14 March 2005 GST/HST Interpretation 53920 - Supplies of extended warranties on vehicles, and product service plans for software made to bands and band-empowered entities

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:

This letter is further to our letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of computer software, used by blind individuals, made by you operating as XXXXX.

We had advised that we were reviewing the decision given in our previous letter to you XXXXX, which concerns the application of the GST/HST to computer software programs, and that we were considering the revocation of that decision. The computer software programs in question were described only as "specially designed for use by the blind (including the visually impaired)" that "communicates normal print in a Braille format and/or large print format and/or a talking format". The decision given was that the computer software programs were considered to be a communication device as described in the former Medical Devices (GST) Regulations, and therefore a zero-rated supply. ^[xxx]1

XXXXX

Section 2 of Part II of Schedule VI to the Excise Tax Act (the ETA) zero-rates a supply of a communication device (other than a device used to convert sound to light signals) that is specially designed for use by an individual with a hearing, speech or vision impairment. It is our position that computer software programs, including that used by individuals with a vision impairment and blind individuals, is not a zero-rated supply as described in this provision. Therefore, the GST/HST would generally apply to these supplies calculated at the rate of 7% or, where the supply is made in a participating province (New Brunswick, Newfoundland and Labrador or Nova Scotia), the rate is 15%.

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 ETA or to our interpretative policy.

Explanation

Because of the particular incapability or limitations of individuals with a hearing, speech or vision impairment, these individuals may require specially designed devices that compensate these impairments and enable them to communicate with others. We do accept that a device that may not in a general sense be considered a communication device may serve as such for these individuals.

Whether a product is a communication device and whether that device is specially designed for the use of an individual with, e.g., a vision impairment, will be a question of fact. This requires identifying and evaluating the product's design features that address the particular needs of an individual with a vision impairment to enable that individual to communicate using the device.

Your submission XXXXX and our decision XXXXX letter did not identify any particular computer software programs and how such programs address the communication needs of an individual with a vision impairment, nor did it identify facts to support the decision and demonstrate that the computer software programs in question at that time were communication devices specially designed for use by an individual with a vision impairment and met the requirements of the former Medical Devices (GST) Regulations. In the absence of supporting facts to demonstrate that a supply meets the conditions for zero-rated status, the supply is taxable at 7% or 15%.

To evaluate whether a particular computer software program or a hardware product is a supply described in section 2 of Part II of Schedule VI to the ETA, we require detailed information that demonstrates that the computer software program or the hardware is a communication device specially designed to address the needs of an individual with a vision impairment to enable that individual to communicate with others using the device. We consider a communication device to be a mechanical or electronic apparatus used by an individual to transmit and/or receive information. A communication device facilitates the exchange of ideas or messages between two or more persons. A product manufactured for the purpose of displaying information in other formats, including magnification and vocalization, or that instructs a printer to emboss Braille characters on paper, would not generally be in and of itself a communication device.

Whether a good is a communication device specially designed for use by an individual with a vision impairment requires an evaluation of the good's specific design features. The reference to "specially designed" relates to the intention of the original designer or manufacturer as to the ultimate use of the goods as reflected in the qualities and features of the goods themselves. The qualities and features of these goods would be unique to the needs of individuals with a vision impairment and compensate or alleviate the limitations or conditions flowing from the vision impairment in relation to communication. The specially designed features of a communication device for purposes of section 2 of Part II of Schedule VI to the ETA must be significant in that the features make the device recognizably different from similar devices without these features. The qualifier "specially designed" imposes a restriction on the word "designed" which excludes multi-use goods from the provision. The specially designed communication device is not reasonably expected to have an alternate use.

Some technology originally designed for another purpose may have been turned to other uses, such as assisting individuals with a vision impairment. However, the fact that these individuals can benefit from the technology is not sufficient to say that the technology was "specially designed" for their use. For example, although text-to-speech synthesis technology has been adapted to be of assistance to individuals with a vision impairment, we have no information to conclude that this technology is a communication device specially designed for the use of an individual with a vision impairment.

We would be pleased to consider any additional documentation and explanation that you may wish to submit regarding particular computer software programs and hardware that you supply to evaluate the application of section 2 of Part II of Schedule VI to the ETA. Please note that we would consider each program or hardware product separately as opposed to categories of products. We note that you did submit to our XXXXX office XXXXX a list of XXXXX categories of software programs, under which XXXXX software programs were identified, as well as a list of XXXXX categories of hardware, under which approximately XXXXX products were identified. However, the brief technical descriptions that were also provided for each category do not address the issue of a communication device that is specially designed for use by an individual with a vision impairment.

Other Information

Section 30 of Part II of Schedule VI to the ETA

Because you indicated in your letter XXXXX addressed to our Tax Services Office XXXXX that some of the products you supply are designed specifically for use by individuals who are blind, we are providing you with information on this provision, which zero-rates the following supplies:

"A supply of a an article that is specially designed for the use of blind individuals when the article is supplied for use by a blind individual 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."

We accept that "blind individuals" are individuals with a 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". For purposes of this provision, a "medical practitioner" is a licensed physician practising the profession of medicine.

All three of the conditions set out in this provision 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. This condition refers only to a product or the good itself; it does not include services.

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 or 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.

Please note that the comments previously noted in this letter regarding the "specially designed" criterion also apply to these articles, as this provision is restricted to articles that are "specially designed for the use of blind individuals". In addition, to be zero-rated under this provision, the supply must be made in the circumstances as set out, which will be a question of fact.

Additional comments

XXXXX.

If you would like to submit additional information regarding your supplies, you may contact our XXXXX GST/HST Rulings Centre XXXXX, or call toll-free at 1-800-959-8287. For your convenience, we have enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series, "Goods and Services Tax Rulings", which explains the conditions under which we issue a ruling or an interpretation in respect of the GST/HST.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division

2005/02/10 — RITS 54355 — Supplies of Cannabis