28 March 2002 GST/HST Interpretation 35167 - Web Site Design

Dear XXXXX:

Thank you for your letter of March 15, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of web site design.

Your request has been transferred from the XXXXX to the Border Issues Unit of the General Operations and Border Issues Division of the Excise and GST/HST Rulings Directorate for response.

In accordance with GST/HST Memoranda Series Section 1.4, an application ruling can only be issued with reference to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and where the taxpayer has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. We are pleased to issue you an interpretation which will elaborate on how the GST/HST applies to the supply described in your letter.

The following information was taken from your letter and our subsequent telephone conversation:

•   Company A designs web sites for its clients. Company A will design a web site based upon the information and criteria provided by its client. Once complete, Company A delivers the finished version of the site to its client through the Internet. On occasion, Company A may, at a later date, be contracted to perform additional work to maintain or modify the information or design of the site.

•   Company A does not retain any property rights in the web site or the modifications to the web site.

•   Company A designs web sites for clients who are resident in Canada and to non-residents.

•   Company A is registered for GST/HST purposes and is resident in the province of XXXXX.

•   Company A performs all of the work necessary to design the web sites and make the modifications at its office in XXXXX.

Interpretation Requested

What is the GST/HST status of a supply of designing a web site as previously described and a supply of updating the information on and/or design of the web site?

Interpretation Given

Based on the information provided, the following interpretation is provided:

The supply of designing a web site or updating the information on and/or design of the web site is considered to be a supply of a service for GST/HST purposes where the supplier does not retain any property rights to the site or the updates.

Paragraph 142(1)(g) of the Excise Tax Act (the "Act") deems a supply of a service to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Therefore, if services such as those performed by Company A are performed entirely in XXXXX, the services supplied are deemed to be made in Canada, and more specifically, in the non-participating province of XXXXX.

A taxable supply of a service made in Canada is subject to tax at the GST rate of 7% (HST rate of 15% when made in a participating province: Nova Scotia, New Brunswick, or Newfoundland) on the value of the consideration for the supply unless the supply is zero-rated (taxed at 0%).

A supply made to a non-resident person of a service of designing a web site or of updating the web site is zero-rated under section 7 of Part V of Schedule VI to the Act provided none of the exclusions of that provision apply. For example, the supply of a service to a non-resident is zero-rated provided it is not rendered to an individual while that individual is in Canada or made to an individual who is in Canada at any time when the individual has contact with the supplier in relation to the supply. GST/HST Memoranda Series Chapter 4.5.3 Exports - Services and Intellectual Property is enclosed for additional information regarding the exclusions in section 7.

A registrant that makes a supply to a non-resident person must verify and maintain evidence that the recipient is not resident in Canada for the supply to be treated as a zero-rated supply. GST/HST Memoranda Series Chapter 4.5.1 Exports - Determining Residence Status has been enclosed for your information. Appendix A of this Memorandum describes the documentation that the Canada Customs and Revenue Agency will generally accept as proof that a person to whom a supply is made 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 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) 952-8812.

Yours truly,

Jeff Frobel
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate