25 May 1999 GST/HST Ruling HQR0001468 - Website Advertising

Dear XXXXX

Thank you for your letter of November 2, 1998, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of advertising an service on your internet website. We apologize for the delay in responding to your request.

Statement of Facts

Our understanding of the facts from your letter and our telephone conversation is as follows:

1. XXXXX is a registered charity under the Income Tax Act and also a registrant for GST/HST purposes.

2[.] XXXXX recently started a website on the internet to provide information on its society and information on XXXXX in general.

3. The website is located in XXXXX[.]

4. XXXXX plans to solicit advertising on its website to help cover the cost of maintaining its website.

5. The type of advertising offered can be in the form of a site logo with a link to the advertiser's website, a site rotating banner or an exclusive page sponsorship.

6[.] XXXXX stipulates the format, i.e. space available, type of electronic format that can be used on its website.

7[.] XXXXX clients are scientific instrument companies in the XXXXX[.]

Ruling Requested

1. What is the tax status of the supply of the advertising service made through the XXXXX website when supplied to a non-resident person who is not registered for GST/HST purposes?

2. What is the tax status of the supply of the advertising service made through the XXXXX website when supplied to a non-resident person who is registered for GST/HST purposes?

3. What is the tax status of the supply of the advertising service made through the XXXXX website when supplied to a Canadian resident?

Ruling Given

Based on the facts set out above, we rule that:

1. The supply of the advertising service made through the XXXXX website to a non-resident person who is not registered for GST/HST purposes at the time of supply is a zero-rated supply.

2. The supply of the advertising service made through the XXXXX website to a non-resident person who is registered for GST/HST purposes at the time of supply is a zero-rated supply.

3. The supply of the advertising service made through the XXXXX website to a Canadian resident is an exempt supply.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act (the ETA), or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

1. Generally, a supply of a service made by a charity is exempt from GST/HST by virtue of section 1 of Part V.1 of Schedule V to the ETA. However, certain supplies of services made by a charity are specifically excluded from this general exemption such as supply of a service that is zero-rated under Schedule VI to the ETA. In particular, section 8 of Part V of Schedule VI to the ETA zero-rates a supply of an advertising service that is made to a non-resident person who is not registered for the GST/HST at the time the service is performed. A zero-rated supply if taxable at the rate of 0%.

2. Section 8 of Part V of Schedule VI does not apply in the case of a supply of an service made to a non-resident person who is registered for the GST/HST at the time the supply if performed. However, under the general zero-rating provision concerning the export of services found in section 7 of Part V of Schedule VI to the ETA, a supply of an advertising service made to a non-resident person who is registered for the GST/HST at the time the service is performed is also zero-rated.

It should be noted that section 7 does not apply when the non-resident person is an individual who is in Canada at any time when the individual has contact with the supplier in relation to the supply of the service, or, when the advertising service is supplied to an individual while that individual is in Canada.

3. As mentioned previously, section 1 of Part V.1 of Schedule V to the ETA generally exempts all supplies of services made by a charity to the extent that they are not zero-rated or otherwise excluded from this exempting provision. As a supply of an advertising service made by a charity to a Canadian resident is not a service that is excluded from this exempting provision, it will be exempt for GST/HST purposes.

For further information, please find enclosed the guide entitled "GST/HST Information for Charities".

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8223.

Yours truly,

Carolle Mercier
Services and Intangibles Unit
General Operations & Border Issues Division
GST/HST Rulings and Interpretations Directorate

XXXXX

HQ letters:

Analysis:

A registered charity has a website on the internet. The website is located in XXXXX XXXXX[.] They are registered for the GST/HST. They plan to solicit advertising to help cover the cost of maintaining their website. Advertising is to come from scientific instrument companies in the XXXXX and perhaps other XXXXX[.] They have asked if the provision of advertising through a website on the internet is taxable supply under the GST/HST.

The issues that arise are:

1. Where is the supply made, if in Canada, it would be a taxable supply unless otherwise exempt.

2. If the supply is made in Canada to a non-resident person, it would be zero-rated in accordance with section 7 of Part V of Schedule VI to the ETA provided that none of the exclusions outlined in paragraphs (a) to (h) apply.

3. If the supply is made in Canada to a non-resident person who is not a registrant at the time the service is performed, it would be zero-rated in accordance with section 8 of Part V of Schedule VI to the ETA.

4. If the supply is made in Canada by a registered charity to a resident and the supply is not otherwise zero-rated, it will be an exempt supply by the charity pursuant to section 1 of Part V.1 of Schedule V to the ETA.

A supply of advertising is a service and is deemed to be made in Canada if any part of the service is, or is to be performed in Canada. Services provided wholly outside Canada are not subject to the GST/HST.

The XXXXX located in Canada, with a website located in Canada and the organization is registered under the GST/HST to collect and remit tax on taxable supplies XXXXX[.] As a charity, they are generally exempt from GST/HST for most supplies that they might make. One exception to this exempt status is the making of zero-rated supplies.

Conclusion

According to the information provided, the client wishes to make zero-rated supplies in Canada to non-resident person pursuant to section 7 of Part V of Schedule VI to the ETA, or to non-resident non registered persons pursuant to section 8 of Part V of Schedule VI to the ETA, and therefore excluded from the general exempting provision of section 1, of Part V.1 of Schedule V to the ETA. They also anticipate selling advertising to resident customers and other international clients as well.