30 March 2001 GST/HST Interpretation 13555 - The Supply of Information Stored on a Web Site

Dear XXXXX:

Thank you for your letter of September 14, 1999 addressed to Mark Muszak concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of a right to access and use information stored on your website. Your request has been transferred from our Toronto Office to the Border Issues Unit of the Excise and GST/HST Rulings Directorate for response.

The following information was taken from your letter and our telephone conversation of March 26, 2001:

•   XXXXX (USCO) is not resident in Canada and is registered for GST/HST purposes.

•   USCO intends to supply the right to access and download the information stored on its web site to clients situated in Canada.

•   The web site is stored on a web server situated outside Canada.

•   The client may subscribe electronically through USCO's web site and make payment using a credit card.

•   Once the subscription information is received and the payment is processed, USCO will send the client a password. The password allows them to access and download the information stored on the web site.

Interpretation Requested

You want to know if you should charge Canadian residents GST/HST and other taxes on the transaction described above.

Interpretation Given

Based on the information provided, we offer the following interpretation:

The supply of the right to access and use existing information or data stored on a web site is generally considered to be a supply of intangible personal property (IPP) for GST/HST purposes. A supply of IPP that may be used in whole or in part in Canada is deemed to be made in Canada pursuant to subparagraph 142(1)(c)(i) of the Excise Tax Act (the "Act"). Subsection 143(1) of the Act overrides the rules in section 142 to deem a supply made by a non-resident person to be made outside Canada unless the supply is made in the course of a business carried on in Canada, or, at the time the supply is made, the person is registered for GST/HST purposes. For this particular supply the rules in subsection 143(1) of the Act are not applicable due to the fact that USCO is registered for GST/HST purposes.

Regardless of whether the web server hosting the web site is situated inside or outside Canada, where the IPP may be used in whole or in part in Canada and is supplied by a person who is registered for GST/HST purposes, the supply is deemed to be made in Canada and subject to GST/HST. With respect to the supply in question, there does not appear to be any restrictions regarding where the IPP may be used. Where there are no restrictions, it will always be the case that the IPP may be used in Canada. A supply of IPP made in Canada is generally subject to GST at the rate of 7% or HST at the rate of 15% or is zero-rated (taxed at 0%).

There are no zero-rating provisions for the supply of IPP made in Canada other than the supply of a copyright or other intellectual property or any right, licence or privilege to use any such property, where the recipient is not resident in Canada and is not registered for GST/HST purposes at the time the supply is made. For example, a supply of a copyright to information may be zero-rated pursuant to section 10 of Part V of Schedule VI to the Act.

Where not zero-rated, a taxable supply of IPP made in Canada is subject to either GST at 7% when made or deemed to be made in a non-participating province or, subject to HST at 15% when made in a participating province (Nova Scotia, New Brunswick or Newfoundland). Whether a supply of IPP made in Canada is made in a participating or non-participating province is determined by applying the rules in section 144.1 of the Act and Schedule IX to the Act.

Where there are no restrictions regarding where the "Canadian rights" in respect of the IPP may be used and it is determined that the "place of negotiation" is outside Canada, the supply of the IPP is considered to be made in a non-participating province and subject to GST at 7%, provided it is not zero-rated. For purposes of these place of supply rules "Canadian rights" refers to that part of the IPP that can be used in Canada. "Place of negotiation" is defined as "... the location of the supplier's permanent establishment at which the individual principally involved in negotiating for the supplier the agreement for the supply ordinarily works".

Based on the information provided, there does not appear to be any restrictions on where the IPP may be used and the "place of negotiation" appears to be outside Canada by virtue of the fact that the non-resident does not have a permanent establishment in Canada. Therefore, the supply by USCO to persons resident in Canada is subject to GST at 7%.

You asked whether you should charge GST/HST and other taxes. If by "other taxes" you mean provincial sales taxes, you may wish to contact each of the province's sales tax offices since provinces (other than the participating provinces) apply their provincial sales tax based on the requirements of provincial legislation.

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) 954-4291.

Yours truly,

B. Mulinda
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate