26 March 2001 GST/HST Interpretation 13454 - The Supply of Information Stored on a Web Site

Dear XXXXX:

Thank you for your facsimile of November 30, 1999, 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 web site. Your request has been transferred from the XXXXX Tax Services Office to the Border Issues Unit of the General Operations and Border Issues Division of the Excise and GST/HST Rulings Directorate for response.

The following information was taken from your letter, discussions with XXXXX XXXXX of the Canada Customs and Revenue Agency (CCRA), and our subsequent telephone conversations:

•   USCO is a GST/HST registered corporation that is not resident in Canada.

•   USCO intends to supply the right to access and use sports related information stored on its web site to clients situated inside and outside Canada. The web site contains raw data, statistics and commentary on subjects of interest to a sports enthusiast.

•   The web site is stored on a web server situated outside Canada and features a database of assorted statistics and commentary of interest to a sports fan.

•   USCO will market and promote the web site by sending advertisements through the postal service to potential clients. These advertisements will describe the data and services on the web site and outline the two methods of subscribing. The client may subscribe by either filling out and returning the advertisement with payment or electronically through USCO's web site making payment using a credit card.

•   Once the subscription information is received and the payment is processed USCO will send the client a password by electronic mail which allows them to access the information stored on the web site.

•   USCO allows their client to pay on either a monthly or annually basis.

Interpretation Requested

What is the GST/HST status of the supply of the right to access and use the information stored on the web site?

Interpretation Given

Based on the information provided we offer the following interpretation:

The supply of the right to access and use information 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 the non-resident supplier 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/HST at the rate of 7% (15% when made in a participating province; Nova Scotia, New Brunswick or Newfoundland) of the value of the consideration for the supply unless the supply is zero-rated (taxed at 0%).

Section 10 of Part V of Schedule VI to the Act is the only relevant zero-rating provision for the supply of IPP made in Canada to a non-resident person. Section 10 zero-rates the supply of a copyright or other intellectual property or any right, licence or privilege to use any such property, provided 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% or, when made in a participating province, HST at 15%. 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 restriction 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.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the 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 CCRA 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 at (613) 952-8812.

Yours truly,

Jeffrey A. Frobel
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate