Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 152843
Dear [Client]:
Subject: GST/HST INTERPRETATION
Place of supply of printed matter and invoice management supplies
We are responding to […][your correspondence], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to printed matter and invoice management services. We apologize for the delay in our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Based on the information provided in your letter, we understand the following:
1. The Supplier is a GST/HST registrant and a provider of total document management and marketing solutions. It provides integrated web and print based communications, information management and associated professional services.
2. The Supplier derives its revenue from a variety of sources, including Product A. Two aspects of the Supplier’s Product A business include the production or processing of printed matter [the Printed Matter Supply] for a customer (the Recipient), which the Supplier then mails to addresses provided by the Recipient […], and the provision of invoice management services [the Invoice Management Supply] to the Recipient […].
3. The Product A business is subject to a service level agreement (SLA) between the Supplier and the Recipient. Each supply is governed by an SLA; a separate SLA could apply in respect of each aspect of the Product A business, or a single SLA could apply to both aspects.
4. It is unclear if the Supplier bills a Recipient separately for each of the supplies or whether the Supplier bills a Recipient globally.
Overview of the Printed Matter Supply
5. The Supplier receives an order from a Recipient to produce printed matter. The order contains descriptions, templates and a proofing system, together with the related printing and delivery service requirements for all product items as formally agreed upon and listed in a schedule to the SLA. Products and templates may be added, revised or deleted from time-to-time as agreed between the Supplier and the Recipient.
6. The Recipient provides the Supplier with the necessary visual identity parameters, requirements and logos such as product images and variable templates. These are then implemented by the Supplier’s technical service teams. The templates can also be customized, which allows the Recipient to choose specific product items.
7. The Recipient can then order, either by phone or online, pre-printed and/or print-on-demand materials such as stationary, forms, labels and marketing materials, and customized print-on-demand documents to the Recipient’s specific needs by allowing changes to product items in line with the Recipient’s approved template guidelines, such as replacing text, logos and images.
8. Once the proof of a product item is approved by the Recipient, it is sent to the production site for printing by the Supplier.
9. The data files received by the Supplier may contain names and/or addresses for imaging purposes that are read electronically by the Supplier's imaging equipment, but that information is not summarized in any manner so as to provide a distribution by province for administrative purposes, and may not even match the final physical ship-to location once production is done. The Recipient can, however, identify and select distribution of its order to a preferred “ship-to address.”
10. The Supplier and Recipient will agree on specific billing arrangements, such as the provision of a separate invoice in respect of each order and/or whether freight costs should be reflected separately from product items on each invoice. The Supplier can invoice the Recipient for its supplies to the Recipient by issuing one summary invoice, together with a detailed invoicing report.
11. The Supplier delivers the printed matter either by using a Canada Post mail drop, where the printed matter will then be delivered by Canada Post to the Recipient’s customers or proposed customers, or directly to an address (typically a customer’s address) specified by the Recipient.
Overview of the Invoice Management Supply
12. The Recipient contracts with the Supplier for printing, print finish and delivery services for the Recipient’s invoicing files.
13. The Recipient provides the relevant invoices in a print-ready file format to the Supplier via an electronic file transfer protocol. The Recipient also provides a summary report file that specifies the number of files and invoices to be printed. The files are separated by invoice type and are differentiated between invoices to be sent to Canada Post and invoices to be returned directly to the Recipient.
14. The SLA generally involves the Supplier contracting to:
- Print invoices on a daily basis;
- Insert invoices, related documents such as business reply envelopes, and any additional inserts as specified by the Recipient into the appropriate outer envelope;
- Post mail as per Canada Post regulations;
- Courier internal mail back and forth to the Recipient as required;
- Manage all necessary inventories for the production of invoices, including mastheads and envelopes;
- Provide a summary bill on all activities;
- Provide quality control audit reports on all activities;
- Provide monthly warehouse reports on all items that are warehoused to meet the requirements of the production of the Recipient’s invoices; and
- Insert cheques delivered by courier to the Supplier.
15. The Supplier’s duties under the SLA are not fixed and may therefore differ from the tasks listed in the SLA. In addition, the Recipient may perform some of the above activities. For example, the Recipient may provide the Supplier with pre-printed paper stock and simply request that the Supplier print the Recipient's name and address on the stock and provide letter shop and delivery services.
16. The Supplier may invoice the Recipient through a summary bill, with postage and handling typically itemized separately. GST or HST is added to each shipment subtotal and at the end of the summary bill, all charges (i.e. individual shipment subtotals) are totaled to reflect the final total of the summary bill.
INTERPRETATION REQUESTED
You would like to know:
1. Are the Supplier’s supplies of Product A single supplies or multiple supplies?
2. What is the appropriate characterization of the Supplier’s Product A transactions?
3. What is the appropriate place of supply rule to apply in respect of the Product A transactions?
INTERPRETATION GIVEN
Our interpretation is general in nature because limited information was provided. We have divided our response according to the two major aspects of the Product A business that is, the Printed Matter Supply and the Invoice Management Supply. In addition, the assumption is made that the supplies are made in Canada and that the Recipients are residents of Canada.
Printed Matter Supply
Based on the information provided, only general comments can be made regarding whether the Supplier is making a single supply or multiple supplies. As stated in GST/HST Policy Statement P-077R2, Single and Multiple Supplies (P-077R2), the determination of whether a transaction consisting of several elements is a single supply or multiple supplies is a determination of fact, including consideration of any relevant agreements or contracts between the parties. In general, multiple supplies occur when one or more of the elements of a transaction can sensibly or realistically be broken out from the other elements. Conversely, two or more elements of a transaction are generally part of a single supply when the elements are integral components, the elements are inextricably bound up with each other, the elements are so intertwined and interdependent that they must be supplied together, or one element of the transaction is so dominated by other elements that the first element has lost any identity for fiscal purposes.
With respect to characterizing a supply made to a particular recipient, all relevant facts, including the terms of the SLA, should also be reviewed. In the case of a supply of printing, a client generally contracts with an organization to acquire property, such as business cards, letterheads, envelopes and brochures. Upon printing of the items, the property is transferred to the client. The primary purpose of the transaction is the transfer of the property. The Canada Revenue Agency (CRA) considers, in cases such as these, that the supply of printing is generally a taxable supply of tangible personal property (TPP) for GST/HST purposes. However, under certain circumstances, the supply of printing may not be a supply of property. If the recipient of the supply were to provide any of the necessary inputs, such as blank business cards, t-shirts or paper, the supply of printing would be the supply of a service.
A similar review of the facts is necessary if other elements are also provided as part of a supply. For example, the supply of graphic design generally involves a graphic designer using specialized technology and computer software to produce designs and layouts, which, on its own, is generally considered to be the supply of a service. However, when a supplier provides graphic design as part of a supply of printing, both activities could, if supplied together, constitute a single supply of TPP.
Based on the information provided, it appears that the Printed Matter Supply could, in some cases, be a single supply of TPP. However, additional information would be required before a definitive answer may be given.
The CRA’s position has been that where a registered supplier supplies goods on a delivered at destination basis and the terms for the sale of the goods dictate that the supplier must deliver the goods to a destination specified by the recipient, the delivery of the goods will generally be considered to be part of a single supply.
Whether a supply made in Canada is made in a participating province or non-participating province is determined by section 144.1 and Schedule IX, and where applicable, the New Harmonized Value-added Tax System Regulations (the Regulations). Section 144.1 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, made in the province. Further, under section 144.1, a supply made in Canada that is not made in any participating province is deemed to be made in a non-participating province.
If a supply of TPP is being made by the Supplier, the place of supply rules under section 1 of Part II of Schedule IX will apply. This section is subject to section 3 of this Part, which deems property to be delivered in a particular province if certain conditions are met, including if a supplier sends the property by mail to an address in the particular province.
We note that […][you suggest] it would be easier for the Supplier to apply the place of supply rules for mail delivery under Part VII of Schedule IX where the Supplier uses Canada Post to send TPP to a Recipient’s customers, instead of having to track where each mail drop is being sent. In addition, it is suggested that not being able to use such rules may be contrary to determining where consumption of the TPP occurs and may have unintended results for recipients that are unable to fully recover GST/HST imposed on the supply.
However, Part VII of Schedule IX may only apply if it is established, based on a complete set of facts, that a separate supply of mail delivery services is made, and that such a supply is not made pursuant to a bill of lading or, additionally in the case of a mail delivery service evidenced by a stamp, postage-paid card, package or similar item (other than an item bearing “business reply” indicia), the consideration for the supply of the service is less than $5 and is sent to an address in a participating province. As a result, if TPP is supplied on a delivered basis, it would be inappropriate to artificially split the supply into two separate components, for the reasons indicated in P-077R2. Please note, because the solution suggested by […][you] would require a legislative change, any future concerns regarding legislative changes of the place of supply provisions should be directed to the Department of Finance.
Finally, where a registered supplier supplies goods on a delivered at origin basis (such as the supplier's premises) and the supplier is not required under the terms for the sale of the goods to deliver the goods to a destination specified by the recipient, the delivery of the goods will generally be considered to be a separate supply of a freight transportation service. As a result, different place of supply rules would apply in respect of the delivery service. Pursuant to section 5 of Part VI of Schedule IX, a supply of a freight transportation service, which includes a service of delivering mail, is made in a province if the destination of the service is in that province, unless Part VII of Schedule IX applies.
For more information on the place of supply rules, please refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province (B-103).
Invoice Management Supply
Similar to our comments regarding the Printed Matter Supply, a determination as to whether the Supplier is making a single supply or multiply supplies in respect of the Invoice Management Supply requires consideration of all relevant facts and the criteria outlined in P-077R2. A review of all relevant facts, including the terms of the SLA with a particular recipient, would also be necessary before being able to characterize a particular Invoice Management Supply.
Based on the information provided, it appears that the Invoice Management Supply could, in some cases, be a single supply of a service. However, additional information would be required before a definitive answer may be given.
As mentioned above, to determine the place of supply for a supply made in Canada, consideration is given to section 144.1, Schedule IX and where applicable, the Regulations.
If a supply of a service is made by the Supplier, section 3 of Part IX of Schedule IX provides that a supply of property or a service is made in a province if the supply is prescribed to be made in the province. As a result, the place of supply rule under subsection 13(1) of Division 3 of Part 1 of Regulations will apply. Pursuant to this provision, a supply of a service is made in a province if, in the ordinary course of business of the supplier, the supplier obtains an address in the province that is:
a) if the supplier obtains only one address that is a home or a business address in Canada of the recipient, the home or business address in Canada obtained by the supplier,
b) if the supplier obtains more than one address described in paragraph (A), the address described in that paragraph that is most closely connected with the supply, or
c) in any other case, the address in Canada of the recipient that is most closely connected with the supply.
This rule is generally based on the location of the recipient, which is generally accomplished by determining the place of supply based on an address in Canada of the recipient that the supplier obtains in the ordinary course of its business.
For more information on the place of supply rules, please refer to B-103.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 902-450-8311. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Allison Fraser
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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