22 August 2002 GST/HST Interpretation 33013 - Fees Charged to Non-residents for Posting Material on a Web Site

Dear XXXXX:

Thank you for your facsimile of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees charged to non-resident persons for the posting of material on a Web site. Your facsimile was sent to the XXXXX and was forwarded to us for a response. We apologize for the delay in replying to your enquiry.

From your letter and our telephone conversation of July 17, 2002, our understanding is that the operator of a Web site charges fees to non-resident persons for the posting of literary materials on the Web site. The Web site is hosted on a server at the operator's establishment in Canada. Interested parties, primarily in the United States, will review the material. There is no charge for reviewing the material. The only fees are those charged to the non-resident customer who is having the material posted on the site. The customer maintains all rights to the literary material. There is no supply of rights or of property between the supplier and the customer.

Interpretation Requested

What is the GST status of the fees charged to the non-resident persons?

Interpretation Given

Based on the information provided, the supply of posting literary material on the Web site is considered by the Canada Customs and Revenue Agency (CCRA) to be a supply of a service for purposes of the Excise Tax Act (the "Act").

Without further information regarding the nature of the literary material and the purpose of having the material posted on the Web site, we are unable to determine if the service is considered to be an advertising service for GST/HST purposes. However, the following interpretation is provided to assist you in making this determination.

The term "advertising" is not defined in the Act, however, the CCRA has provided an explanation as to what is generally considered to be an advertising service for GST/HST purposes in section 4.5.3 Exports - Services and Intellectual Property of the GST/HST Memoranda Series. For your information, a copy of this section is enclosed. The explanation in this section refers to a service of creating a message and a service directly related to the communication of such a message. Further, a message must be oriented towards soliciting business, attracting donations, or calling public attention in the form of an information notice, a political announcement or other similar communication.

There are occasions where the person communicating a message will not be the same person creating or supplying the message. Generally, the person supplying the broadcast or communication service will be in possession of the message or will have received sufficient information as to the content of the message prior to the supply of the service to know that the message is in the nature of advertising. In these situations, the supply of the broadcast or communication service will be considered to be a supply of an advertising service.

Pursuant to paragraph 142(1)(g) of the Act, a supply of a service is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. The supply of a service made in Canada in the course of a commercial activity is taxable for GST/HST purposes at the rate of 7% (15% where the supply is made in a participating province (The three participating provinces are Nova Scotia, New Brunswick and Newfoundland and Labrador.)) on the value of the consideration for the supply unless the supply is zero-rated (i.e., taxable at the rate of 0%).

Section 8 of Part V of Schedule VI to the Act zero-rates a supply of a service of advertising made to a non-resident person who is not registered for purposes of the GST/HST at the time the service is performed. It should be noted that this section would not apply where the non-resident recipient is registered.

However, where the non-resident person is registered for purposes of the GST/HST at the time the service is performed, the supply of the advertising service may still be zero-rated under the general zero-rating provision of section 7 of Part V of Schedule VI to the Act. It should be noted that where the service is not an advertising service, it may also be zero-rated under this section. A supply of a service to a non-resident is zero-rated under this section unless it is excluded under paragraphs (a) through (h) (The exclusions to section 7 in Part V of Schedule VI to the Act are discussed in paragraphs 18-23 of the enclosed section 4.5.3, - Exports - Services and Intellectual Property of the GST/HST Memoranda Series.) of this section.

In the above circumstances, the supplier must verify and maintain evidence that the recipient of the supply is not resident in Canada and, as the case may be, not registered for purposes of the GST/HST. Section 4.5.1, Exports - Determining Residence Status of the GST/HST Memoranda Series is enclosed for your review. Appendix A of this section describes the documentation that the CCRA will generally accept as proof that the recipient is not resident in Canada. Appendix B of this section describes the documentation that the CCRA will generally accept as proof that a person is a non-resident and not registered.

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 CCRA 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) 954-7931.

Yours truly,

Anne Kratz
Electronic Commerce Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate