Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 137186
March 29, 2012
Dear [Client]:
Subject:
GST/HST RULING
[Whether carrying on Business in Canada] - Supplies Of Electronic Books Via The Internet
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of electronic books via the internet by a non-registered, non-resident corporation.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
The following are the facts outlined in your letter.
1. [...] (the "Company") is [...].
2. [...].
3. The Company has its principal place of business in [...] [Country X]. It has no physical presence or operations in Canada (i.e., no stores, business locations, employees, bank accounts, etc.)
4. The Company is a non-resident, non-registrant for GST/HST purposes.
5. The Company currently sells books [...] in electronic format ("electronic books") to consumers throughout North America [...] via the [...] internet [...].
6. [...] Delivery of the electronic books is accomplished by the download of electronic data from the internet to the customer's computer or e-reader device.
7. The Canadian customers purchase the electronic books with credit cards.
8. The electronic books can be purchased online by customers located throughout Canada and used in participating and non-participating provinces in Canada.
9. [...].
10. [...].
11. [...].
12. [...].
13. No physical form of any electronic book is sold to customers, such as a CD, flash drive, or paper copy, by the [...] the Company.
14. [...].
15. [...].
16. [...].
17. [...].
18. The Company has all control over pricing, discounts, promotions, and volume of the electronic books [...].
19. [...].
20. [...].
Ruling Requested
You would like to know:
1. Does the Company have a permanent establishment in Canada for purposes of the ETA?
2. Is the Company carrying on business in Canada for GST/HST purposes?
3. [...].
Ruling Given
Based on the facts set out above, we rule as follows:
1. The Company does not have a permanent establishment in Canada for purposes of the ETA.
2. The Company is not carrying on business in Canada for GST/HST purposes.
3. [...].
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
The Company does not have a permanent establishment in Canada as it has its principal place of business outside Canada and has no fixed place of business in Canada through which it makes supplies.
Whether a non-resident person is carrying on business in Canada is a question of fact requiring consideration of all the relevant facts. The factors that will be considered in determining whether a non-resident person is carrying on business in Canada for GST/HST purposes in a particular situation include:
• the place where agents or employees of the non-resident are located;
• the place of delivery;
• the place of payment;
• the place where purchases are made or assets are acquired;
• the place from which transactions are solicited;
• the location of assets or an inventory of goods;
• the place where the business contracts are made;
• the location of a bank account;
• the place where the non-resident's name and business are listed in a directory;
• the location of a branch or office;
• the place where the service is performed; and
• the place of manufacture or production.
The importance or relevance of a given factor in a specific case depends upon the nature of the business activity under review, and, as always, the particular facts and circumstances of each case. Generally, a non-resident must have a significant presence in Canada to be considered to be carrying on business in Canada.
Based on the information provided, our understanding is that the only factors that are present in Canada in this case are the place of contract, solicitation, and payment. These factors are insufficient to support a conclusion that the Company is carrying on business in Canada for GST/HST purposes.
The supplies of electronic books made by the Company to recipients in Canada by means of download from [...] websites are supplies of intangible personal property (IPP).
As the Company is a non-resident, non-registrant, supplies of IPP made in Canada by the Company shall, pursuant to subsection 143(1) of the ETA, be deemed to be made outside Canada and therefore not subject to tax.
However, the recipient of the supply of IPP in Canada may be required to self-assess tax under Division IV or Division IV.1 as applicable.
[...]
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8220. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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