5 February 1999 GST/HST Interpretation HQR0001517 - The Meaning of "Printed Book" and "Audio Recording" for the Purpose of Section 259.1 of the Excise Tax Act

Dear XXXXX

Thank you for your facsimile of November 19, 1998, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to "electronic books" in the context of section 259.1 of the Excise Tax Act.

Interpretation Requested

You have posed the following three questions concerning the application of section 259.1.

1) Do CD-ROMs (i.e., "electronic books") come within the meaning of "printed book" or "audio recording" for the purposes of subsections 259.1(1) and (2) of the Excise Tax Act?

2) If CD-ROMs (i.e., "electronic books") do not clearly come within the meaning of "printed book" or "audio recording" for the purpose of these subsections, is there an administrative policy to include them?

3) Is Revenue Canada considering an amendment to section 259.1 to make CD-ROMs (i.e., "electronic books") eligible for the rebate?

For the purpose of our response, we will assume as fact that all CD-ROMs contain textual, auditory, and visual information, and that none contain only auditory information. We will also assume as fact that all audio compact discs ("CDs") contain only auditory information.

Interpretation Given

1) Do CD-ROMs (i.e., "electronic books") come within the meaning of "printed book" or "audio recording" for the purposes of subsections 259.1(1) and (2) of the Excise Tax Act?

It is the Department's position that, in the context of section 259.1, "printed book" should be construed according to its ordinary meaning. A "book" is essentially a number of sheets fastened together in some way, whether by staple, hardcover, or binding. A "printed book" is a book which contains printed words, pictures, diagrams, symbols or other visual aids, including music and Braille. Based on this interpretation, a CD-ROM is not a printed book for the purpose of section 259.1.

"Audio recording" should also be construed according to its ordinary meaning. A "recording" is essentially a trace of information made on a medium. An "audio recording" is a recording of audible information (i.e., information perceived by the ear). Since CD-ROMs contain textual, auditory, and visual information, in our view, although they contain an auditory component, they are not merely audio recordings. CDs, on the other hand, contain nothing but auditory information, and therefore, all CDs are audio recordings. Thus, although all CDs are audio recordings for the purpose of section 259.1, CD-ROMs are not.

Note that section 259.1 does not apply to just any audio recording. It applies only to those in which all or substantially all (generally, 90% or more) of the recording is a spoken reading of a printed book.

2) If CD-ROMs (i.e., "electronic books") do not clearly come within the meaning of "printed book" or "audio recording" for the purpose of these subsections, is there an administrative policy to include them?

There is no administrative policy which would result in CD-ROMs being regarded as either "printed books" or "audio recordings" for the purpose of section 259.1.

3) Is Revenue Canada considering an amendment to section 259.1 to make CD-ROMs (i.e., "electronic books") eligible for the rebate?

The authority to amend the Excise Tax Act rests with the Department of Finance. We have been advised that no such amendment is contemplated at this time.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (403) 231-4104.

Yours truly,

John Smith
Goods Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate