CRA finds that a non-resident supplied software licences directly to Canadian users rather than to non-resident sales representatives

ACo, a non-resident that was registered under the regular GST/HST registration provisions and had no physical presence in Canada, appointed non-resident representatives to solicit orders from Canadian business end-users to use its software permitting safe access to their company networks. Some aspects of the arrangements made it appear as if Aco was selling the software licences to the representatives rather than the end-users, i.e., it charged an agreed price for each licence to the representative, who established the price at which the licence would be sold to the end-user – and it was the representative who invoiced the end user and was responsible for collecting the invoice.

However, CRA considered that Aco was not making supplies of the licences to the representatives but rather to the end-user in Canada and that GST/HST applied to such supplies. In this regard, it noted that ACo retained all ownership rights in the software, the representative was not granted a licence to use or reproduce or distribute the software, and it was Aco who was solely authorized to provide the related support services to end-users.

Neal Armstrong. Summary of 21 February 2023 GST/HST Ruling 217305 under ETA s. 142(1)(c).