13 July 2004 GST/HST Interpretation 47616 - Vacation points

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.

This is further to our telephone conversation XXXXX regarding the tax status of supplies of computer equipment, including computer hardware and software, as well as training services, supplied by way of sale to individuals by XXXXX. We understand that XXXXX is XXXXX with respect to the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST"), and that XXXXX is not a "small supplier" for GST/HST purposes.

You would like confirmation that the supplies made by XXXXX do not meet the conditions of section 30 of Part II of Schedule VI to the Excise Tax Act (the "ETA") and are therefore subject to the 7% GST. XXXXX We note your original request was made through XXXXX to GST/HST Rulings in XXXXX. Your request was transferred to us for reply XXXXX. I apologize for the delay in responding to your request.

For the reasons outlined below, we are in agreement that the supplies made by XXXXX of computer equipment, including hardware, software, and training/support services, do not meet the conditions set out in section 30 of Part II of Schedule VI to the ETA. Accordingly, these supplies are subject to the 7% GST.

Section 30 of Part II of Schedule VI to the ETA

As you know, this provision zero-rates the following supplies:

"A supply of an article that is specially designed for the use of blind individuals when the article is supplied for use by a blind individual or to or by the Canadian National Institute for the blind or any other bona fide institution or association for blind individuals or on the order or certificate of a medical practitioner."

Accordingly, all three of the following conditions must be met in order for a supply to be zero-rated under this provision:

1. The supply must be an article that is specially designed for the use of blind individuals.

2. The article must be supplied for use by a blind individual.

3. The supply must be made

(a) by or to the Canadian National Institute for the Blind ("CNIB") or a similar bona fide institution or association for blind individuals; or

(b) if sold directly to individual consumers, the article must be supplied for the use of a blind individual on the order of a medical practitioner.

Because the case at hand involves sales made directly to individual consumers, the issue is whether the computer software, hardware and related equipment supplied by XXXXX are (1) articles specially designed for the use of blind individuals that are (2) supplied for the use of a blind individual (3) on the order or certificate of a medical practitioner.

We accept that "blind individuals" are individuals with visual acuity of 20/200 or 20 degrees or less visual field in both eyes. It is our understanding that individuals with this condition have been referred to as "legally blind" individuals or as individuals with 10% vision or less. Individuals whose vision can be corrected by eyeglasses or contact lenses to exceed these criteria are not considered to be legally blind.

Whether it can be said that a particular article is specially designed for use by blind individuals requires an evaluation of the article's specific design features. The term "specially designed" relates to the intention of the original designer or manufacturer as to the ultimate use of the articles as reflected in the qualities and features of the articles themselves. The qualities and features of these articles would be unique to the needs of blind individuals and compensate or alleviate limitations or conditions flowing from blindness. The specially designed features must be significant in that the features make the article recognizably different from similar articles without the features. The specially designed article is not reasonably expected to have an alternate use.

It will be a question of fact whether the second condition that requires the article be supplied for the use of a particular blind individual is met. Note that this condition means that supplies made at the pre-retail level, e.g., sales made by a manufacturer to retailer, as well as importations, would not be zero-rated under this provision.

The third condition requiring that the supply be made on the order or certificate of a medical practitioner is also a question of fact. It is our view that the medical practitioner's order or certificate would flow from the medical practitioner's medical knowledge to specify a particular article that would meet the needs of the blind individual. This condition also excludes supplies made at the pre-retail level, as well as importations, from this provision.

On the basis of the totality of the wording of this provision, each supply made must substantiate that it consisted of an article specially designed for the use of blind individuals that was made on the order or certificate of a medical practitioner for the use of a particular blind individual.

Additional Comments Regarding the "Specially-Designed" Condition

Some articles may have been originally designed for some other purpose and later turned to other uses, such as assisting blind individuals. However, the fact that disabled individuals can benefit from them does not mean that those articles were "specially designed" for use by an individual with a disability. The qualifier "specially designed" imposes a restriction on the word "designed" which excludes general-purpose goods from the zero-rating provision. For instance, although certain technology, such as text-to-speech synthesis technology, has been adapted to be of assistance to blind individuals, we have no information to conclude that this technology was specially designed for the use of blind individuals.

The following factors may be relevant in ascertaining the original designer or manufacturer's intention as to the ultimate use of the article:

•   the extent to which the "special design" is expressed in the articles, that is, the articles have features, qualities or capabilities not found in general purpose articles but rather were originally designed for the purpose of addressing the needs of blind individuals;

•   the extent to which the articles are designed for use by blind individuals relative to their extent of use by other individuals; e.g., whether it is in fact used exclusively by blind individuals;

•   the extent to which the advertising and marketing of the articles is directed towards blind individuals, e.g., is it marketed solely for use by blind individuals.

Our general understanding of computer equipment, including the computer hardware and software described in the background information, is that this is general-purpose equipment. For instance, computer printers, keyboards, and monitors are not specially designed equipment for the use of blind individuals, notwithstanding that, for example, a printer may have the capacity to print Braille characters. Further, the computer equipment was not represented in the background information as being specially designed for the use of blind individuals, e.g., some of the computer hardware and software was marketed for use by individuals with low vision and individuals with learning disabilities.

XXXXX Supplies

You advised that XXXXX sells computer hardware and software to individuals resident in XXXXX. XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

Whether any of the computer software and hardware supplied by XXXXX meets the conditions in the ETA of being specially designed for the use of blind individuals and supplied to a blind individual is a question of fact. Each supply would have to be evaluated to determine whether these conditions are met. Although some of the computer hardware and software may have features that would appear to be specially designed for the use of blind individuals, it is still necessary to evaluate each of the computer hardware and software using the factors identified above. This evaluation may require that the client provide additional details that demonstrates how a particular computer hardware or software is specially designed for the use of blind individuals, such as the specific design features that make this hardware or software unique to the needs of blind individuals and whether the supply satisfies the condition in the ETA of being made on an order or certificate of a medical practitioner.

XXXXX

XXXXX

XXXXX

Should you have any other questions or require further clarification on this matter, please do not hesitate to contact me at (613) 952-6761.

2004/06/16 — RITS 47877 — Purchase of Mixed-use Building