22 October 2002 GST/HST Interpretation 36209 - Application of GST/HST to Web Site Hosting

Dear XXXXX:

This is in respect of your facsimile, dated XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the provision of virtual hosting space on a server located in the province of XXXXX.

Pursuant to our telephone conversation of XXXXX, you indicated that what is termed "the provision of virtual hosting space on a server" in your query is actually Web site hosting. Furthermore, you confirmed that the supplier of the Web site hosting is resident in Canada and is registered for purposes of the GST/HST.

Below we have provided an interpretation of the rules in respect of the supply of Web site hosting made by a registered supplier. For further assistance, we have also enclosed GST/HST Technical Information Bulletin B-090: GST/HST And Electronic Commerce which provides detailed information regarding the characterization of supplies made by electronic means, the place of supply rules for such supplies, and the treatment of these supplies when made to non-residents.

Interpretation Requested

Is the provision of Web site hosting space on a server that is located in the province of XXXXX subject to tax when made to residents of Canada and to non-residents?

Interpretation Given

The Canada Customs and Revenue Agency (CCRA) considers the provision of Web site hosting to be a supply of a service for purposes of the Excise Tax Act (the ETA).

Pursuant to paragraph 142(1)(g) of the ETA, a service, other than a service in relation to real property, is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Given that some of the activities carried out by the supplier in performing the service are carried out in Canada, the supply of the Web site hosting is made in Canada.

A supply of a Web site hosting service that is deemed to be made in Canada is taxable for GST/HST purposes at the rate of 7% (or 15% where the supply is made in a participating province, i.e., Nova Scotia, New Brunswick, or Newfoundland and Labrador) on the value of the consideration for the supply unless the supply is zero-rated.

Certain supplies are prescribed to be made in a province for purposes of the GST/HST pursuant to the Place of Supply (GST/HST) Regulations (the Regulations).

Pursuant to subsection 10(1) of the Regulations where there is to be a single final recipient of a computer-related service made by a particular supplier, and the final recipient acquires the supply under an agreement either with the particular supplier or another supplier, the supply is considered to be made in a particular province if the final recipient avails itself of the service at a single ordinary location in that province, and:

•   the particular supplier maintains information sufficient to determine that location; or

•   it is the normal business practice of the particular supplier to obtain information sufficient to determine that location.

Failing this, the supply will be made in a particular province if the mailing address of the recipient of the supply is in that province.

A "computer-related service" includes "... a service involving the electronic storage of information and computer-to-computer transfer of information." It is our position that Web site hosting is a computer-related service for purposes of the Regulations.

A "final recipient" means a person who is the recipient of the supply and who acquires it otherwise than for purposes of supplying it to another person. Where consideration for a supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration is the "recipient' of the supply as defined in subsection 123(1) of the ETA.

Subsection 10(2) of the Regulations applies where there are to be multiple final recipients of a supply of a computer-related service made by a particular supplier and each final recipient acquires the supply under an agreement with either the particular supplier or another supplier.

Where, in the case of each final recipient, there is a single location at which the final recipient avails itself of the service and

•   either the particular supplier maintains information sufficient to determine that location; or

•   it is the normal business practice of the particular supplier to obtain information sufficient to determine that location;

the supply is made in the province, if any, that would be determined, under the place of supply rules for services under Part V of Schedule IX to the ETA (discussed on pages 21-22 of the enclosed Technical Information Bulletin), to be the province in which the particular supply is made if the service were performed in each province in which, and to the same extent to which, the final recipients avail themselves of the service. In any other case, the supply of the computer-related service will be made in a particular province if the mailing address of the recipient is in that province.

Therefore, generally where the final recipient of a Web site hosting service is located in one of the participating provinces, the supply is subject to HST at 15%. Otherwise, the supply of the Web site hosting service is subject to GST at 7% unless the supply is zero-rated.

Regarding a supply of a Web hosting service that is made to a non-resident person, that supply may be zero-rated for purposes of the ETA (i.e., taxed at the rate of 0%). Section 7 of Part V of Schedule VI to the ETA, zero-rates a supply of a service made to a non-resident person other than a service that is made to a non-resident individual who is in Canada at any time when the individual has contact with the supplier in relation to the supply, or where the supply is rendered to a non-resident individual while that individual is in Canada. There are other exclusions under section 7 but none relate to the provision of the Web site hosting service.

It is the supplier's responsibility to verify that the recipient of a supply is a non-resident person for purposes of the GST/HST. For your information, we have enclosed section 4.5.1, Exports - Determining Residence Status of the GST/HST Memoranda Series. Appendix A of this section describes the documentation that the CCRA will generally accept as proof that the recipient is not resident in Canada.

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) 952-8530.

Yours truly,

Dwayne Moore
Electronic Commerce Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate