31 October 2003 GST/HST Interpretation 46235 - Supply of Advertising Services

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of advertising service made by a GST/HST registered non-resident magazine publisher to its Canadian customers.

Based on the information provided in your letter, our understanding of the facts is as follows:

A company ("ForCo") which is not resident in Canada but which is registered for GST/HST by reason of subsection 240(4) of the Excise Tax Act (the "Act") is engaged in the publication and sale of various magazines which are sold both by subscription and on newsstands in all provinces in Canada.

Subscription sales of ForCo's publications are sent by mail or courier to customers in Canada. The various titles offered by ForCo have greater or lesser degrees of Canadian circulation, however, all of the titles have some material measure of circulation in Canada (i.e., 1%-10%).

At various times ForCo is approached by Canadian resident persons who wish to place advertisements in its publications. ForCo agrees to supply such advertising services and sells advertising space to these customers or to Canadian advertising agencies acting on their behalf.

Interpretation Requested

ForCo is required to charge GST in respect of the supply of the service of providing advertising space in its publications where such publications have circulation in Canada.

Interpretation Given

Based on the information provided, we offer the following interpretation:

As ForCo is registered for GST/HST purposes, it is required to collect and remit GST/HST on all taxable (other than zero-rated) supplies made in Canada. A supply of a service, (including an advertising service) is deemed to be made in Canada by virtue of paragraph 142(1)(g) of the Act where the service is, or is to be performed in whole or in part in Canada.

Although the term "advertising" is not defined in the Act, the Canada Customs and Revenue Agency (CCRA) has provided an explanation as to what is generally considered to be an advertising service in Memoranda Series section 4.5.3 Exports - Services and Intellectual Property. The explanation in the Memoranda Series is as follows:

An advertising service is generally considered by the CCRA to be

(a) a service of creating a message oriented towards soliciting business, attracting donations, or calling public attention in the form of an information notice, a political announcement or other similar communication by any means including oral, written, or graphic statements and representations disseminated by any means, including,

(i) in a newspaper or other publication,

(ii) on radio or television,

(iii) in a notice, handbill, sign, catalogue, or letter, and

(iv) on a billboard or on real property; and

(b) a service directly related to the communication of such a message (e.g., air time on a broadcasting service, space in a publication) where,

(i) the communication service is supplied as part of the supply of a message as defined in paragraph (a) above, or

(ii) the person providing the communication service can demonstrate that, at the time the supply is made, the service is in relation to the supply of a message as defined in paragraph (a) above.

There are occasions where the person broadcasting or communicating a message, within the meaning of subparagraph (b) above, will not be the same person supplying the message (i.e., the creative aspect). 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.

Although ForCo is not involved in the creation or design of the advertising message, its provision of advertising space in magazines is considered to be a service of communicating the message and therefore a supply of an advertising service. As these magazines are circulated in part to newsstands and subscribers in Canada, the advertising service supplied by ForCo is made in Canada. As there are no relevant zero-rating provisions for the supply of advertising services to Canadian residents, the supply by ForCo is subject to GST/HST.

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) 952-8812.

Yours truly,

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