15 February 1999 GST/HST Interpretation HQR0000648 - Supplies of Internet Services to Indians

Dear XXXXX

Thank you for your fax transmission of April 17, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations. We apologize for the delay in responding to your query.

Interpretation Requested

We understand that XXXXX is an Internet Service provider. Internet services are provided via telephone lines and generally a customer would receive this service by connecting their computer to the telephone line in their home. However, Internet service is not specifically required to be delivered to a particular address as the userid and password for connecting a computer could be used from any area.

You are questioning whether, and under what circumstances, you can provide Internet services to Indian individuals relieved of GST/HST.

Interpretation Given

Revenue Canada's administrative policy concerning the application of tax to purchases by Indians and Indian bands is summarized in Technical Information Bulletin [B-]039R GST Administrative Policy: Application of GST to Indians (TIB039R). The treatment of purchases by Indians under the GST/HST is consistent with the Indian Act under which the personal property of an Indian or an Indian band situated on a reserve and their interests in reserve lands are not subject to tax. TIB039R is enclosed for your reference.

Under subsection 123(1) of the Excise Tax Act, a "telecommunication service" includes the making available for such emission, transmission, or reception telecommunication facilities of a person who carries on the business of supplying the services 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. Therefore, providing access to the internet is considered a supply of a telecommunication service. As a service, the provision of access to the internet to an Indian individual will be relieved of tax if the supply is provided at a location on a reserve.

The location where internet access is provided will be considered to be on reserve when the Indian individual who is the recipient of the supply is ordinarily located on a reserve when accessing the internet. However, if you do not maintain sufficient information to determine the location of the user and it is not your usual business practice to obtain information sufficient to determine the location of the user, the location of the supply will be considered to be on a reserve if the address of the Indian individual who is recipient of the supply is on reserve.

You must maintain adequate documentation that the supply of the service was made to an Indian, as registered under the Indian Act. Revenue Canada will accept as adequate evidence a notation on the invoice or other sales document which is retained by the vendor, of the nine or ten digit registry number or the band name and family number (commonly referred to as the band number/treaty number).

Although your letter did not specifically identify this issue, we would point out that the supply of a service to an Indian band or band empowered entity may be relieved of tax when the service is acquired, on or off reserve, by the band or band empowered entity for band management activities and a certificate attesting to this fact is provided to the supplier. The supplier must maintain a copy of the certificate as documentary evidence. TIB039R provides more information concerning this matter, including the form of the certificate to be provided.

When a supply of a service is provided to an Indian, Indian band or band empowered entity under circumstances where the supply is relieved of tax, the result is that the supplier does not collect the amount of tax due. This treatment does not change the tax status of the supply provided. The supplier continues to be eligible for input tax credits to the extent that goods and services are acquired for use or consumption in its commercial activities.

In the circumstances where the conditions for tax relief are not met, tax on the service of internet access must be collected at the rate of either 7% or 15%. On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%.

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.

Should you require clarification on the above matter, please contact me at (613) 954-7954.

Yours truly,

S. Leclaire
Educational Services and Indians
GST/HST Rulings and Interpretations Directorate