26 March 2002 GST/HST Interpretation 36061 - Teleconferencing Service

Dear XXXXX:

Thank you for your letter of May 23, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to teleconferencing services.

All legislative references are to the Excise Tax Act and regulations thereunder, unless otherwise specified.

We will not address the place of supply rules for the HST as the transaction in question is with respect to equipment and facilities located in XXXXX and customers located outside of Canada.

As per the enclosed section 1.4, Goods and Services Tax Rulings, of Chapter 1 of the GST/HST Memoranda Series, the Canada Customs and Revenue Agency (CCRA) is unable to issue a GST/HST ruling when a request is general in nature and does not relate to a specific set of facts and to specific persons. Without the agreements relating to the transaction and without the identities of the persons involved in the transaction we are unable to provide you with a ruling specific to the transaction you have described. However, we are pleased to provide you with the following general interpretation concerning the application of the GST/HST to teleconferencing services.

Statement of Facts

Our understanding of the facts from your letter and our conversations of November 15, 16 and 22, 2001, is as follows:

1. Your client, Co. A, located in XXXXX and registered for GST/HST purposes, provides teleconferencing services to individuals and businesses throughout Canada and the United States (U.S.).

2. Co. A's equipment allows them to provide a bridging service that allows customers to use a toll free service (in this case, customers are required to reimburse Co. A for any long distance charges incurred by Co. A) or dial up directly to access the teleconferencing service.

3. Co. A's software and computer equipment used to provide the teleconferencing services are located in XXXXX along with the necessary staff and support services.

4. Co. A has a customer who requires all subsidiaries, including its U.S. subsidiaries, to use the teleconferencing services of Co. A.

5. The moderator who initiates the teleconference is the recipient of the supply and is billed directly for the teleconferencing service.

6. The U.S. subsidiaries using the teleconferencing services are not involved in providing telecommunication services.

7. When the moderator is in the U.S., the other participants of the call may be located in the U.S. or Canada.

Interpretation Requested

You would like to know if Co. A is required to charge the GST when the moderator who initiates the teleconference is located in the U.S.

Interpretation Given

Teleconferencing services fall under the definition of a telecommunication service for GST purposes. Pursuant to subsection 123(1) a "telecommunication service" is defined as

"(a) the 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, or

(b) making available for such emission, transmission or reception telecommunications facilities of a person who carries on the business of supplying services referred to in paragraph (a)".

Based on the information provided, the teleconferencing services provided by Co. A fall under paragraph (a) of the definition of a telecommunication service.

To determine whether the telecommunication service is being provided in Canada, we must refer to section 142.1. Subparagraphs 142.1(2)(b)(i) and (ii) provide that, in the case of a telecommunication service other than the supply of making telecommunications facilities available, the service is considered to be supplied in Canada where the telecommunication is both emitted and received in Canada or is either emitted or received in Canada and the billing location is in Canada.

Subsection 142.1(1) states that "the billing location for a telecommunication service supplied to a recipient is in Canada if

(a) where the consideration payable for the service is charged or applied to an account that the recipient has with a person who carries on the business of supplying telecommunication services and the account relates to a telecommunications facility that is used or is available for use by the recipient to obtain telecommunication services, that telecommunications facility is ordinarily located in Canada; and

(b) in any other case, the telecommunications facility used to initiate the service is located in Canada."

Subsection 123(1) defines a "telecommunication[s] facility" as "any facility, apparatus or other thing (including any wire, cable, radio, optical or other electromagnetic system, or any similar technical system, or any part thereof) that is used or is capable of being used for telecommunications".

The bridging equipment used to provide the teleconferencing service qualifies as a telecommunications facility and it is the facility used to initiate the service provided by Co. A. Therefore, the billing location is in Canada pursuant to paragraph 142.1(1)(b) because the bridging equipment used to provide the teleconferencing service is located in XXXXX.

Further, based on the information provided, the telecommunication service provided by Co. A is emitted from where its bridging equipment is located, therefore, the telecommunication service is emitted in Canada. Hence, as per subparagraph 142.1(2)(b)(ii), the supply of the telecommunication service is deemed to be made in Canada as the service is emitted in Canada and the billing location is in Canada.

Generally, the GST/HST is applied to the consideration paid or payable for taxable supplies that are made in Canada, or deemed to be made in Canada, unless a legislative provision specifically exempts the supply. Section 165 imposes on every recipient of a taxable supply the obligation to pay tax in respect of that supply. Taxable supplies, other than zero-rated supplies, made in Canada are subject to the GST at a rate of 7% when made in a non-participating province, and to the HST at the rate of 15% when made in a participating province (New Brunswick, Nova Scotia, or Newfoundland and Labrador).

In this case, there are no legislative provisions to provide that the supply is either zero-rated or exempt. Therefore, the supply of the teleconferencing service made in Canada and in a non-participating province by Co. A to a moderator located in the U.S. who is the recipient of the supply is taxable at a rate of 7%.

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) 952-9588.

Yours truly,

Doris Rist
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate