17 January 2000 GST/HST Interpretation HQR0001948 - Books Exported from the

Dear XXXXX

This refers to your facsimile of September 7, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to children's books being imported into Canada from the XXXXX[.]

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency.

The following facts were presented in your letter:

1. The XXXXX is a registered educational charity but is not registered for the GST/HST.

2. The XXXXX publishes a range of books and posters on XXXXX for use by pupils and teachers.

3. The XXXXX exports children's books from the XXXXX to Canada

Interpretation Requested

You have requested the Canada Customs and Revenue Agency (CCRA) to clarify whether children's books are subject to GST at 7%.

Interpretation Given

Every person, whether that person is a resident of Canada or not, who, either through an employee or agent, or by means of advertising directed at the Canadian market, solicits orders for, or offers to supply prescribed publications, to be sent by mail or courier to a person at an address in Canada, is considered to be carrying on business in Canada and is required to be registered for the purposes of the GST/HST. Furthermore, in order to register the person must be other than a small supplier, meaning that the person's worldwide taxable sales must be in excess of $30,000.

The Publications Supplied by a Non-Resident Registrant (GST/HST) Regulations and the proposed amendments to those Regulations, effective November 26, 1997, define prescribed property for the purposes of section 143.1 of the Excise Tax Act ("the Act").

The proposed amendment to the title of the Regulations, Publications Supplied by a Registrant (GST/HST) Regulations, effective January 1, 1993, states that prescribed publications include:

(a) a book, newspaper, periodical, magazine and any similar printed publication, other than a publication included in Section 1 of Schedule VII to the Act; and

(b) an audio recording that relates to a publication included in (a) above and that accompanies the publication when it is submitted to the Canada Post Corporation or a customs officer.

It should be noted that audio cassettes are not considered to be prescribed publications and by themselves do not qualify for non-taxable importation. However, whenever an audio cassette accompanies a book, the entire package is considered to be a prescribed publication.

Under the provisions of section 143.1 of the Act, a supply of prescribed tangible personal property is deemed to be made in Canada, if the property is supplied by a person who is registered for the GST, provided the property is sent by mail or courier, to the recipient of the supply at an address in Canada. Therefore, if you qualify to register for the GST/HST, there is provision in the Act for you, as a non-resident to collect the GST/HST from the recipient of the supply and submit the GST/HST to the Government of Canada. When the books are imported into Canada, the recipient of the supply is not liable to the GST/HST at the time of importation.

If you do not qualify to be registered, the recipient of the books will be liable for the GST at a rate of 7% on the value of the books, at the time of importation, provided the value of the books is more than $20.00. Books, valued at not more than $20.00, sent to the recipient of the books, by mail or courier, are not subject to the GST at time of importation. If the recipient is resident in a participating province, the recipient is liable for an additional tax on the value of the goods calculated at the tax rate for that province. Goods that are imported for sale or for any other commercial, industrial, occupational, institutional or other like use are only subject to the GST.

Effective for acquisitions or importations made on or after October 24, 1996, a full rebate of the GST paid is available on purchases of printed books, audio recordings of printed books, bound or unbound printed versions of religious scripture and subscriptions to periodicals containing less than 5% advertising. The rebate is available to certain specified persons, including municipalities, school authorities, universities, public colleges, charities and qualifying non-profit organizations that operate public lending libraries, and prescribed charities and qualifying non-profit organizations whose primary purpose is the promotion of literacy.

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%. To the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

Also effective April 1, 1997, the governments of Nova Scotia, New Brunswick, and Newfoundland, and Labrador implemented a full rebate of the provincial component of the HST, known as a point-of-sale rebate, at the time of acquisition on supplies of:

•   most printed books or updates of such books

•   audio recordings, all of substantially all of which are spoken reading of printed books, or

•   bound or unbound printed versions of scriptures of any religion.

Thus, all suppliers, including publishers, wholesalers, distributors, and retailers need to collect only the 7% federal component of the HST on sales of qualifying books when they are sold in, or are imported or otherwise brought into a participating province. In effect, the supplier is paying or crediting a rebate to the purchaser when qualifying goods are purchased.

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, by telephone, at (613) 952-6743 or, by facsimile, at (613) 990-1233.

Yours truly,

Cheryl R. Leyton
Border issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate