27 July 2000 GST/HST Interpretation 25170 - Application of the GST/HST to Marketing Services

Dear XXXXX

Thank you for your Memorandum of May 6, 1999, that you faxed to our XXXXX, in which you requested an interpretation in connection with the application of the Goods and Services Tax (GST), under the Excise Tax Act (the Act). I apologize for the lateness of this response.

Interpretation Requested

You provide marketing services primarily to two non-resident companies, namely XXXXX, of XXXXX (XXXXX who are not registered for GST/HST purposes.

You do not have an agency relationship with either of these non-resident companies, nor do you process orders for their products on their behalf.

The agreement with both XXXXX provides that you will be their marketing manager for North America and undertake to supply the following services:

-    Advertising - Research advertising options, prepare advertisements, reserve advertising space and manage the overall advertising schedule for XXXXX. The advertisements are placed in Canadian and US publications.

-    Promotional Literature - Research, prepare and distribute promotional literature for both XXXXX.

-    Mailouts - Maintain a prospect database for mailout purposes, prepare promotional packages for mailouts and oversee mailouts to addresses throughout North America.

-    Website Maintenance - Maintain XXXXX website and handle e-mail correspondence generated through the website, which is hosted by an internet provider in XXXXX.

In the course of supplying the advertising and promotional services, you acquire inputs from printing companies, graphic service providers and a mailhouse, all of which are located in XXXXX.

You wish to know whether the marketing, advertising and website maintenance services you supply to your non-resident customers qualify as a zero-rated supply.

Interpretation Given

Based on the information provided, I am pleased to provide you with the following interpretation:

Subsection 142(1) of the Act provides that a service (other than a service that is in relation to real property) is deemed to be made in Canada if all or any part of the service is, or is to be, performed in Canada, and is subject to GST at the full rate of 7 per cent, unless, of course, the service is relieved from tax under specific provisions of the Excise Tax Act (the Act).

Part V of Schedule VI to the Act provides for the zero-rating of certain services supplied in Canada to non-resident persons. A zero-rated supply means a taxable supply subject to tax at the rate of 0 per cent.

Section 8 of Part V of Schedule VI to the Act, provides for the zero-rating of a supply of an advertising service performed in Canada when made to an unregistered non-resident.

In supplying a marketing and advertising service a supplier would generally be involved in graphically illustrating to people at large the message that its customer wishes to convey. In other words, the supplier would be creating a message oriented towards soliciting business by any means and disseminated by (through) any means (medium).

Therefore, according to the above information, you would be involved in supplying on the one hand an advertising service that is zero-rated by virtue of section 8 of Part V of Schedule VI to the Act.

On the other hand, your supply of a service of maintaining the non-residents' website on the Internet, which would be similar in nature to deleting old information, re-arranging a webpage by inserting graphics, colours etc., and including new information (i.e., a programming service), is considered by the Canada Customs and Revenue Agency (CCRA) to be a supply of a service in respect of intangible personal property. Accordingly, section 7 of Part V of Schedule VI would apply to zero-rate the supply of the website maintenance service made by you to XXXXX.

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 Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8220.

Yours truly,

Daniel E.B. Chamaillard,
Senior Technical Analyst
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate