21 September 2001 GST/HST Interpretation 33447 - Internet Services

Dear XXXXX:

Thank you for your letters of November 2, 2000 and June 29, 2001 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of your client. Your request has been transferred from the XXXXX to the Border Issues Unit of the General Operations and Border Issues Division for response. We regret the delay in responding.

We understand that you represent a company that provides Web Hosting and Domain Name Registration. The company is based in XXXXX and pays to lease computer equipment that is located in the United States. The company charges its customers a monthly or annual fee for hosting individual domain sites. In addition the company charges a fee for the initial registration of a specific Domain name. To register a domain name, a customer is asked for various contact and technical information that makes up the registration, the company keeps records of the contact information and submits the technical information to a central directory known as the "registry." When the company registers a domain name, there is no indication of any rights or property being transferred by the company to the customer. The company has clients worldwide.

In accordance with GST/HST Memoranda Series Section 1.4, an application ruling can only be issued with reference to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and only where the taxpayer has presented all of the relevant facts, such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. I am pleased to issue you an interpretation which will elaborate on how the GST/HST applies to the supplies described in your letter.

Interpretation

You wish to know the tax status of the supplies of Web Hosting and Domain Name Registration, as described above.

Interpretation Given

Based on the information provided we offer the following interpretation:

The supplies related to web Hosting and Domain Name Registration as described are both considered to be supplies of services for GST/HST purposes. Pursuant to paragraph 142(1)(g) of the Excise Tax Act (the Act), a supply of a service is deemed to be made in Canada if the service is performed in whole or in part in Canada. A supply of a service made in Canada, is taxable for GST/HST purposes at the rate of 7% (15% where the supply is made in a participating province: Nova Scotia, New Brunswick, or Newfoundland) unless the supply is zero-rated.

Section 7 of Part V of Schedule VI to the Act zero-rates a supply of a service when made to a non-resident person provided none of the exclusions of the provision apply. For example, the supply of a service to a non-resident is zero-rated provided it is not rendered to an individual while that individual is in Canada or made to an individual who is in Canada at any time when the individual has contact with the supplier in relation to the supply. It is the supplier's responsibility to verify that the recipient is a non-resident and to ensure that all of the remaining zero-rating criteria are satisfied. A service of Web Hosting or a service of Domain Name Registration supplied to a non-resident qualifies for zero-rating under this provision. For your information, we have enclosed GST/HST Memoranda Series Chapter 4.5.1 Exports - Determining Residence Status. Appendix A of this Memorandum describes the documentation that Canada Customs and Revenue Agency (CCRA) will generally accept as proof that the recipient is not resident in Canada. Also included is GST/HST Memoranda Series Chapter 4.5.3, Exports - Services and Intellectual Property.

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.

Finally, in your letter of June 29, 2001, you mentioned that you would like to be informed about the CCRA's policy with regards to previously filed returns, in the event that the information being provided is contrary to the way your client is currently collecting GST/HST. For your information please find attached copies of section 1.4 of Chapter 1 and section 3.1 of Chapter 3 of the GST/HST Memoranda Series. These memoranda contain guidance on CCRA policies concerning the above subject.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-5124.

Yours truly,

Gabrielle Nadeau
Border Issues Unit
General Operation and Border Issues Division
Excise and GST/HST Rulings Directorate