26 July 2000 GST/HST Interpretation 25666 - Website Maintenance Contract

Dear XXXXX:

Thank you for your letter of January 4, 2000 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your particular situation in connection with the website maintenance contract you have with XXXXX ). I apologize for the lateness of this response.

Interpretation Requested

I understand the facts as follows:

-    You have an agreement with XXXXX to supply a website maintenance service and additional graphic design work, from December 1999 to September 2000.

-    The website maintenance includes adding new content, updating old information, deleting irrelevant information, adding new pages and photos, etc. The additional graphic design work is subcontracted out to a third party who will invoice you directly. As such, you would be acquiring the additional design work as an input into your supply to the unregistered non-resident.

-    Most of the work will be performed by you in Canada, where the uploading of the revised website will be made onto your customer's server located in XXXXX.

-    Part of the services supplied by you will be performed abroad.

Interpretation Given

According to the above information, it appears that the agreement between you and the unregistered non-resident provides, in substance, for the supply of a maintenance service in connection with your customer's website (i.e., a programming service), that is considered to be in respect of intangible personal property.

Paragraph 142(1)(g) of the Excise Tax Act (the Act) provides that where a supply of a service (other than a service in relation to real property situated in Canada) is, or is to be, performed in whole or in part in Canada, the supply is deemed to be made in Canada.

As mentioned earlier, substantially all of the services are performed in Canada, therefore, paragraph 142(1)(g) of the Act would apply to deem the supply to be made in Canada, notwithstanding that you will be performing some of the services abroad. As such, the supply would generally be taxable at the full rate of tax either at 7 or 15 percent, depending on where in Canada the service is performed, unless such a supply can be zero-rated (taxed at 0 per cent).

Part V of Schedule VI to the Act, zero-rates, in part, certain supplies of services that are supplied in Canada by a registrant to a non-resident person. More particularly, section 7 of Part V of Schedule VI, which is the general zero-rating provision for services supplied in Canada, would apply under the circumstances 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
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate