23 May 2006 GST/HST Ruling 50777 - Reconsideration of GST/HST Application "Arranging for" financial services

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:

The following is in response to the facsimile XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of information on compact discs. We apologize for the delay in responding to your request.

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

Statement of Facts

Our understanding of the facts from the information supplied in the facsimile transmissions and our telephone conversations is as follows:

1. The XXXXX is a registered charity within the meaning of subsection 248(1) of the Income Tax Act and therefore a charity for purposes of the GST/HST under subsection 123(1).

2. The XXXXX is not registered for purposes of the GST/HST.

3. As part of its mandate, the XXXXX created a XXXXX resource of information on XXXXX.

4. The XXXXX maintains a Web site of the XXXXX information it gathered, including: statistics, environmental related articles, and geographic maps. There is also a bi-annual magazine with various articles related to XXXXX. This information is available at no charge to persons who access the site.

5. The XXXXX occasionally receives requests from the federal and provincial governments and other organizations for specialized information XXXXX.

6. According to the client's request, the XXXXX supplies information files containing resource material extracted from existing data XXXXX, which are re-worked and analyzed.

7. This information is delivered on compact disc (CD) and normally stored in XXXXX.

8. The information is not readily available from the XXXXX Web site.

9. There are no intellectual or property rights provided with these information files.

10. The XXXXX is charging for the supply of these specialized information files in an effort to recover costs for time spent on the analysis and configuration of the information.

Ruling Requested

Are the supplies made in Canada by XXXXX to the federal and provincial governments and other organizations resident in Canada, of specialized XXXXX files on compact disc which contain information, analysis and data prepared by XXXXX according to client specifications, subject to the GST/HST?

Ruling Given

Based on facts as set out above, we rule that the supplies made in Canada by XXXXX to the federal and provincial governments and other organizations resident in Canada, of the specialized XXXXX files on compact disc which contain information, analysis and data prepared by XXXXX according to client specifications, are the supply of a service and are exempt of the GST/HST under section 1 of Part V.1 of Schedule V.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Determining whether a supply is one of property or a service is important as it affects the application of the GST/HST. Subsection 123(1) of the ETA defines the term "property" to mean any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money. In contrast, subsection 123(1) of the ETA defines the term "service", in part, to mean anything other than property and money.

The enclosed technical I[nformation] Bulletin B-090, GST/HST and Electronic Commerce (TIB) outlines the Canada Revenue Agency's (CRA) policies in respect of transactions made by electronic means. A supply made by electronic means is characterized as either a supply of a service or of intangible personal property. The TIB outlines three factors that are considered to indicate a supply made by electronic means is a service:

•   the supply does not include the provision of rights (e.g., technical know-how) or if there is a provision of rights, the rights are incidental to the supply;

•   the supply involves specific work that is performed by a person for a specific customer; and

•   there is human involvement in making the supply.

The supply of data files by XXXXX involves an individual from XXXXX manipulating information from existing data and performing some analysis work. The information is specific to the customer's request XXXXX. There are no rights attached to the supply of the information and it is supplied on a CD to the client. The creation of these types of data files according to customer specifications would therefore be the supply of a service.

Generally, supplies of property and services made by a charity in Canada are exempt of the GST/HST under section 1 of Part V.1 of Schedule V, unless such supplies are excluded under paragraphs 1(a) through (n). As a charity, the supply made in Canada by XXXXX of the service as described above qualifies for exemption under the provisions of section 1 of Part V.1 of Schedule V when made to federal and provincial governments and organizations resident in Canada.

However, please note, where a supply of a service is made to a non-resident person, the supply may be zero-rated (subject to the GST at the rate of 0%) under the export provisions of section 7 of Part V of Schedule VI as an exported supply. Zero-rated supplies in Schedule VI are specifically excluded from the provision for charities under section 1 of Part V.1 of Schedule V.

The CRA Web site (www.cra-arc.gc.ca) contains other publications with more information on the application of the GST/HST to property and services supplied by charities and non-profit organizations. You may wish to refer to the Guide GST/HST Information for Charities.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0420.

Yours truly,

Debra Murphy
Charities, Non-Profit Organizations and Educational Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/05/02 — RITS 77423 — Tax Status of XXXXX Cochlear Implant System