|
XXXXX
|
File# 11680-1(mr)
XXXXX HQR0000484
XXXXX Sch. IX, Part VIII, s. 2
XXXXX S. 144.1
|
April 1, 1997
Dear XXXXX
This refers to your letter of December 16, 1996, and our telephone conversations of February 13, 1997 and, March 7, 1997, in which you requested a Harmonized Sales Tax (HST) interpretation concerning the application of the HST on telecommunication services.
You have requested answers to the following questions:
1. Which provinces are participating in the HST and when is the implementation date?
2. Will the 2 out of 3 rule for telecommunication services be used for HST purposes? i.e., if two of the following are in the same province: point of emission, point of termination and billing location.
3. Will HST apply to telecommunication services where all three provinces are different?
4. Will HST apply to supplies of telecommunication services which straddle the implementation date of April 1, 1997? XXXXX
5. Will there be an HST exemption for telephone calls which are less than or equal to 25 cents?
6. Will there be an HST exemption for the 1-800 numbers similar to N.B. PST which allows this exemption?
7. Will P.E.I. residents be subject to both HST and PST on telecommunication services? (PST is payable by all P.E.I. residents on telecommunication services)
1. The term "Participating provinces" is defined in proposed subsection 123(1) as a province or area referred to in Schedule VIII, but does not include the Nova Scotia offshore area or the Newfoundland offshore area except to the extent that offshore activities are carried on in that area. The participating provinces are listed in Schedule VIII as Nova Scotia, New Brunswick, Newfoundland, the Nova Scotia offshore area and the Newfoundland offshore area. The proposed implementation date for HST is April 1, 1997.
2. The proposed definition for "telecommunication service" in subsection 123(1) reads as follows:
a) the service of emitting, transmitting or receiving signs, signals, writing, images or sounds or intelligence of any nature by wire, cable, radio, optical or other electromagnetic system, or by any similar technical system, or
b) making available for such emission, transmission or reception telecommunication facilities of a person who carries on the business of supplying services referred to in paragraph (a).
"Telecommunication facility" is defined in proposed subsection 123(1) as any facility, apparatus or other thing including any wire, cable, radio, optical or other electromagnetic system, or any similar technical system, or any part thereof that is used or is capable of being used for telecommunications.
First it must be determined if a supply is made in Canada according to subsection 142.1(2) which applies after April 23, 1996. If a supply is deemed to be made in Canada under subsection 142.1(2), then GST applies at the rate of 7%. Second it must then be determined if this supply is made in a participating province.
The proposed place of supply rules for HST are found in section 144.1 which states that for HST purposes, a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province, but is deemed to be made outside the province in any other case and a supply made in Canada that is not made in any participating province is deemed to be made in a non-participating province.
According to proposed section 2 of Part VIII of Schedule IX, a supply of a telecommunication service (other than a telecommunications channel) is made in a province if:
(a) in the case of a telecommunication service of making telecommunications facilities available:
(i) all of those facilities are ordinarily located in the province, or
(ii) where not all of those telecommunications facilities are ordinarily located in the province, the invoice for the supply of the service is sent to an address in the province; and
(b) in any other case,
(i) the telecommunication is emitted and received in the province,
(ii) the telecommunication is emitted or received in the province and the billing location for the service is in the province, or
(iii) the telecommunication is emitted in the province and is received outside the province and the billing location for the service is not in a province in which the telecommunication is emitted or received.
Therefore, the 2 out of 3 rule applies for HST purposes if your customers fall under paragraph 2(b) of Part VIII of Schedule IX as follows:
A supply is considered to be made in a province when the telecommunication is both emitted and received in that province. Also, a supply is considered to be made in a province when the telecommunication is either emitted or received in the province and the billing location for the supply is in that province.
3. Finally, the supply is considered to be made in a province if the telecommunication is emitted in the province and is received in another province and the billing location for the supply is not in a province in which the telecommunication is emitted or received. (i.e., all three provinces are different)
4. Proposed subsection 352(5) addresses the situation where services are supplied on a continuous basis by means of a wire, pipeline or other conduit. This would include supplies of telephone services. This proposed subsection provides a general prorating rule for continuous supplies of services made in a participating province and straddling the HST start-up date (April 1, 1997) where the consideration for the supply becomes due or is paid before August 1, 1997. The provincial component of the HST will not apply to property or services to the extent they are delivered or rendered before April 1, 1997.
Proposed subsection 352(6) provides that where the consideration for a continuous supply made in a participating province is neither paid nor becomes due until after July 1997, the provincial component of the HST is payable in respect of that consideration regardless of when the service is performed or made available.
5. Under subsection 165.1(1), where the consideration for a supply of a telecommunication service is paid by depositing coins in a coin-operated telephone, the HST payable is zero where the amount deposited for the supply does not exceed 25 cents. In any other case when coins are deposited in a coin-operated telephone, the HST is calculated as 15 per cent of the amount deposited but where the resulting product is XXXXX a multiple of 5 cents and a fraction of 5 cents, the product is rounded to the nearest 5 cents.
6. There are no HST exemptions for 1-800 numbers under the Excise Tax Act.
7. Also, the 2 out of 3 rule applies in all provinces. i.e., there are no exceptions for residents of P.E.I.
The foregoing comments represent our general views with respect to the subject matter of your letter. Unannounced proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in S 1.4 of the GST Memoranda Series do not bind the department with respect to a particular situation.
We can not add your name to a mailing list concerning the application of GST and HST to telecommunication services as there is none available. All registrants will receive the Excise News and other Revenue Canada publications. Changes to the Excise Tax Act are announced in the budget, media etc. If you need additional information or publications, please contact your local Tax Services Offices at XXXXX Revenue Canada will not transmit client information and documentation by facsimile transmission (fax) to the requester or anyone else who requested the ruling or interpretation. This policy applies even in cases where the requester authorizes Revenue Canada to forward the material by facsimile.
Should you require further clarification concerning the above, please feel free to contact me at (613) 952-0419.
Michèle Routhier
Policy Officer
Border Issues
General Operations and Border Issues Division
GST Rulings and Interpretations
Policy and Legislation Branch
Email this Content