27 March 1997 GST/HST Interpretation HQR0000495 - Definition of Printed Book

Dear XXXXX

Thank you for your letter of January 8, 1997 concerning the application of the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) to your operations.

Interpretation Requested

Effective April 1, 1997 a point-of-sale rebate of the provincial component of the Harmonized Sales Tax (HST) on certain printed books, audio recordings of printed books, and printed religious scripture will be available in the participating provinces (Nova Scotia, New Brunswick, and Newfoundland). Subsection 234(3) of the Excise Tax Act (ETA) and regulations to be made pursuant to that subsection will allow registrants to deduct from their net tax the amount of the point of sale rebates they have provided to customers for supplies of qualifying printed books in the participating provinces. Subsection 259.1(1) of the ETA provides a definition of the term "printed book" that will apply for the purpose of determining whether a product qualifies for the point-of-sale rebate. You have enquired as to whether certain products will be excluded from the definition of a printed book given in subsection 259.1(1) of the (ETA).

Interpretation Given

You ask whether computer books will be excluded from the definition of a printed book in subsection 259.1(1) by reason of the exclusion in paragraph 259.1(1)(f) for, "a warranty book or an owner's manual." A book dealing with the subject of computers will only be excluded from the definition of printed book by paragraph 259.1(1)(f) if it falls within the meaning of the terms warranty book or owner's manual. Neither of these terms are defined in the Excise Tax Act. The ordinary meaning of terms is applicable when the context of the legislation does not require a special meaning to be attached to them.

We consider that a warranty booklet provides information about the terms and conditions of a warranty, such as the extent of the warranty, its duration, the benefits offered, and the procedure for making a claim. A warranty booklet may also describe maintenance procedures which must be carried out in order to keep the warranty in effect and provide a space for notation of a record of each required maintenance procedure once it has taken place.

An owner's manual is a short guide intended to accompany a product at the time of its acquisition and to provide a new user of that product with basic instructions and information necessary for its proper operation such as, a description of its features, how to make it ready for operation, how to care for the product, how to use it and how to recognize and deal with problems. In the context of computer software an owner's manual would typically give information such as:

Hardware and operating system requirements;

How to install the software to the user's computer system;

Instructions on registering and obtaining updates;

Basic instruction about how to use the software;

What to do if problems arise.

Some books on the subject of computers are neither owner's manuals nor warranty booklets and therefore will not be excluded from the definition of a printed book by paragraph 259.1(1)(f).

Please note that paragraph 259.1(1)(p) excludes from the definition of printed book items which are similar to any of the items excluded by paragraphs 259.1(1)(a) to (o). Therefore, a printed book which is similar to a warranty booklet or an owner's manual will also be excluded from the definition of a printed book. We consider an item to be similar to a warranty booklet or an owner's manual if it contains substantially the same information as would be contained in a warranty booklet or an owner's manual. Thus, for example, a book which contains information similar to that noted above but is sold as an option because the actual owner's manual is provided in electronic format (e.g. on CD-ROM) would be excluded from the definition of a printed book, because it is similar to an owner's manual. On the other hand, a printed book which contains all of the information noted above but also goes into much greater detail than the owner's manual does in giving instruction on how to use the software would not be considered to be similar to an owner's manual.

You also asked whether reference books such as car guides, home repair books, almanacs, Guinness books, cookbooks, encyclopedias, dictionaries, wine and cheese guidebooks, books on art or books on astrology or numerology will be excluded from the definition of printed book. There is no specific exclusion for reference books in any of paragraphs (a) to (p) of the subsection 259.1(1) definition of printed book. Hence reference books containing information on the subjects noted above would not be excluded from the definition of a printed book simply because they are reference books. However, reference books on the topics noted above may be excluded if they fall within the definition of one of the items in paragraphs (a) to (p). For example, a car guide containing substantially the same information as an owner's manual would be excluded from the definition of printed book by paragraph 259.1(1)(p).

You have asked how it will be determined whether a printed book is designed primarily for affixing thereto or inserting therein items such as stickers and is therefore excluded from the meaning of printed book by reason of paragraph 259.1(1)(h). The ETA does not provide direction as to what constitutes a "primary purpose" so we must look to the commonly accepted meaning of "primary" which is generally described as, "of the first importance, principal, chief, main, or of the first rank". In the context of determining use or purpose we consider the word "primarily" as meaning more than 50% as determined on a fair and reasonable basis in the context of the particular supply.

In determining whether a product is used "primarily" for one purpose or for another the determination has generally been made on the basis of all of the pertinent factors in the particular case. We consider that the following factors may be relevant in determining whether a printed book is designed primarily for affixing thereto or inserting therein items such as stickers:

1. The purpose as expressed in product descriptions and advertising materials.

A book which is most prominently described as a sticker book in the summary intended to be read by potential buyers (e.g. on the cover or book flap) is much more likely to be considered to be primarily a sticker book than would a book in which stickers are either not mentioned at all or are only given a minor part in the product description.

2. The relative proportion of the book's usable space devoted to stickers and to other purposes.

A book in which stickers will cover most of the usable space with only brief descriptions under each sticker will be more likely to be treated as a sticker book than a book which contains one small sticker at the beginning of each chapter.

3. Whether the book without the stickers would serve a useful purpose.

A book in which the text consists solely of commentary on the stickers that is irrelevant without the stickers being available to look at is more likely to be considered a sticker book than a book containing text that provides useful information independent of the stickers.

It is not possible to give a definitive analysis in the absence of a detailed description of a particular product, since, in any particular case, some or all of these factors may or may not be relevant or may have different relative weight. Other factors not mentioned here may also have to be considered. The determination as to whether a printed book is designed primarily for affixing thereto or inserting therein items such as stickers should based on all of the facts relevant to a specific product (i.e. will be made on a case-by-case basis.)

You have asked whether a number of products which consist of a printed book and another item or items which are sold together for a single price will fall within the definition of a printed book. The examples you give are:

1) a book on how to use a calculator sold with a calculator;

2) a book on a fairy tale character sold with a necklace;

3) Several books sold in a cardboard case together with stuffed animals;

4) a book about animals with an incorporated electronic panel which makes animal sounds when buttons on the panel are pressed.

In many circumstances an item which consists of a book and another product packaged together and sold for a single price will be considered a new product that does not fall within the definition of a printed book. For example, the Tariff Board of Canada decided that a combined product consisting of a book sold together with a record in an attached sleeve did not qualify for an exemption from Federal Sales Tax available for printed books because the combined product was not a printed book.

In the event that a printed book and another item packaged together are considered to be two separate supplies rather than a single supply of a new product, it is necessary to determine whether supply of the other item is incidental to the printed book supply or whether the supply of the printed book is incidental to the other item supply. If the supply of the other item is incidental to the supply of the printed book then the entire product will be considered to be a printed book. Conversely, if the printed book supply is incidental to the supply of the other item, then no part of the supply will be considered to be that of a printed book. Draft policy statement P-077 "Single and Multiple Supplies" and policy statements P-160: "Meaning of the Phrase Where a Particular Property or Service is Supplied Together with any other Property or Service" and P-159: "Meaning of the Phrase 'Reasonably Regarded as Incidental'" set out factors relevant to the consideration of whether one supply is incidental to another. We have enclosed copies of Draft Policy Statement P-077 and Policy Statements P-160 and P-159 for your reference.

In the event that a printed book and another item are considered to be two supplies, rather than a single supply of a new item, and neither supply is considered to be incidental to the other, then it will be necessary to allocate the consideration between the part attributable to the book and the part attributable to the other item. Only the part attributable to the printed book will be eligible for the rebate applicable to printed books.

One of the examples you give of a combined product is that of a printed book together with an audio recording of the book. The provisions relating to rebates for printed books also provide a rebate for an audio recording all or substantially all of which is a spoken reading of a printed book. We consider all of substantially all to mean 90% or more. Therefore, if 90% or more of the content of the tape is a spoken reading of a printed book, then the tape and book packaged together will qualify for the rebate. However, if more than 10% of the tape contains songs or other material which is not a reading from a printed book, then the tape will not qualify and you would need to determine whether the combined items are a new product, two independent supplies or supplies one of which is incidental to the other.

You have asked whether children's books made from materials other than paper, such as cloth or plastic, would fall within the definition of a printed book. A printed book can be made of cloth or plastic provided the product is printed and is a book. A child's story book in which the printing is on sheets of plastic bound together in the form of a book would fall within the definition. On the other hand, a product composed of a number of sheets of cloth bound together having only embroidered cloth badges sewn onto the sheets would not be qualify as a printed book because it is not printed. Conversely, a child's story printed on a continuous plastic roll which is designed to be inserted in a device which advances the roll on the turning of a crank would not fall within the definition of printed book because it is not a book, although the words and pictures are reproduced by means of printing. We consider that the word "book" as used in section 259.1 should be interpreted in accordance with its ordinary meaning. Common dictionary definitions of the term "book" indicate that the essence of a book is a number of sheets fastened together in some way, and that the nature of the fastening, i.e., by staple, hardcover or binding, is not determinative of the issue. A continuous plastic roll does not consist of a number of sheets fastened together and therefore is not a book.

Your final question is whether books with very little literary content such as books with 3-D images and baby books with many pictures and few words can be considered to be printed books. Printed books may contain printed words, printed pictures, diagrams, symbols, or other visual aids, including music and Braille. Therefore a book containing printed words and images or even one containing only printed images is a printed book.

In all cases, when determining whether a product is a printed book which qualifies for the rebate, it is necessary to first determine whether the product is a book and is printed according to the ordinary meaning of these words and second to determine whether the product is removed from the definition of printed book by any of the exclusions listed in paragraphs 259.1(1) (a) to (p) of the ETA.

As was noted earlier in this letter, it is not possible to give a definitive analysis of whether a given product is a printed book that qualifies for the rebate without a sample or a detailed description of the product, since, in any particular case, some or all of the factors noted in this letter may or may not be relevant or may have different relative weight. Other factors not mentioned here may also have to be considered. The determination as to whether a specific product is a printed book qualifying for the rebate should be based on all of the facts relevant to that specific product (i.e. will be made on a case-by-case basis).

If you require further written assistance in determining whether any particular product which you supply qualifies for the rebate applicable to printed books you can request an interpretation or ruling. For example, you could request a ruling as to whether a combined product is a printed book. The procedures for requesting interpretations and rulings are set out in GST Memoranda Series (1.4). You should include detailed product descriptions or samples with your request.

The foregoing comments represent our general views with respect to the subject matter of your letter. These comments are not rulings and, in accordance with the guidelines set out in GST Memoranda Series (1.4), do not bind the Department with respect to a particular situation.

For your convenience, find enclosed, a copy of GST Memoranda Series (1.4). If you need additional information, please feel free to contact us again.

Yours truly,

Mark Sylvest
Rulings and Interpretations Officer