Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 81238
XXXXX
June 30, 2008
Subject:
_GST/HST Interpretation
Application of GST/HST to Roaming Services
Dear XXXXX:
Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to roaming services.
Roaming Services
As we understand it, cellular carriers in Canada (hereafter, "Canadian Carriers") allow their subscribers to use their cell phones to make and receive telecommunications while in the service area of cellular carriers in the United States (hereafter, "American Carriers"). These telecommunication services, which are referred to as roaming services, can only be provided to subscribers of a particular Canadian Carrier where that Canadian Carrier has entered into a bilateral roaming agreement with a particular American Carrier with respect to the roaming services, and where that Canadian Carrier has granted its subscribers the ability to roam on that American Carrier's network.
While in the United States, subscribers of Canadian Carriers often use their cell phones to make calls to places in Canada. Typically, in these situations the American Carrier invoices the Canadian Carrier two amounts in respect of the telecommunication services furnished to the subscriber: (1) an airtime charge, which is for access from the subscriber's cell phone to the nearest cellular tower in the American Carrier's service area; and (2) a long distance charge, which is for carrying the call from the toll switch (i.e., the central office in the local calling area) to its final destination in Canada.
Under the terms of the roaming agreement, the Canadian Carrier is liable to pay these amounts to the American Carrier. In addition, the Canadian Carrier is responsible for billing to, and collecting from, its subscribers all charges that are incurred by the subscriber as a result of the telecommunication services furnished by the American Carrier. Typically, the amounts are disclosed as separate items on the subscriber's monthly invoice or statement.
Review of the Application of GST/HST to Roaming Services
XXXXX
XXXXX XXXXX.
CRA's Position
After careful consideration XXXXX, our position continues to be that Canadian Carriers are obtaining telecommunication services from American Carriers for use in making single supplies of telecommunication services to their subscribers. In our view, treating the airtime and long distance charges as consideration for multiple supplies, XXXXX, is contradictory to our policy set out in GST/HST Policy Statement P-077R2, Single and Multiple Supplies, that a supply that is a single supply from an economic point of view should not be artificially split. XXXXX.
Consequently, in accordance with the two-out-of-three rule in subparagraph 142.1(2)(b)(ii) of the Excise Tax Act (ETA), a Canadian Carrier is deemed to have made a supply of a telecommunication service in Canada in respect of a cellular telephone call emitted in the United States where the call is received in Canada and the billing location for the call is in Canada. The billing location is considered to be in Canada if the fee for the call is charged or applied by a Canadian Carrier to an account of the subscriber that relates to a cell phone ordinarily located in Canada. The CRA considers a cell phone to be ordinarily located in Canada if the phone has a telephone number with an area code assigned to a geographic area in Canada.
Similarly, in accordance with the two-out-of-three rule in subparagraph 2(b)(ii) Part VIII of Schedule IX to the ETA, a Canadian Carrier is deemed to have made a supply of a telecommunication service in a province in respect of a cellular telephone call emitted in the United States where the call is received in the province and the billing location for the call is in the province. The billing location is considered to be in a province if the fee for the call is charged or applied by a Canadian Carrier to an account of the subscriber that relates to a cell phone ordinarily located in the province. The CRA considers a cell phone to be ordinarily located in a province if the phone has a telephone number with an area code assigned to a geographic area in the province. In the situation where an area code is assigned to more than one province, such as area code 902 which serves both Nova Scotia and Prince Edward Island, the next three digits in the telephone number (i.e., the central office code or "exchange") determine the ordinary location of the cell phone.
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If you require clarification with respect to any of the issues discussed in this letter, please call John Sitka, Director, General Operations and Border Issues Division at (613) 954-7959.
Yours truly,
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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