26 June 2002 GST/HST Interpretation 32951 - Application of GST/HST to Long Distance Calls

Dear XXXXX:

Thank you for your facsimile of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) with respect to the supply of telecommunication services. XXXXX.

Interpretation Requested

You would like to know the tax treatment in respect of long distance telephone calls made by XXXXX pursuant to a sample agreement between XXXXX and XXXXX ("the institution"). The institution is a registered charity (within the meaning assigned by subsection 248(1) of the Income Tax Act) that is XXXXX. The agreement provides that upon the issuance of a personal identification number, XXXXX XXXXX can make long distance calls. The calls are billed by the institution on a monthly basis to XXXXX and XXXXX assumes responsibility for the calls made using the XXXXX personal identification number. The service is offered to XXXXX and is in respect of calls made from the telephone provided by the institution in the XXXXX room.

Interpretation Given

The supply of a long distance telephone call is a supply of a "telecommunication service" pursuant to paragraph (a) of the definition included in subsection 123(1) of the Excise Tax Act ("the Act"). A "telecommunication service" is defined, in part, as a service of emitting, transmitting or receiving signs, signals, writing, images or sounds or intelligence of any nature by wire, cable, radio, optical or other electromagnetic system, or by any similar technical system.

In the sample agreement you forwarded us, XXXXX contracts with the institution for supplies of long distance calls. It appears that the supplies of the telecommunication services made pursuant to contracts like this sample contract are made by the institution to XXXXX.

The institution is a "public institution" as defined under subsection 123(1) of the Act.

A supply made by a public institution may be an exempt supply as defined under subsection 123(1) of the Act, i.e. "a supply included in Schedule V" to the Act and not subject to the GST/HST. Part VI of Schedule V includes, in section 2, a "supply made by a public institution of any personal property or a service, but not including (...)". The supply of a telecommunication service made pursuant to an agreement such as the sample agreement you forwarded us would be exempt by its inclusion in section 2 of Part VI of Schedule V to the Act. The services at issue are not excluded from the application of this provision.

Telecommunication services which are exempt supplies remain exempt regardless of their place of supply, as the exempting provision (section 2 of Part VI of Schedule V) does not mention the place of supply as a factor to be considered for the supply to be included or not in the provision. As such, it is not necessary to examine the special rules that relate to the place of supply for telecommunication services.

It should be noted that where the institution is charged GST/HST in respect of telecommunication services that are supplied to the institution and that are, in turn, supplied by the institution to XXXXX on an exempt basis, the institution is not entitled to claim any input tax credits in respect of the GST/HST charged. However, as you may be aware, the institution may claim a public service body rebate in respect of such GST/HST, provided the conditions for claiming such a rebate have been met.

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) 952-8815.

Yours truly,

Raymond Labelle
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate