1 October 1996 GST/HST Interpretation 11640-3[9] - Application of the GST to Telemarketing Services Supplied by a Non-resident Corporation

I refer to XXXXX memorandum dated August 19, 1996, concerning the application of the Goods and Services Tax (GST) to services supplied to the above-referenced firm. XXXXX requested a review of his proposed interpretation letter to XXXXX I understand that:

•   XXXXX is a non-resident corporation incorporated in XXXXX[.]

•   XXXXX provides XXXXX services on behalf of XXXXX throughout XXXXX[.]

•   XXXXX contracts with a Canadian company, XXXXX located in XXXXX, to provide telemarketing services.

•   These telemarketing services consist of XXXXX contacting people throughout XXXXX to solicit orders for XXXXX[.] When telemarketing calls are successful, they are relayed to the appropriate office in XXXXX and the applicable XXXXX is carried out by the operator responsible for that market.

•   When XXXXX invoices XXXXX for the supply of the telemarketing services, the totals are shown in XXXXX XXXXX pays for these services in XXXXX[.]

•   Although XXXXX has an administrative office in XXXXX all the services are performed in XXXXX and all revenue is generated in XXXXX[.] Before determining if the telemarketing services supplied by XXXXX to XXXXX are subject to the GST, a determination must first be made as to the residency status of XXXXX[.] As XXXXX is incorporated in XXXXX would not be deemed, under the provisions of paragraph 132(1)(a) of the Excise Tax Act (Act), to be resident in Canada. Although XXXXX does have an administrative office in XXXXX is not making any supplies through that office. The XXXXX office is, therefore, not a permanent establishment of XXXXX[.] As XXXXX does not have a permanent establishment in Canada, XXXXX would not be deemed under the provisions of subsection 132(2) to be resident in Canada. For GST purposes, XXXXX is considered to be a non-resident.

XXXXX is providing a service of soliciting orders for supplies of XXXXX services to be performed by XXXXX in XXXXX[.] Under the provisions of paragraph 142(2)(g) of the Act, XXXXX XXXXX services would be deemed to be made outside Canada. Therefore, I agree with XXXXX decision that because of the proposed amendment to Schedule VI, Part V, section 5 to the Act contained in the Notice of Ways and Means Motion dated April 23, 1996, the telemarketing services supplied by XXXXX to XXXXX (a non-resident) qualify for zero-rating.

I would also like to mention that, prior to April 24, 1996 (the effective date of the proposed amendment to Schedule VI, Part V, paragraph 7(f) of the Act contained in the Notice of Ways and Means Motion dated April 23, 1996), the telemarketing services could have qualified for zero-rating under the provisions of Schedule VI, Part V, section 7. I would suggest that this point also be included in XXXXX letter to XXXXX[.] I will be contacting XXXXX and requesting that the interpretation letter dated March 6, 1996, written to XXXXX be amended.

Please contact me at (613) 952-6743 if you require further information.

Garry L. Ryhorchuk
Senior Policy Officer
Border Issues Unit
General Operations and Border Issues Division
GST Rulings and Interpretations
Policy and Legislation Branch