GST/HST and e-commerce
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GST/HST and e-commerce
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Find out about the GST/HST and e-commerce
Find out if you need to register for a GST/HST account
Typical electronic supplies
Find out which GST/HST rate to charge
Find out about the GST/HST and e-commerce
E-commerce refers to all transactions conducted over computer networks. It means that only supplies of intangible personal property (IPP) and services are made through electronic commerce. For more information on how the GST/HST applies to supplies of IPP, services and telecommunication services, see Find out which GST/HST rate to charge.
Generally, if you are registered for the GST/HST, you have to charge and collect the GST/HST on all taxable supplies of goods that you make in Canada (other than supplies that are zero-rated).
Generally, you may claim input tax credits in your GST/HST returns to recover the GST/HST paid or payable on purchases and expenses for consumption, use, or supply in your commercial activities. For more information, see Input tax credits.
Find out if you need to register for a GST/HST account
Generally, you have to register for the GST/HST if you provide taxable supplies of property and services in Canada, unless you are a small supplier. If you don’t have to register for the GST/HST, it may be beneficial to register voluntarily. For more information, see Find out if you need to register for a GST/HST account.
Non-residents
A non-resident person who has a permanent establishment in Canada is treated as a resident of Canada, and has the same GST/HST obligations. For more information, see GST/HST Policy Statements P-208R, Meaning of Permanent Establishment in Subsection 123(1) of the Excise Tax Act (the Act).
Examples - Permanent establishment
Example 1
You are a non-resident business and you enter into an agreement with an independent Canadian Internet Service Provider (ISP) for your website to be hosted by the ISP. The website is hosted on a server that is owned by the ISP and is permanently located in Canada. The ISP is responsible of the server on which the Web site is hosted.
You do not have a permanent establishment in Canada as a result of your website being hosted in Canada. Your Web site is not tangible property and does not have a physical presence in Canada. The server does not constitute a permanent establishment because it is not at your disposal.
Example 2
You are a non-resident ISP in the business of hosting your customers' websites. The server on which the websites are hosted is permanently located in Canada. You own the server, but no employee is required at its the location.
You have a permanent establishment in Canada. Your server is tangible property and has a physical location in Canada. The functions carried out through the server are considered to be a significant and essential in an ISP's business.
Examples – Permanent establishment
Example 1
THIS IS MY TEST You are a non-resident business and you enter into an agreement with an independent Canadian Internet Service Provider (ISP) for your website to be hosted by the ISP. The website is hosted on a server that is owned by the ISP and is permanently located in Canada. The ISP is responsible of the server on which the website is hosted.
You do not have a permanent establishment in Canada as a result of your website being hosted in Canada. Your Web site is not tangible property and does not have a physical presence in Canada. The server does not constitute a permanent establishment because it is not at your disposal.
Example 2
You are a non-resident ISP in the business of hosting your customers' websites. The server on which the websites are hosted is permanently located in Canada. You own the server, but no employee is required at its the location.
You have a permanent establishment in Canada. Your server is tangible property and has a physical location in Canada. The functions carried out through the server are considered to be a significant and essential in an ISP's business.
If you are considered to have a permanent establishment in Canada, you are required to register for the GST/HST for the activities carried on through that permanent establishment. Therefore, you need to charge and collect the GST/HST on all taxable supplies made in Canada in the course of carrying on a business in Canada. For more information, see Register for a GST/HST account.
We consider certain factors to determine if a non-resident person is carrying on business in Canada for GST/HST purposes. The importance of a given factor in a specific case depends on the nature of the commercial activity under review, and on the particular facts and circumstances of each case.
Factors considered for carrying on a business in Canada
- the place where the non-resident's agents or employees are located
- the place of delivery
- the place of payment
- the place where purchases are made
- the place from which transactions are solicited
- the location of an inventory of goods
- the place where the business contracts are made
- the location of a bank account
- the place where the non-resident's name and business are listed in a directory
- the location of a branch or an office
- the place where the service is performed
- the place of manufacture or production
Typical electronic supplies
In the following section, you will find a description of the typical supplies made by electronic means. It is possible that your supply does not fit in any category. If you are uncertain, we encourage you to request a decision from the CRA. For more information, see GST/HST Technical Information Bulletins B-090, GST/HST and Electronic Commerce.
Electronic ordering and downloading of digitized products
These supplies typically involve a customer downloading a digitized product from a supplier. These products can be softwares, applications, music, games or any other product in its digital format. This category also includes a subscription to a website that allows the downloading of digitized products. The right on the product can be permanent or temporary.
The supplies in this category are intangible personal property.
Software maintenance and other forms of technical support
Software maintenance is the modification or update of a software product after delivery to prevent or fix defects or to improve performance or other attributes. Software maintenance contracts usually include technical support.
Typically, the supplies in this category are services if the technical support is provided on-line by a technician. If the technical support is incidental to the supply and the principal object of the contract is the software updates, then the supply is characterized as one of intangible personal property. If the technical support is in the form of on-line technical documentation or a trouble-shooting database, the supply is also characterized as one of intangible personal property.
Application hosting, website hosting, and data warehousing
Hosting is a service that allows clients to load their website or software on a server owned by the hosting entity to make it available to the public or to employees. This category also includes website conception and data warehousing.
The supplies in this category are services.
Supplies related to on-line sales
These supplies are advertisement, referral and representation activities on behalf of on-line suppliers of goods and services. This category includes web banner advertising, displaying of promotional messages or external links.
The supplies in this category are services.
Subscription to databases and interactive web sites
A database is a collection of organized and structured information on a computer support. An interactive website contains videos, images, music, games or activities. Its main purpose is to let the subscriber interact with the website’s functionalities. These supplies typically involve a provider who makes digitized content available to customers for research, retrieval, and use.
The supplies in this category are intangible personal property.
Information provided electronically
The supplies in this category include all of the following:
- periodic electronic delivery of data (for example, news clippings)
- undisclosed technical information on a product
- professional advisory services
- content acquisition transactions (for example, the acquisition of various images or articles by a website operator to display them on his website and attract users)
The supplies in this category are intangible personal properties or services. If the supply is of an existing product or a product created for a group of customers who receive rights to the product, it is characterized as a supply of intangible personal property. If the making of the supply involves human intervention or a specific work done for a specific customer, and if the supply does not involve the transfer of rights, the supply is a service.
Telecommunication services
Telecommunication services include all of the following:
- Internet access services
- E-mail services
- voice telephony provided through the Internet
- Web broadcasting
Many intangible personal property (IPP) or services in another category are also telecommunication services. For example, a right to access a website where visual and audio content is broadcasted in real time is a supply of IPP. However, since Web broadcasting in real time is a telecommunication service, the supply is one of a telecommunication service.
Find out which GST/HST rate to charge
The rate of tax to charge for a supply is determined by the place of supply. The GST/HST usually applies to a taxable supply of property or service when it is made in Canada. If the supply is made in a participating province, the HST applies at the rate of the province. If the supply is made in a non-participating province, the GST applies at the rate of 5%. For the tax rate of each province, see GST/HST provincial rates table.
Use the following sections to find out which place of supply rules apply to your supply.
Intangible personal property
Generally, a personal property is intangible if it cannot be seen and touched. Supplies of intangible personal property (IPP) (for example, a supply of software or a subscription to a website) usually do not involve physical interactions and do not require delivery. Factors that generally indicate that your supply made by electronically is an IPP are:
- your supply is a right in a product or a right to use a product for personal or commercial purposes, such as an intellectual property or a right to use intellectual property, or a right of a temporary nature (for example, a right to view, access or use a product while on-line)
- your product that has already been created or developed is provided
- your product is created or developed for a specific customer, but you keep the ownership of the product
- your supply consists of a right to make a copy of a digitized product
You need to determine the place of supply to know which GST/HST rate to charge. If your supply is IPP, see GST/HST and place of supply rules.
Examples – Place of supply for IPP
Example 1 – Supply made in Canada
You supply software in electronic format to a non-resident. There are no restrictions with respect to the place of use of the software. The supply of the software is deemed to be made in Canada, as it is a supply of intangible personal property which may be used in whole or in part in Canada. Your supply is subject to GST/HST.
Example 2 – Supply made in a province
You supply software by way of licence to a company in Quebec for use by its employees at its office in Ontario. The licence provides that the software can only be used from the office in Ontario. The Canadian rights in respect of the software can be used primarily in Ontario. Since it is a participating province, your supply is subject to HST at the rate of 13%.
However, if your supply is made to a non-resident who is not registered, it could be zero-rated. For more information, see Exports.
Examples - Place of supply for IPP
Example 1 - Supply made in Canada
You supply software in electronic format to a non-resident. There are no restrictions with respect to the place of use of the software. The supply of the software is deemed to be made in Canada, as it is a supply of intangible personal property which may be used in whole or in part in Canada. Your supply is subject to GST/HST.
Example 2 - Supply made in a province
You supply software by way of licence to a company in Quebec for use by its employees at its office in Ontario. The licence provides that the software can only be used from the office in Ontario. The Canadian rights in respect of the software can be used primarily in Ontario. Since it is a participating province, your supply is subject to HST at the rate of 13%.
Services
Services
Traditionally, the place of supply of a service is the place where the service is actually performed. Electronic commerce allows services to be provided remotely (for example, software maintenance services or on-line advertising). Factors that generally indicate that your supply made by electronic means is a service are the following:
- Your supply does not include the provision of rights, or if there is a provision of rights, the rights are incidental to the supply.
- Your supply involves specific work that is performed by you for a specific customer.
- There is human involvement in making the supply.
You need to determine the place of supply to know which GST/HST rate to charge. If your supply is a service, see GST/HST and place of supply rules.
Examples – Place of supply for services
Example 1 – Supply made in Canada
You provide computer and software technical support services by electronic means to a non-resident using your computer and your server in Canada. The supply is deemed to be made in Canada as it is the supply of a service using hardware located in Canada. Your supply is subject to HST/GST.
Example 2 – Supply made in a province
You provide online editing and translation services to clients over the Internet. The clients come from everywhere in Canada and your business is located in Quebec. A client in Saskatchewan sends you its original documents by e-mail. You review or translate those documents before returning them to the client's e-mail address. The services are performed from your business address in Quebec. You do not obtain an address from your clients.
The service is performed primarily in Quebec. Since Quebec is not a participating province, your supply is subject to GST at the rate of 5%.
However, if your supply is made to a non-resident who is not registered, it could be zero-rated. For more information, see Exports.
Examples - Place of supply for services
Example 1 - Supply made in Canada
You provide computer and software technical support services by electronic means to a non-resident using your computer and your server in Canada. The supply is deemed to be made in Canada as it is the supply of a service using hardware located in Canada. Your supply is subject to HST/GST.
Example 2 - Supply made in a province
You provide online editing and translation services to clients over the Internet. The clients come from everywhere in Canada and your business is located in Quebec. A client in Saskatchewan sends you its original documents by e-mail. You review or translate those documents before returning them to the client's e-mail address. The services are performed from your business address in Quebec. You do not obtain an address from your clients.
The service is performed primarily in Quebec. Since Quebec is not a participating province, your supply is subject to GST at the rate of 5%.
Special rules for computer-related services and internet access
Special rules apply to determine in which participating province a supply of computer-related services or Internet access is made. A computer-related service means one of the following:
- a technical support service that is provided by means of telecommunications and relates to the operation or use of computer hardware or software
- a service involving the electronic storage of information and computer-to-computer transfer of information
If you supply is a computer-related service or internet access, see Computer-related services and internet access.
Telecommunication services
Telecommunication services
Many typical supplies of intangible personal property or service made by electronic means are also telecommunication services (for example, e-mail or Internet access services). If a supply is characterized as a telecommunication service it is subject to special rules on the place of supply and zero-rating rules. Your supply is generally considered to be a telecommunication service supply if its predominant purpose is to do one of the following:
- provide for the emission, transmission or reception of signs, signals, writings, images or sounds or intelligence of any nature through a telecommunications network
- make available a telecommunications facility for such emission, transmission or reception
- provide a means through which other services or IPP are delivered, rather than to provide the services or IPP
However, your supply is generally not considered a telecommunication service supply if:
- you use or consume a telecommunication service in making a supply of a service or property
- it includes the provision of a telecommunication service, but only as a means of delivering another service or property
- it is incidental to the supply of another service or property
You need to determine the place of supply to know which GST/HST rate to charge. If your supply is a telecommunication service, see Telecommunication services.
Examples – Place of supply for telecommunication services
Example 1 – Supply made in Canada
You are an Internet Service Provider located in Canada that provides Internet access to resident and non-resident customers. Internet access is a telecommunication service which involves making available telecommunications facilities. Your supply is deemed to be made in Canada as the facilities or part thereof which enables connection to the Internet are located in Canada. Your supply is subject to GST/HST.
Example 2 – Supply made in a province
You provide long distance call services by electronic means to a customer. He makes a long-distance call from Toronto to Montreal. The billing location from the service is in Ontario. Since the communication is emitted and billed in Ontario, your supply is deemed to be made in Ontario. Since it is a participating province, your supply is subject to HST at the rate of 13%.
Examples - Place of supply for telecommunication services
Example 1 - Supply made in Canada
You are an ISP located in Canada that provides Internet access to resident and non-resident customers. Internet access is a telecommunication service which involves making available telecommunications facilities. Your supply is deemed to be made in Canada as the facilities or part thereof which enables connection to the Internet are located in Canada. Your supply is subject to GST/HST.
Example 2 - Supply made in a province
You provide long distance call services by electronic means to a customer. He makes a long-distance call from Toronto to Montreal. The billing location from the service is in Ontario. Since the communication is emitted and billed in Ontario, your supply is deemed to be made in Ontario. Since it is a participating province, your supply is subject to HST at the rate of 13%.
However, if your supply is made to a non-resident who is not registered, it could be zero-rated. For more information, see Exports.
Special rules for computer-related services and internet access
Special rules apply to determine in which participating province a supply of computer-related services or internet access is made. A computer-related service means one of the following:
- a technical support service that is provided by means of telecommunications and relates to the operation or use of computer hardware or software
- a service involving the electronic storage of information and computer-to-computer transfer of information
If you supply is a computer-related service or internet access, see Computer-related services and internet access.
Exports
Exports
According to the place of supply rules for IPP, services and telecommunication services, your supply may be considered to be made in Canada. However, if it is made to a non-resident who is not registered, your supply could be an export. For more information, see Exports.
If your supply is considered an export, it could be a zero-rated supply, which is a taxable supply that is subject to a GST/HST rate of 0%. However, before zero-rating your supply, you must verify that it is eligible. To know if your supply is eligible for zero-rating, see GST/HST Info Sheet GI-034, Exports of Intangible Personal Property and GST Memoranda series chapter 4-5-1 Exports – Determining Residence Status.
Forms and publications
- GST/HST Technical Information Bulletin B-090, GST/HST and Electronic Commerce
- GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province
- GST/HST Memoranda Series Chapter 4-5-3, Exports – Services and Intellectual Property
- Guide RC4027, Doing Business in Canada – GST/HST Information for Non-Residents
- Date modified:
- 2019-04-15