6 August 2004 GST/HST Interpretation 46409 - Sections 201 and 235 of the Excise Tax Act

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 letters XXXXX (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of hardcover and cardstock cover comic books (hereinafter referred to as "graphic novels").

Interpretation Requested

You operate a bookstore XXXXX that sells books and comic books, including graphic novels, and have requested a ruling on whether graphic novels would be eligible for the rebate on printed books.

Interpretation Given

The Canada Revenue Agency (CRA) is unable to issue a GST/HST ruling in regards to the matters raised in your submission. The CRA's policy with respect to the issuance of GST/HST rulings is outlined in the enclosed document entitled GST Memorandum 1.4 Goods and Services Tax Rulings. One such instance is when a matter, on which a determination is requested, is primarily one of fact, and the circumstances are such that all the pertinent facts cannot be established at the time of the request for the GST/HST ruling. In particular, although you have provided us with general information on the graphic novels that you sell, a ruling could only be issued in respect of a specific book or a specific series of books. However, we are pleased to issue a GST/HST interpretation based on our understanding of the information provided in your letters and in your telephone conversation with XXXXX of the XXXXX Region GST/HST Rulings Centre.

Based on our understanding of the information, it is the CRA's view that graphic novels are eligible for the point-of-sale rebate for printed books.

You provided the following information. The graphic novels are also known as "trade paperbacks". Some have cardstock covers (similar to telephone book covers) while others have hard covers. They are square bound like regular novels (i.e., the pages are glued to the cover as opposed to being stapled to the cover). They have introductions, pictures, comic strips, descriptive writing and dialogue. They are not dated or numbered, not published periodically as is a normal comic and have International Standard Book Numbers (ISBNs) and United States Library of Congress numbers. Regular comics are generally numbered and/or dated, published periodically and are not issued these numbers. Regular comics are published once, kept in circulation for a month or two, and remaining copies are then returned and usually destroyed. However, the items in question are kept in circulation indefinitely and may eventually be reprinted (with an update in the introduction which they generally contain). You sell some comics andperiodicals by subscription, where the customer must buy each issue and give XXXXX months notice to cancel. As the graphic novels are generally a single publication (although there may be a sequel as with regular novels), they are not purchased by subscription. Rather, they are pre-ordered and the customer pays for the book when it arrives. You stated that the distributor delivers to you weekly and charges 7% tax on the graphic novels.

There are two rebates that can be obtained under certain conditions for a printed book or an update of such a book. One of the rebates is for the GST or the federal component of the HST paid or payable on these books. This rebate is known as the federal book rebate and is available under certain conditions across Canada. Two of the requirements for receiving this rebate are that the supplier is a "specified person" and that the books are acquired for purposes other than resale. Specified persons include certain types of public sector bodies. A private, for-profit bookstore acquiring books for resale would not meet these requirements. Accordingly, the federal book rebate would not apply in this case.

The other rebate is for the provincial component of the HST paid or payable on these same books and is known as the point-of-sale rebate. The governments of the participating provinces provide to all persons a rebate of 100% of the provincial component of the HST on all supplies of printed books or an update to such books. The CRA administers this rebate of the 8% provincial component of the HST on behalf of the participating provinces. This rebate is available to all persons who purchase qualifying books if HST applies to the sale. Normally, the supplier pays or credits the rebate to the purchaser when the qualifying books are bought. The point-of-sale rebate is available at any point in the distribution chain. It is not limited to sales made to consumers through retail establishments located in the participating provinces. It applies to sales by publishers, wholesalers and distributors throughout the country that are subject to HST.

It must be determined if the graphic novels meet the definition of a printed book. For purposes of the federal book rebate and for the point-of-sale rebate, the expression "printed book" has its ordinary meaning subject to specific exclusions. It is clear in this case that the graphic novels come within the ordinary meaning of a printed book.

It must next be determined whether they are magazines or periodicals. The legislation governing the rebate states that a printed book does not include, among other things, "anything that is or the main component of which is a magazine or periodical acquired otherwise than by way of subscription" or "a magazine or periodical in which the printed space devoted to advertising is more that 5% of the total printed space". In this case, you stated that the graphic novels are not sold by subscription.

The legislation does not define "magazine" or "periodical". It is our view that magazines or periodicals generally have the following characteristics:

•   the pages are stapled, not bound, to the cover

•   they contain miscellaneous pieces (articles, stories, poems, etc.) by various contributors, usually with photographs, illustrations or other graphics;

•   they are a series of issues of printed material published at regular intervals, especially weekly or monthly;

•   they are issued in successive parts and intended to be continued indefinitely;

•   each issue contains the volume number, issue number and/or date of issue;

•   they are sold at least in part through subscription;

•   they are displayed and sold in part through newsstands and magazine racks with other publications which may or may not contain editorials, photos, advertising or contributed works;

•   outdated issues are not kept on display or for sale; and

•   they are assigned an International Standard Serial Number (ISSN) - the ISSN is an internationally recognized identification number for serial publications, consisting of an eight-digit standard number that, once assigned, becomes a permanent attribute of the individual serial for as long as it is issued under a given title.

Note that any one criterion by itself is not conclusive. For example, some types of publications, such as annuals or less frequently published serials, may be assigned both an ISSN and an ISBN. Monographs within a monographic series usually have both an ISBN for the individual monograph and an ISSN for the entire series.

Based on the above, the graphic novels would not be magazines or periodicals. They are square bound and not stapled. They are not dated or numbered, not published periodically and have ISBNs. They are generally published as a single publication (although there may be a sequel as with regular novels) and are not purchased by subscription - rather, they are pre-ordered and the customer pays for the book when it arrives. The graphic novels are kept in circulation indefinitely and may eventually be reprinted (with an update in the introduction which they generally contain).

The foregoing comments represent our general views with respect to the subject matter of your letters. 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 613-952-7909.

Yours truly,

Gunar Ozols
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

XXXXX

2004/08/10 — RITS 46808 — [Application of the GST to Membership Rules and the Payments of Membership Deposits]