26 February 2002 GST/HST Interpretation 31085 - Website Hosting Supplied to Indians

Dear XXXXX:

Thank you for your letter of April 20, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of website hosting provided to Indians. As the scenario is a generalized one and is not in reference to a particular supply, we provide an interpretation rather than a ruling. We apologize for the delay in providing you with our response.

Recently, Canada Customs and Revenue Agency (CCRA) published a discussion paper for public comment on the administration of the GST/HST in the electronic commerce environment. The discussion paper can be accessed at CCRA's website (http://www.ccra-adrc.gc.ca/tax/technical/ecommerce-e.html). The deadline for comments is March 1, 2002.

Interpretation Requested

You would like to understand the application of the GST to supplies of website hosting to Indians.

Interpretation Given

The administrative policy of Canada Customs and Revenue Agency (CCRA) concerning the application of GST/HST to the section 87 Indian Act relief (referred to below as s. 87 relief) is explained in the Technical Information Bulletin (TIB) B-039R, GST Administrative Policy - Application of GST to Indians. We enclose it for your reference. The treatment of purchases made by Indians under the GST/HST is consistent with the Indian Act under which the personal property of an Indian or an Indian band situated on a reserve and their interests in reserve lands are not subject to tax.

On page 41 of our electronic commerce discussion paper, entitled GST/HST and Electronic Commerce, we indicate that website hosting, when provided without being part of a package that includes internet access, is considered to be the supply of a service, other than a telecommunication service.

Supplies of website hosting not part of a package that includes internet access

TIB B-039R explains that a supply of a service provided to Indian individuals is relieved of GST/HST when the service is performed totally on reserve. Therefore, the service of providing website hosting to an Indian individual is relieved of tax only if it is performed totally on reserve. By virtue of the nature of e-commerce, the place of supply is often difficult to determine. It is necessary to examine each supply of a service on a case-by-case basis. Generally, a supply of a service (other than a telecommunication service) will be performed at least in part at a location off-reserve, and therefore not eligible for tax relief under TIB-B039R, if:

•   the service requires a person performing a task (i.e., the supplier acting through one or more of its employees), and the person performing or physically carrying out the task is situated off of a reserve at the time the activity is done; or

•   the service includes operations performed by the supplier's computer equipment, and any of the computer equipment used in the task is located off a reserve at the time the activity is performed.

We understand that you have a head office in XXXXX, and the website hosting service is carried out at these physical locations. There are no Indian reserves within the city limits of XXXXX. As your services do not appear to be performed totally on a reserve, you will be required to charge GST/HST to Indian individuals, even though they may live on reserve.

However, where an Indian band, tribal council, or band-empowered entity acquires website hosting for band management activities or for real property interests on reserve, the supply is relieved of tax. In such a case, the band, tribal council, or band-empowered entity will provide a certificate such as the one described in TIB-B039R, on page 7.

Where a supplier relieves tax for an Indian entity, the supplier must maintain a copy of the certificate as documentary evidence. Eligibility for input tax credits for a recovery of GST on expenses is not affected by the relief of tax on supplies to Indian bands, tribal councils and band-empowered entities.

Supplies of website hosting where the website hosting is part of a package that includes internet access.

The electronic commerce discussion paper states that providing internet access is a telecommunication service. On page 52 of the paper, CCRA indicates that a typical transaction made between an internet service provider and an individual consumer is one where the provider makes a single supply which includes a connection to the internet, an e-mail account, and space on the provider's server. The predominant purpose of the combined supply to the consumer is the access to the internet. CCRA's view is that this package is the supply of a telecommunication service.

As a service, the provision of access to the internet to an Indian individual will be relieved of tax if the supply is provided at a location on a reserve. As a telecommunication service, the location where internet access is provided is considered to be on-reserve when the Indian individual who is the recipient of the supply is ordinarily located on a reserve when accessing the internet. It is our administrative practice to apply relief where an Indian recipient of the telecommunication service is a resident on a reserve and the invoice for those services is sent to the residence.

You must maintain adequate documentation that the supply of the service was made to an Indian, as registered under the Indian Act. CCRA will accept as adequate evidence a notation on the invoice or other sales document which is retained by the vendor, of the nine or ten digit registry number or the band name and family number (commonly referred to as the band number/treaty number).

The supply of a telecommunication service to an Indian band, tribal council, or band-empowered entity is relieved of tax when the service is acquired, on- or off-reserve, by the band, tribal council, or band-empowered entity for band management activities and a certificate attesting to this fact is provided to the supplier. The supplier must maintain a copy of the certificate as documentary evidence.

When a supply of a service is provided to an Indian, Indian band or band-empowered entity under circumstances where the supply is relieved of tax, the supplier continues to be eligible for input tax credits to the extent that goods and services are acquired for use or consumption in its commercial activities.

In order for us to provide you with an interpretation concerning other electronic supplies, we will need a complete statement of facts characterizing the supply. Characterization issues for GST/HST purposes are described starting on page 30 of CCRA's discussion paper.

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, they 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 Dave Caron, Manager of the Aboriginal Affairs Unit at 954-7957, or myself at (613) 957-1175.

Yours truly,

Dwight Kostjuk
Rulings Officer
Aboriginal Affairs Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate