8 December 2004 GST/HST Interpretation 45733 - Input Tax Credit Available to a Charity for Capital Property

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 Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX XXXXX XXXXX	Case Number: 45733
XXXXX	December 8, 2004

Subject:

GST/HST APPLICATION RULING Supply of books with CD ROMs and/or online access in the participating provinces

Dear XXXXX:

Thank you for your letter XXXXX, (with samples), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below. We apologize for the delay in responding.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

1. XXXXX ("the Company") is XXXXX publisher, and sells books and publications through XXXXX divisions:

(a) XXXXX.

(b) XXXXX.

(c) XXXXX.

2. A significant number of the Company's clients can be identified as schools, school boards, community colleges, and universities.

3. The Company sells approximately XXXXX titles directed to the Higher Education market, roughly XXXXX% of which include a CD-ROM and/or online capability. Generally, the CD-ROM and the online capability are intended to provide tutorials, exercises, and/or tests to use in conjunction with the printed material.

4. The Company has provided five samples that they consider to be representative of the types of publications they sell.

5. The first publication is XXXXX ("Product A"). Product A outlines sociology's basic ideas, research, and insights, and is intended for introductory courses on sociology.

6. Product A includes a XXXXX CD-ROM, a XXXXX CD-ROM, an Access Code for a XXXXX Website with XXXXX, and a XXXXX study chart. (The XXXXX CD-ROM and the XXXXX study chart were not provided with the sample textbook.)

7. The cover of Product A clearly indicates that these items are included. Specifically, the front cover highlights that the book is a XXXXX Edition with the XXXXX CD-ROM and the Access Code to the XXXXX Website and XXXXX included as XXXXX Bonus Items. The spine indicates that a free CD-ROM is included. The back cover indicates that the XXXXX CD-ROM, the XXXXX CD-ROM, and the XXXXX study chart are included with this edition, and provides the address of the free XXXXX Website.

8. The XXXXX CD-ROM is inside a folder attached at the back of Product A. It contains study resources (sociologists gallery, glossary, interactive maps), the chapters of the textbook in Portable Document Format (excluding certain copyrighted portions such as pictures and artwork), and an offline version of the interactive study guide from the XXXXX Website.

9. XXXXX Websites are text-specific, interactive websites that are generally accessible to anyone. However, an Access Code is required to view certain information on some XXXXX Websites.

10. The XXXXX Website for Product A includes chapter overviews and learning objectives, exercises and questions, links to informative websites, and a chat room for students. This particular XXXXX Website has both protected and unprotected access. Students are required to enter the Access Code to use the protected website, which includes a XXXXX-month subscription to XXXXX, an online sociology research database with access to more than 100 sociological journals, magazines and newspapers.

11. The XXXXX CD-ROM contains XXXXX Census of Canada data, maps, charts, and interactive tutorials. The XXXXX study chart is a laminated chart that gives students a brief overview of an introductory sociology course, which can be used as a study aid for tests and exams.

12. The XXXXX CD-ROM, the XXXXX CD-ROM, the XXXXX study chart, and the Access Code to the XXXXX Website and XXXXX are included free with the purchase of Product A.

13. Product A and the XXXXX CD-ROM are not available separately.

14. The XXXXX CD-ROM, the subscription to XXXXX, and the XXXXX study chart are not available separately; however, these items are included free with the purchase of other introductory sociology textbooks.

15. The second publication is XXXXX ("Product B"). Product B is an introduction to psychology specifically tailored to meet the needs of students in Canada, and includes traditional coverage of problems, theories, findings and practices.

16. Product B includes a XXXXX CD-ROM, a XXXXX CD-ROM, a XXXXX Website, and an Access Code for WebCT Online Resources.

17. The cover of Product B clearly indicates that a CD-ROM and a XXXXX Website are included. Specifically, the front cover indicates that the book is a XXXXX Edition with a complete electronic version of the text and study resources on CD-ROM as a bonus inside. The spine indicates that a free CD-ROM is included, and the back cover highlights the address and features of the XXXXX Website.

18. The XXXXX CD-ROM is inside a folder attached near the back of Product B. It contains the chapters of the textbook in Portable Document Format (excluding certain copyrighted portions such as pictures and articles), and an offline version of the interactive study guide from the XXXXX Website.

19. The XXXXX CD-ROM is in a separate booklet that is packaged with Product B. The XXXXX-page booklet describes the features of the CD-ROM. It includes XXXXX interactive modules that correspond to topics in introductory psychology courses, with lessons, data collection experiments, interactive exercises, and quizzes.

20. The XXXXX Website for Product B, which does not require an Access Code, is an online study guide with practise tests and interactive learning activities for each chapter of the text, and links to related websites, student discussions, and polls and surveys.

21. The Access Code to the WebCT Online Resources is in a separate cardboard folder that is packaged with Product B. WebCT is a Web-based course platform that is used to provide course content over the Internet, for both campus-based and distance learning courses. Instructors at universities and colleges that use WebCT can add the Company's WebCT Online Resources to their online course environment. The WebCT course content provided by the Company is based on a specific textbook and provides resources similar to those on the XXXXX Websites. XXXXX WebCT courses are protected and require an Access Code.

22. The Access Code to the WebCT Online Resources allows students to access text-related resources through WebCT for XXXXX months, including course assignments, practice quizzes, links to relevant websites, and communication tools.

23. The XXXXX CD-ROM, the XXXXX CD-ROM, the XXXXX Website, and the Access Code to the WebCT Online Resources are included free with the purchase of Product B.

24. Product B and the XXXXX CD-ROM are not available separately.

25. The Access Code to the WebCT Online Resources may be purchased separately. This allows students who purchase used textbooks access to the WebCT Online Resources, since an Access Code can only be used by one person.

26. The XXXXX CD-ROM may be purchased separately, or it can be packaged with any introductory psychology textbook at no extra charge.

27. The third publication is XXXXX ("Product C"). Product C provides the context for understanding organizational behaviour in the Canadian workplace and highlights the many Canadian contributions to the field.

28. Product C includes a XXXXX CD-ROM and a XXXXX Website.

29. The packaging of Product C clearly indicates that these items are included. Specifically, a sticker on the book's plastic wrapper indicates that it is a XXXXX Edition with a complete electronic version of the text and study resources on CD-ROM as a bonus inside. The back cover of the book indicates that this edition includes an interactive CD-ROM and provides the address of the XXXXX Website, highlighting the features of both.

30. The XXXXX CD-ROM is inside a folder attached to the inside back cover of Product C. It provides students with an assortment of tools to assist learning, including a complete electronic version of the textbook chapters with hyperlinks and a self-assessment library. A box at the end of each chapter in the textbook identifies the tests on the CD-ROM that are related to that chapter.

31. The XXXXX Website, which does not require an Access Code, contains an interactive study guide with chapter outlines, questions and exercises, links to relevant websites, search tools, and video clips outlining organizational behaviour issues and how they affect Canadian individuals and companies.

32. The XXXXX CD-ROM and the XXXXX Website are included free with the purchase of Product C.

33. Product C and the XXXXX CD-ROM are not available separately.

34. The fourth publication is XXXXX ("Product D"). Product D presents the basic concepts of anatomy and is designed for one-semester or one-quarter introductory anatomy courses in the health fields.

35. Product D includes a XXXXX CD-ROM, XXXXX, and an Access Code to the XXXXX.

36. The XXXXX CD-ROM is inside a folder at the front of Product D. It contains interactive exercises and quizzes for each chapter, and a pronunciation glossary. Special icons in the textbook indicate the exercises that are included on the XXXXX CD-ROM.

37. XXXXX is a XXXXX-page, staple-bound booklet containing colour photographs of the bones in the human skeleton and soft tissues of the human body.

38. The Access Code to the XXXXX is printed on a removable wallet-sized card included on a page at the front of Product D. XXXXX are online learning environments that present a wider view of a course's subject area to supplement the textbook's content, as well as text-specific resources. An Access Code, either purchased separately or packaged with a textbook, is required to use a XXXXX.

39. The Access Code allows students to use the online resources available at the XXXXX for one year, including interactive tutorials, practice quizzes customized to the textbook, clinical case studies, and research tools.

40. The XXXXX CD-ROM, XXXXX, and the Access Code to the XXXXX are included free with the purchase of Product D.

41. Product D and the XXXXX CD-ROM are not available separately.

42. XXXXX is not available separately; however, it is included free with the purchase of other introductory anatomy books.

43. The Access Code to the XXXXX may be purchased separately; it is also included free with the purchase of other anatomy or physiology textbooks.

44. The fifth publication is XXXXX ("Product E"). Product E is designed as a "teach yourself" computer programming guide.

45. Product E is sold in a box set with a CD-ROM.

46. The slipcase of the box set clearly indicates the items that are included. Specifically, the box set is labelled as the XXXXX Edition, and indicates that it includes Product E, the complete XXXXX, and assessment exams.

47. The CD-ROM is included in a cardboard folder inside the slipcase. It includes the XXXXX, the source code for the examples in Product E, and the self-assessment tests. The XXXXX is the translator between the programming language and machine code, necessary to run the programs written in XXXXX.

48. The suggested retail price of the box set is $XXXXX in Canada.

49. Product E is available separately, and has a suggested retail price of $XXXXX in Canada.

50. The CD-ROM is not available separately; the slipcase indicates that the XXXXX is valued at $XXXXX.

Transactions

The Company sells these books, and similar publications, with the CD-ROMs and/or online access capabilities to campus bookstores, which in turn sell them to students.

Ruling Requested

Do the books supplied by the Company with CD-ROMs and/or online access capabilities, and sold together for a single consideration, meet the definition of a "printed book" under subsection 259.1(1) of the Excise Tax Act (ETA), such that they are eligible for the point-of-sale rebate when delivered or made available in a participating province?

Ruling Given

Based on the facts set out above, we rule that supplies of Products A, B, C, D and E with the CD-ROMs and access to the online resources (and the other elements outlined above) are supplies of new products that are not "printed books" for purposes of subsection 259.1(1) of the ETA, and are therefore not eligible for the point-of-sale rebate.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Qualifying goods for the point-of-sale rebate are a printed book or an update of a printed book, an audio recording all or substantially all of which is a spoken reading of a printed book, and a bound or unbound printed version of scripture of any religion, where "printed book" has the meaning assigned by subsection 259.1(1) of the ETA.

Section 259.1 of the ETA outlines the federal book rebate of the GST available to specified persons (e.g. municipalities, school authorities and universities) under certain conditions. For purposes of the point-of-sale rebate and the federal book rebate, the expression "printed book" has its ordinary meaning, subject to the exclusions listed in subsection 259.1(1). None of these exclusions applies to the samples above. Common dictionary definitions of the term "book" indicate that a book is essentially a number of sheets fastened together in some way.

In some cases, an item that consists of a book and another product packaged together and sold for a single price will be considered to be a single supply of a new product that does not fall within the definition of a printed book.

In other cases, a printed book and another item packaged together and sold for a single price will be considered to be two separate items. In these cases, it is necessary to determine if the supply of one item is incidental to the supply of the other.

The products submitted were reviewed with reference to our policy position on single and multiple supplies (P-077R2, Single and Multiple Supplies, copy enclosed) to determine whether each product is a single supply or a multiple supply before determining whether there is a supply of a "printed book" for purposes of the point-of-sale rebate. We concluded that there is a single supply in each case, and that supply is of a new product that does not qualify for the rebate:

1. Product A is supplied as a XXXXX edition with two CD-ROMs, the study chart, and access to the XXXXX Website with XXXXX. The resulting package provides extensive learning resources in several formats that are integrated together to meet the recipient's needs. Although the recipient may be aware of the various elements, the recipient cannot acquire them separately or substitute any of the elements. The supply of Product A with the two CD-ROMs, the study chart, and access to the XXXXX Website with XXXXX is a single supply of a new product that is not a printed book.

2. Product B is supplied as a XXXXX edition with two CD-ROMs, and access to the XXXXX Website and the WebCT Online Resources. The resulting package provides extensive learning resources in several formats that are integrated together to meet the recipient's needs. Although the recipient may be aware of the various elements, in this particular transaction, the recipient cannot acquire them separately or substitute any of the elements. The supply of Product B with the two CD-ROMs, and access to the XXXXX Website and the WebCT Online Resources is a single supply of a new product that is not a printed book.

3. Product C is supplied as a XXXXX edition with the CD-ROM and access to the XXXXX Website. The resulting package provides extensive learning resources in several formats that are integrated together to meet the recipient's needs. Although the recipient may be aware of the various elements, the recipient cannot acquire them separately or substitute any of the elements. The supply of Product C with the CD-ROM and access to the XXXXX Website is a single supply of a new product that is not a printed book.

4. Product D is supplied with a CD-ROM, XXXXX, and the Access Code to the XXXXX. The resulting package provides extensive learning resources in several formats that are integrated together to meet the recipient's needs. Although the recipient may be aware of the various elements, in this particular transaction, the recipient cannot acquire them separately or substitute any of the elements. The supply of Product D with the CD-ROM, XXXXX, and the Access Code to the XXXXX is a single supply of a new product that is not a printed book.

5. Product E is sold in a box set with the CD-ROM; they are integrated together to meet the students' needs. The resulting package provides a XXXXX and learning resources that explain how to program in that language. Although the recipient may be aware of the elements included in the box set, in this particular transaction, the recipient cannot acquire them separately or substitute any of the elements. The supply of Product E in a box set with the XXXXX, source code and self-assessment tests on CD-ROM is a single supply of a new product that is not a printed book.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8253.

Yours truly,

Jacqueline Russell
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2004/11/18 — RITS 50425 — Segregated Fund Early Withdrawal Fees