8 October 2004 GST/HST Interpretation 53429 - GST Status of Medical and Assistive Devices

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.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to advertising services XXXXX.

The following information was presented in your letter.

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

Interpretation Requested

Is the supply of advertising space sold in the Canadian Edition considered to be a supply of an advertising service performed wholly outside Canada pursuant to paragraph 142(2)(g) of the Excise Tax Act ("the Act")?

Interpretation Given

A taxable (other than zero-rated) supply made in Canada is subject to GST at 7% or HST at 15% if made in a participating province (New Brunswick, Nova Scotia and Newfoundland and Labrador).

Paragraph 142(1)(g) of the Act deems a supply of a service to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. A supply of a service is deemed to be made outside Canada, pursuant to paragraph 142(2)(g) of the Act, if the service is, or is to be, performed wholly outside Canada.

The Canada Revenue Agency ("CRA") generally considers an advertising service to be a supply of a service of creating a message oriented towards soliciting business, attracting donations, or calling public attention in the form of an information notice, a political announcement or other similar communication by any means including oral, written, or graphic statements and representations disseminated by any means. An advertising service also consists of a service directly related to the communication of such a message (e.g., air time on a broadcasting service, space in a publication) where the communication service is supplied as part of the supply of a message, or the person providing the communication service can demonstrate that, at the time the supply is made, the service is in relation to the supply of a message.

There are occasions where the person broadcasting or communicating the message will not be the same person creating or supplying the message. Generally, the person supplying the broadcast or communication service will be in possession of the message or will have sufficient information as to the content of the message prior to the supply of the service to know that the message is in the nature of advertising. In these situations, the supply of the broadcast or communication service will be considered to be a supply of an advertising service.

Although XXXXX is not involved in the creation or design of the advertising message, their provision of advertising space in the Magazine is considered to be a service of communicating the message and, therefore, a supply of an advertising service. As these magazines are circulated in part to newsstands and subscribers in Canada, the advertising service XXXXX is deemed to be made in Canada under paragraph 142(1)(g) of the Act.

Although the advertising service XXXXX is deemed made in Canada, the supply may qualify for zero-rating where the supply is made to a non-resident such as a multi-national corporation. Specifically, section 8 of Part V of Schedule VI to the Act zero-rates a supply of an advertising service that is made to a non-resident person who is not registered for purposes of the GST/HST at the time the service is performed. Also, a supply of an advertising service made to a registered non-resident person may be zero-rated under section 7 of Part V of Schedule VI of the Act provided that none of the exclusions of that provision apply. It is the supplier's responsibility to verify that the recipient is a non-resident and, as the case may be, not registered for GST/HST purposes. Appendix A of GST/HST Memoranda Series section 4.5.1, Exports - Determining Residence Status, describes the documentation that the CRA will generally accept as proof that the recipient of the supply is not resident in Canada and Appendix B describes the documentation that the CRA will accept as proof that a person is a non-resident and not registered for purposes of the GST/HST.

Please note that the letter XXXXX to which you referred in your letter does not reflect our current position with respect to the place of supply of a supply of a service of advertising. For example, a more recent interpretation letter XXXXX reflecting our current position regarding this issue may be found on the public database.

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 Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6743.

Yours truly,

Cheryl R. Leyton
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2004/10/01 — RITS 54077 — Recovery of the Goods and Services Tax (GST) That [Were] Paid to XXXXX on the Purchase of XXXXX Products for Resale