10 November 2006 GST/HST Ruling 76978 - Contracted Services to Care Facilities

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 supplies of publications with CDs by XXXXX ("the Company").

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Our understanding of the facts, based on your letters XXXXX and our telephone conversation XXXXX is as follows:

1. The Company is a XXXXX that sells books to commercial and retail customers.

2. You have noticed that some of the technical publications that the Company sells are now including supplemental information in the form of a CD. Examples include XXXXX.

3. You have provided information on three example publications sold with CDs.

4. The first publication is XXXXX("Product A"). XXXXX.

5. The following description of Product A and the included CD is XXXXX:

XXXXX.

6. The second publication is XXXXX ("Product B"). Product B is published by XXXXX.

7. The third publication is XXXXX ("Product C"). Product C is published by the XXXXX.

8. XXXXX

XXXXX

•   XXXXX.

Ruling Requested

You would like to know whether books that include supplemental CDs, such as Products A, B, and C, are subject to the full HST when sold in XXXXX participating provinces.

On October 6, 2006, the Department of Finance announced proposed amendments to the Deduction for Provincial Rebate (GST/HST) Regulations under the ETA to facilitate the expanded application of the point-of-sale rebate on printed books. These amendments have not yet been enacted. As stated in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, we are unable to issue a ruling with respect to proposed legislation. However, we are pleased to provide the following interpretation.

Interpretation Given

The governments of Nova Scotia, New Brunswick, and Newfoundland and Labrador ("the participating provinces") provide a point-of-sale rebate of the 8% provincial component of the HST to all purchasers of printed books and other qualifying property. Qualifying property includes printed books and updates of printed books, audio recordings all or substantially all of which is a spoken reading of a printed book, and bound or unbound printed versions of scripture of any religion. The term "printed book" does not include electronic versions of books or printed books packaged together with CD-ROMs.

As recently announced by the governments of the participating provinces, the rebate is being expanded to include a new category of qualifying property, called composite property. This change applies to sales made on or after September 1, 2006. More information on this change can be found in the enclosed GST/HST Technical Information Bulletin B-094, Amendments to the Point-of-Sale Rebate for Printed Books.

Composite property consists of a printed book and a read-only medium (and/or a right to access a website under certain conditions) that is wrapped, packaged or prepared for sale as a single product. A read-only medium is a tangible medium that is designed for the read-only storage of information and other material in digital format.

Composite property is eligible for the point-of-sale rebate under two situations:

•   A printed book and a read-only medium sold together as a single product qualifies for the rebate if all or substantially all of the value of the material on the read-only medium is reasonably attributable to

–   a reproduction of the printed book, and/or

–   material that makes specific reference to the printed book and its content, and that supplements and is integrated with that content.

•   A printed book and a read-only medium and/or the right to access a website sold together as a single product qualifies for the rebate when the product is specially designed for use by students enrolled in a qualifying course ^[iv]footnote 1 and the read-only medium and/or website contain material that is related to the subject matter of the printed book.

There is no indication that the publications sold by the Company would meet the condition of being specially designed for use by students enrolled in a qualifying course, and thus they cannot meet the second situation. If the publications meet the first situation, then they are composite property and eligible for the point-of-sale rebate.

Under the first situation, all or substantially all of the material on the read-only medium must be either (i) a reproduction of the printed book or (ii) material that supplements and is integrated with the printed book and its content. Material on the read-only medium that does not make specific reference to the printed book and its content would not meet the second of these conditions. As well, the printed book must be the primary component of the package, and the material on the read-only medium must be supplementary to it.

The CD included with Product A includes the same information as the printed publication. Product A would meet the definition of composite property since the printed publication and the CD are sold together as a single product and all or substantially all of the value of the material on the CD is attributable to the reproduction of the printed publication or to material that makes specific reference to the printed publication and its content, and that supplements and is integrated with that content.

The CD-ROM included with Product B is XXXXX of the information provided in the printed publication. As such, it contains information that makes specific reference to the printed publication and its content, and that supplements and is integrated with that content. Product B would meet the definition of composite property since the printed publication and the CD-ROM are sold together as a single product and all or substantially all of the value of the material on the CD-ROM is attributable to the reproduction of the printed publication or to material that makes specific reference to the printed publication and its content, and that supplements and is integrated with that content.

Product C would not meet the definition of composite property since the CD-ROM is not supplementary to the printed publication. The CD-ROM contains more information than the printed publication, and the publisher indicates that the publication is not complete without both the printed component and the CD-ROM component.

Therefore, Products A and B will be eligible for the point-of-sale rebate of the 8% provincial component of the HST when sold in a participating province on or after September 1, 2006. The Company only has to collect the 6% federal component of the HST on supplies of Products A and B. Product C does not meet the definition of composite property, and will not be eligible for the point-of-sale rebate. The Company will have to collect the full 14% HST on supplies of Product C made in a participating province.

The foregoing comments represent our general views with respect to the proposed amendments to the Excise Tax Act as they relate to the subject matter of your request. Any change to the wording of these proposed amendments or any future proposed amendments to the ETA, 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 GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8253.

Yours truly,

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

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