USco stipulates that Canco is not acting as agent of USco; and Canco does not have contact with the customers.

Ruling that the supplies of New Services by Canco to USco are zero-rated pursuant to Sched. VI, Pt. V, s. 5.

As a small part of its business, a U.S. resident who is not registered for GST/HST purposes (“USco”) supplies information services to Canadian businesses and individuals, who subscribe by credit card through a website hosted on a U.S. web server and with the information services being delivered electronically to them from that server. USco, whose personnel for the most part do not visit Canada, will now receive expanded assistance respecting marketing to its Canadian customers from its Canadian resident affiliate ("Canco"), which heretofore has only provided it with customer address and contact information and other data. The "New Services" include most of the leg work involved in marketing including strategy development, weekly “prospecting” of accounts, assistance in the preparation of term sheets and proposals for delivery to prospective clients and in the negotiation of contract terms and drafting contracts, use of the Canco website as a portal in communicating with current and prospective purchasers and attending key trade events to promote the USco information services.

The Services Agreement between Canco and USco stipulates that Canco is not acting as agent of USco; and Canco does not have contact with the customers.

There is no statutory definition of carrying on business in Canada for ETA purposes. CRA ruled that USco, following the New Services addition, is not carrying on business in Canada for GST/HST purposes.