The Petitioner (“Hootsuite”), which provided its customers with an online social media management system, did not itself have the servers and storage facilities to host its platform, and instead accessed those of Amazon Web Services (“AWS”). The Ministry of Finance assessed BC provincial sales tax on the basis that (i) technical support by AWS through an online chat feature (“AWS support”) and (ii) Hootsuite’s access to AWS software allowing users to access remote hardware virtually through the use of a stack of software (“EC2” and “S3”), constituted the provision to Hootsuite of software, and on the basis that (i) above (the AWS support) also constituted, and that Hootsuite’s access to dedicated telecommunication service in the U.S. allowing AWS to maximize the efficiency of its virtual hardware (“AWS direct connect”) constituted a taxable communication service.
The AWS support was provided through a web interface (the “Console”), which was opaque to Hootsuite, with the web browser on Hootsuite’s computer interpreting the information contained on the Console and then rendering the information on Hootsuite’s browser, with no software downloaded or exchanged in the process. However, the Hootsuite web browser temporarily created a cache of files to improve page load times.
Thomas J indicated that the purchase of the AWS support was not a purchase of “software,” whose definition in the PSTA referenced the delivery, accessing, or the right to use, a software program. Thomas J stated (at para. 59):
[T]he key distinction between “software” and a “software program” for the purposes of the PSTA is that a “software program” requires the purchaser to utilize the software as an “application”; that is, the user must be able to interact with the software and create an output based in part on those interactions with the program.
He went on to indicate that although the cached resources constituted software that was for use on or with an electronic device in B.C., they did not constitute a “software program,” as their only purpose was to optimize the efficiency of the web interface between the user’s browser and the Console, and the user could not interact with the cached resources in a meaningful way. In also rejecting a Ministry argument that the Hootsuite use of a B.C. computer to interact with the technical support staff through the Console located outside of B.C. constituted a purchase of software, Thomas J indicated that the web interface was an “opaque application” (para. 66) as the user could not access or modify the Console and the only purpose of the interface was “to facilitate the exchange of technical information from the engineers to Hootsuite (para. 66).
Furthermore, even if there was such a software purchase, in this context “use” required “the user to interact directly with the program to create an output” (para. 68), which was not the case here.
Furthermore, the above findings were “consistent with the fundamental nature of the transaction -- the purchase of technical expertise through which software is only one of several ways in which the information is provided to the purchaser” (para. 70, see also para. 82(a)).
Regarding Hootsuite’s access to the EC2 and X3 cloud-computing (”infrastructure as a service”) of AWS), Thomas indicated (at para. 90) that “EC2 creates a virtual machine to provide computing resources to Hootsuite … [that] is opaque to the user - it cannot be manipulated or directly accessed by Hootsuite” and (at para. 98) that “S3 is a hardware storage product in which users install an application program to store and backup data on the virtual machine.” He stated (at para. 103):
[T]he fundamental nature of both the EC2 and S3 product is to provide an on-demand computer infrastructure service. As such, the products are not subject to PST.
Furthermore, if this characterization was incorrect, a similar analysis to that above would indicate that there was no purchase of a software program. For instance, although a Linux operating system was provided as part of the EC2 service, it was “installed on the virtual machine which, although located in the cloud, is not situated in British Columbia’ (para. 110) and was “solely used on the virtual machine to allow Hootsuite’s application programs, installed on the virtual machine, to interact with the virtual machine” (para. 112).
Email this Content