February 27, 1997
Dear Sir,
Thank you for your letter of March 21, 1996 (with attachments) concerning the application of the Goods and Services Tax (GST) to the transaction described below.
Our understanding of the facts is as follows:
Statement of Facts:
1) The XXXXX (the Board) is an administrative tribunal and one of its functions is to issue non-exclusive licenses for the use of published works, the copyright owners of which cannot be located.
2) Section 70.7 of the Copyright Act gives the Board the authority to issue a non-exclusive license for the use of published works.
3) A person can apply to obtain a non-exclusive license to use a published work in which the copyright of an unlocatable owner subsists.
4) After reviewing the application, the Board issues a non-exclusive license to the applicant and fixes the amount of royalty.
5) The applicant pays the royalty to a management company, which places the amount in trust in case the copyright owner is located and subsequently claims the royalties.
6) The following is an excerpt from the reasons for the decision that accompanies the licenses: "The Board is of the view that the authority it is given under subsection 70.7(2) of the Copyright Act to establish the terms and conditions of the license allows the use of any means to protect the interests of the unlocatable copyright owners, without placing an inordinate burden on the applicant. By ordering the licensee to pay the royalties fixed in the license directly to a management company, the Board enables the copyright owner to claim his or her royalties directly from the management company. Consequently, the copyright owner can obtain his or her royalties from the management company instead of having to go through the courts. If the copyright owner does not claim the royalties within five years after the license expires, the management company may dispose of the royalties fixed in the license and the accumulated interest as it sees fit for the general benefit of its members. To this end, the Board orders the licensee to pay the amount fixed in the license in trust to XXXXX XXXXX which has informed the Board that it is willing and able to administer this trust."
XXXXX
Question:
You ask whether the applicant is required to pay the GST on the non-exclusive license, and whether the Board or XXXXX is responsible for applying the tax.
Answer:
Based on the facts presented, it is the Department's opinion that the supply of a non-exclusive license, by the Board to the applicant, for the use of published works is exempt. The Board, XXXXX, is authorized under section 70.7 of the Copyright Act to issue this non-exclusive license.
Subsection 20(c) of Part VI of Schedule V states that a license issued by a government, municipality or by a board, commission or other body established by a government is an exempt supply. Therefore no GST has to be collected by the Board.
If the supply of a license was not exempt under the subsection 20(c) of Part VI of Schedule V, the Board would have been responsible for applying the tax.
The foregoing comments represent our general views with respect to the subject matter of your letter. 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 GST Memoranda Series (1.4), do not bind the Department with respect to a particular situation.
For your convenience, find enclosed, copy of GST Memoranda Series (1.4). If you need additional information, please feel free to contact us again.
Yours truly,
Anny Roy LL.B. D.D.N.
Ruling Officer
Public Services Bodies and Government
GST Rulings and Interpretations
| c.c.: |
Manager of Government Unit
Anny Roy
ATIP |
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