18 June 2003 GST/HST Interpretation 6510 - Supply of Printing

This is in further reference to your memorandum XXXXX Mr. Garry XXXXX Ryhorchuck's e-mail message XXXXX, and our previous memorandum XXXXX from Don Gagnon to you.

In our previous memorandum we did not provide responses to four questions dealing with issues related to printing. The memorandum indicated that "the nature of the supply of printing remains unresolved. Matters related to printing will be dealt with in a policy at a later date". We now provide responses to those questions.

XXXXX we discussed the issues and additional information was requested with respect to the use of the term "design" in the questions. XXXXX I received an e-mail from you clarifying the information provided in the four questions. That information has been incorporated into the questions below.

Opinions requested

1. Is the supply of a printed annual report a supply of property or a supply of a service where the design on the cover of the report is provided by the print company, but the information contained in the report is supplied by a band-empowered entity (BEE)? That is to say, the BEE provides financial statements, graphs, pictures, president's message, etc to the graphic designer who then provides a layout. This layout is then given to the printer for printing.

2. Is the supply of seminar folders, made by a printing company, a supply of property or a supply of a service where they are provided to a BEE and the design on the cover is the logo of the BEE? The logo is provided to the printer who then prints the folders with the logo on them along with other information.

3. Is there a difference in the type of supply (i.e. property or a service) if the material provided by the printing company is wrapped, bound or has metal rings binding it?

4. Is the supply of cheques and invoices with the BEE's name and logo on them a supply of property or a supply of a service. The BEE provides the logo and the information required on the cheques to the printer.

General Information

The following is the CCRA's position on the various aspects of printing and whether the supply is that of a good or a service.

Where a client has a contract with a supplier to acquire property in the form of business cards, letterhead, envelopes, brochures, etc., and the printed property is transferred to the client, the primary purpose of the transaction is the transfer of goods (e.g., the business cards, etc.). The goods are not incidental to providing a service, rather, they are the reason for the client's contract with the supplier.

Further, where the supply of printing produces new property where ownership is transferred to the recipient of the supply, the view is that printing is the supply of tangible personal property (TPP) and not a service. However, there may be situations where the supply of printing may not be a supply of property. If the recipient of the supply were to provide the necessary inputs (e.g., blank business cards, paper, etc.) the supply of printing would be a supply of a service.

The supply of graphic design generally involves a graphic designer using specialized technology to produce designs and layouts, and often involves a high level of expertise and skill. Graphic design activities are generally the supply of a service and not the supply of TPP. Where the supplier simply designs a business card, letterhead, etc, this would be considered a service. However, it should be noted that in specific circumstances, a graphic design could be considered intangible personal property (IPP). An example of a situation where graphic design could be considered IPP is where a client purchases a copyright logo.

Where the client requires graphic design along with the supply of printing (i.e., a client requires business cards but in order to have the cards printed, graphic design is required) there are two possibilities to consider. The first is that there are two separate supplies to the client; one supply of a graphic design and a second supply of printing. The second possibility is that the elements of the transaction (graphic design and printing) constitute a single supply. GST/HST Policy P-077R, Single and Multiple Supplies, provides guidelines to help in determining whether the provision of graphic design together with printing can be seen as a single supply or as multiple supplies.

According to P-077R, a single supply will frequently take the form of a single transaction that includes a number of constituent elements, goods and/or services, provided together. These elements are often, but not always, provided for a single amount. Multiple supplies may also take the form of a single transaction, but the constituent elements are considered separate supplies.

Therefore, the first factor to consider is whether some elements are inputs or themselves supplies. In some cases the graphic design element can be thought of as an input into the printing activity. Although the client may receive a plate and/or negative created during the graphic design which is then used to print the desired product, ultimately the client is interested in receiving whatever TPP it is that had been requested (e.g., business cards, letterhead, reports, etc.). The client does not necessarily contract for both graphic design and printing. These factors would support the view of a single supply.

A second factor to consider is the number of suppliers and/or recipients. Is the supplier of the graphic design the same person supplying the printing? If so, this would indicate a single supply.

A third factor that may indicate that graphic design and printing activities is a single supply is where a client makes a request to have TPP printed and the activities of graphic design and printing have a use to the client only when provided together. That is to say, the provision of graphic design would not have a use to the client on its own. The client requires that graphic design be provided in order to obtain the printing. The supplier would not be able to provide the client with the printed materials they have requested without the graphic design activity. The ability to provide the printed materials is contingent upon the input of graphic design into the process.

Therefore, it is reasonable to conclude that where graphic design work and printing are supplied together to the client, both activities will constitute a single supply.

Also, the legislative scheme of the Excise Tax Act (ETA) supports the view that any supply which involves a predominantly property component was not intended to be characterized as a service. As a result, it can be argued that the legislative scheme of the ETA supports considering the supply of printing and the supply of graphic design, where supplied together with printing, a single supply of TPP.

Opinions provided

Therefore, in applying the general information above, the following responses are being provided to the four questions posed:

1. Based on our discussion, the assumption has been made that the information provided by the BEE is data, etc., in a raw format and has to be set up by the designer into a report format. A supply of a printed annual report is a supply of property. Where the design on the cover of the report is provided by the print company, the above comments on graphic design would have to be applied. The supply of the cover design may be that of a service or IPP, depending on whether the design is a copyright logo. Also, in applying P-077R a case may be made for a single supply, and therefore, the design of the cover may be an input into the supply of the TPP.

2. A supply of seminar folders is a supply of TPP. The BEE is providing its logo in the form of a plate or some other form to the printer whereby the printer will merely transfer, print or copy the logo onto the folder, along with other information that is to be printed onto the folder. The comments above on graphic design may apply where the logo and other information are laid out by the designer. However, P-077R will have to be applied to assist in determining whether there are multiple supplies or a single supply. Where there is no graphic design involved and the printer is, by whatever method, merely transferring the logo to the folders, the supply is that of printing and is TPP.

3. The nature of the supply not contingent on whether the printed material is bound, wrapped or bound with rings.

4. Based on the information provided, it is assumed the logo has already been designed and is being transferred to the cheques. The supply of cheques and invoices with the BEE's name and logo on them is a supply of TPP.

If you require further information, please do not hesitate to contact me at 613-954-7954.