File : 11895-1(on)
c.n. 914(REG)
XXXXX April 27, 1995
I refer to the letter of March 22, 1994 from the Corporation of the City of XXXXX . A copy of the letter and a sample advertising agreement were sent to Mr. Neil Minken of Special Sectors by XXXXX of your office. XXXXX requested our input on this case. I apologize for the delay in replying to the request.
On November 30, 1994, Mr. Owen Newell of my office contacted XXXXX in order to clarify certain points. The facts are as follows:
1. XXXXX supplies a specified amount of advertising space in the XXXXX to advertisers who wish to have advertisements displayed in the arena. XXXXX enters into a written agreement with the advertiser.
2. A sample agreement indicates that XXXXX supplies space to advertisers for a two year period. XXXXX charges the advertisers XXXXX at the time the agreement is signed, and XXXXX at the beginning of the second year.
3. Under the terms of the agreement, XXXXX has the right to determine the specific location of the advertisement on the arena boards. The agreement also specifies that the material upon which the advertisement is painted is provided by XXXXX and remains the property of XXXXX is also responsible for regular maintenance of the advertisement.
4. XXXXX has given the exclusive right to sell advertising space in the arena to XXXXX carrying on business as XXXXX . All artwork and painting for advertisements shall be completed by XXXXX The costs of preparation and production by XXXXX is the sole responsibility of the Advertiser.
5. Under the terms of the agreement, all advertisements must be approved by XXXXX before being installed. The advertiser may have the advertisement changed after installation, where all costs shall be paid by the advertiser. Subsequent to installation, where XXXXX feels the advertisement is inappropriate and removes the advertisement, the removal costs shall be borne by XXXXX and a refund shall be paid to the advertiser based on the time remaining in the agreement.
Question:
Is the supply of the advertising space by XXXXX to advertisers a taxable supply of an advertising service or a supply of real property by means of a licence pursuant to subparagraph 25(f)(ii) of Part VI of Schedule V to the Excise Tax Act (the Act)?
Response:
An advertising service, as described in GST-Memorandum 300-3-5 (Exports), is generally considered by the Department to be
(a) a service of creating a message which is oriented towards soliciting business, attracting donations, or calling public attention in the form of an information notice, a political announcement or other similar communication by any means including oral, written, or graphic statements and representations appearing ,
(i) in a newspaper or other publication,
(ii) on radio or television,
(iii) in a notice, handbill, sign, catalogue, or letter, and
(iv) on a billboard or on real property; and
(b) a service directly related to the communication of such message (e.g., air time on a broadcasting service, space in a publication) where,
(i) the communication service is supplied as part of the supply of a message as defined above, or
(ii) the person providing the communication service can demonstrate that, at the time the supply is made, the service is in relation to the supply of a message as defined above.
There are occasions where the person broadcasting or communicating a message, within the meaning as defined above, will differ from the person supplying the message. Generally, the person supplying the broadcast or communication service will be in possession of the message prior to the supply of the service to know that the message is in the nature of advertising.
In these situations, the supply of the broadcast or communication service will be considered to be a supply of an advertising service.
XXXXX is in the service of creating a message. XXXXX is supplying a service directly related to the communication of the message created by XXXXX is also in a position to demonstrate that at the time the supply of the communication service was made, it was aware that the service was in relation to the supply of a message.
It is our view that the supply being made by XXXXX is a supply of an advertising service. The supply of an advertising service by XXXXX is a taxable supply. There are no provisions within the Act to exempt this supply by a municipality.
As stated in the facts, XXXXX has specified the size of the advertisement, the right to determine the specific location of the advertisement in the arena, the design and content of the advertisement and is responsible for maintaining the advertisement. Pursuant to policy statement P-062 dated May 25, 1993, a licence of real property does not normally confer exclusive possession of the property to the licensee but is in the nature of a right or privilege to enter upon and use grantor's land in a certain manner or for a specified purpose. It is a personal right between the licensor and licensee and does not create any estate or interest in the property.
Based on the facts, it is our opinion that XXXXX has not supplied the right to use the arena by means of a licence. Under the terms of the contract, the advertiser requires XXXXX approval on advertisement content; the advertiser has no right in determining where the advertisement is placed in the arena; XXXXX is responsible for the maintenance of the advertisement; and XXXXX is the only person allowed to physically remove the advertisement. These conditions do not indicate that the advertiser has been supplied the right to use the arena.
Should you have any questions or require further assistance please contact Ms. Joanne Houlahan, Manager, MUSH, NPO's and Charities at (613) 954-7945 or Mr. Owen Newell, Policy Officer, Municipalities at (613) 954-4280.
J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations
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