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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5XXXXX
XXXXX
XXXXX
XXXXX
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Case Number: 37989XXXXX
XXXXXJanuary 19, 2004
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Subject:
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GST/HST INTERPRETATION
Tax status of service
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Dear XXXXX:
Thank you for your facsimile XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a supply made by a particular corporation ("S").
The following information was presented in your letter.
Background
• S is a corporation with its head office in XXXXX and a branch in XXXXX.
• S is a resident of Canada and is registered for purposes of the GST/HST.
• The commercial activity of S consists of advising on and arranging for the placement of its customers' ("C") publicity and commercial messages in various advertising media in all the provinces of Canada as well as other countries.
• S plays no role in the creation of the publicity.
• C is a corporation headquartered in XXXXX with offices in other provinces whose activity consists of XXXXX to the public in all the provinces of Canada.
• C is a resident of Canada and is registered for purposes of the GST/HST.
The Transaction
• C and its advertising agency produce a commercial message in the form of banner ads to be displayed on various Internet web sites.
• C and S meet or confer by other means to discuss and determine on which particular web sites the banner ads will be placed.
• The meetings and communications take place solely in Canada.
• XXXXX.
• XXXXX.
• The web site operator invoices S for the space that was purchased.
• S issues an invoice to C for the space that was purchased at a price which XXXXX.
• S pays the web site operator for the space.
• C pays S.
The Web site operator with whom S transacts may not always operate the particular Web site on which the commercial message will actually appear. In such cases, the layout is as follows.
• XXXXX.
• XXXXX.
• The commercial message actually appears on Web site Y which is hosted on another server.
• Web site X is hosted on a server situated in Canada.
• Web site Y is hosted on a server situated outside of Canada.
• XXXXX.
• Web site Z also may be hosted on a server anywhere in the world.
S's activity in respect of any transaction such as outlined above may vary in the following manner:
Scenarios
• XXXXX.
• XXXXX.
• XXXXX.
Interpretation Requested
Should S collect GST on the invoices it issues to C?
Interpretation Given
Based on the information provided, S would be required to collect GST pursuant to subsection 221(1) of the Excise Tax Act ("the Act") on the invoices it issues to C in the scenarios described above.
In each of the scenarios described above, S is making a supply of a service to C that is considered to be an advertising service for GST/HST purposes. For GST/HST purposes, an advertising service is generally considered 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, 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, or
(ii) the person providing the communication service can demonstrate that the service is in relation to the supply of a message.
A taxable (other than zero-rated) supply of a service made in Canada is subject to GST at 7% or HST at 15% if deemed to be made in the participating provinces of New Brunswick, Nova Scotia or Newfoundland and Labrador. Pursuant to subsection 221(1) of the Act, the supplier is required to collect the tax payable by the recipient of the supply.
Paragraph 142(1)(g) of 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. Paragraph 142(2)(g) of the Act deems a supply of a service to be made outside Canada if the service is, or is to be, performed wholly outside Canada.
Whether a service is performed in whole or in part in Canada is a question of fact to be determined on a case-by-case basis. A supply of a service is performed at least in part in Canada if:
• the service requires a person to perform a task (i.e., the supplier acts through one or more of its employees), and the person performing or physically carrying out the task is situated in Canada at the time the activity is done;
• the service includes operations performed by a supplier's equipment (e.g., computer equipment ), and the equipment is located in Canada;
• the supply involves doing something to or with a recipient's equipment by accessing it from a remote location and the recipient's equipment is located in Canada; or
• any activity related to the performance of the service is undertaken in Canada.
Based on the information provided, the supply of the service made by S to C would be considered to be performed in Canada and consequently deemed to be made in Canada.
There is no provision in the Act that would zero-rate the supply of the service made by S to C in this case. For your additional information regarding zero-rated services, including zero-rated advertising services, please refer to enclosed GST/HST Memoranda Series 4.5.3, Exports - Services and Intellectual Property.
Whether a supply of a service made in Canada is made in a participating or non-participating province is determined by applying the rules in section 144.1 and Schedule IX to the Act. Section 144.1 of the Act provides that a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX to the Act, made in the province. Section 144.1 also states that a supply made in Canada that is not made in a participating province is deemed to be made in a non-participating province.
The place of supply rules for a supply of a service are provided for in Part V of Schedule IX to the Act. Paragraph 2(a) of Part V of Schedule IX to the Act deems a supply of a service to be made in a province if all or substantially all (90% or more) of the Canadian element of the service is performed in the province. According to section 1 of that same Part, "Canadian element" of a service means the portion of the service that is performed in Canada. Based on the information provided, including the fact that S is a corporation with its head office in XXXXX and a branch in XXXXX, the supply of the service made by S to C in each of the scenarios would be deemed to be made in a non-participating province pursuant to section 144.1 of the Act.
For your additional information, please find enclosed GST/HST Technical Information Bulletin B-090, GST/HST and Electronic Commerce.
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 Revenue Agency with respect to a particular situation.
For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6743.
Yours truly,
Cheryl R. Leyton
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
| c.c.: |
C.R. Leyton
P. McKinnon |
| Encl.: |
Section 1.4
Section 4.5.3
TIB-090 |
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