14 July 2000 GST/HST Interpretation 13612 - The Supply of Brochures and Catalogues Made to US Customers

Dear XXXXX:

Thank you for your letters of December 3, 1998 and January 12, 1999, and the additional information sent electronically to XXXXX, by XXXXX of your office, in connection with your request for a GST/HST ruling regarding the treatment of Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain scenarios as outlined below. I apologize for the lateness of this response.

The Canada Customs and Revenue Agency (CCRA), at this time, is unable to issue you a GST/HST ruling as requested. An application ruling, for GST/HST purposes, provides the CCRA's position on specific provisions under the Excise Tax Act (the Act) as these relate to a clearly defined fact situation of a particular person. Accordingly, a request that relates to a hypothetical situation or set of fictional transactions cannot be accepted as a request for a ruling. In such instances, an interpretation of the relevant sections of the Act may be provided. Therefore, I am pleased to issue to you a GST/HST interpretation in respect of the transaction proposed in your original request. For your information, I am enclosing a copy of GST/HST Memoranda Series 1.4, entitled "Goods and Services Tax Rulings".

Interpretation Requested

According to the information provided in the above referenced correspondence and to the additional information provided by XXXXX, I understand the issues as follows:

— A non-resident of Canada XXXXX) - XXXXX not registered for GST/HST purposes - comes to Canada and contracts with a registrant printing company XXXXX) to print brochures.

— Once the brochures are ready, XXXXX takes possession of the brochures in Canada and exports them to the US for distribution outside Canada.

— XXXXX also contracts with XXXXX from outside Canada to have catalogues printed as well. The catalogues will then be transferred in Canada by XXXXX to a consignee of XXXXX for no consideration and be distributed in Canada at no charge.

— XXXXX, in both situations, provides XXXXX XXXXX that contains the actual layout, fonts, colours and text to be reproduced in the form of a brochure or catalogue.

— XXXXX must then extract from the XXXXX the information, etc., to be printed. The printing process involves transposing the information included on the XXXXX onto a print film in order for XXXXX to produce printing plates. These will then be set onto press where the print size and colour are chosen, according to XXXXX specifications.

— Throughout the printing process, XXXXX is required to carry liability insurance in respect of XXXXX information (i.e., intellectual property) contained on its XXXXX, in case of accidental destruction.

— Once the brochures or catalogues are printed, XXXXX returns the XXXXX to XXXXX unless the agreement between XXXXX provides that such XXXXX is to be destroyed by XXXXX, following the supply of the printing services.

— XXXXX has not been charging the GST/HST to XXXXX.

Interpretation Given

Section 142 of the Act provides for the general place of supply rules for GST purposes, subject, in part, to section 179 of the Act. Paragraph 142(1)(a) deems a supply of tangible personal property to be made in Canada if the property is, or is to be, delivered or made available in Canada to the recipient of the supply.

Paragraph 142(1)(g) deems a supply of a service (other than a service in relation to real property) to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Therefore, such supplies would be taxable if made in Canada, unless they are specifically deemed to be made outside Canada elsewhere in the Act and thus not subject to tax at all.

As mentioned above, section 142 is subject to section 179 of the Act. More particularly, subsection 179(3) of the Act provides, in part, for the deeming of a supply of tangible personal property or a service of manufacturing or producing tangible personal property to be made outside Canada, provided that all of the following conditions are met. For example:

— XXXXX must cause physical possession of the brochures to be transferred at a place in Canada to XXXXX.

— After physical possession of the brochures is transferred to XXXXX, the latter exports the brochures.

— The brochures are not acquired by XXXXX for consumption, use or supply in Canada at any time after physical possession of the brochures is transferred to XXXXX.

— After physical possession of the brochures is transferred to XXXXX, and before the brochures are exported, these are not further processed, transformed or altered in Canada.

— XXXXX maintains evidence satisfactory to the Minister of the exportation of the brochures by XXXXX.

Should it be determined that the supply is one of a service made to XXXXX of manufacturing the brochures, the supply of the service made by XXXXX would be deemed to be made outside Canada by virtue of subparagraphs 179(3)(a)(ii) and 179(3)(c)(ii) of the Act.

Similarly, if the supply made by XXXXX is one of tangible personal property (e.g., the brochures), such a supply would also be deemed to be made outside Canada pursuant to subparagraphs 179(3)(a)(i) and 179(3)(c)(ii) of the Act.

Now turning to the catalogues that are transferred by XXXXX to XXXXX consignee in Canada, subsection 179(1) of the Act, provides that the supply of the service of producing the catalogues would be deemed to be a supply of the catalogues (i.e., tangible personal property) by operation of paragraph 179(1)(d) of the Act.

Nonetheless, such a supply would not be taxable by virtue of subparagraph 179(1)(c.2)(i) of the Act, where XXXXX has supplied the catalogues to the consignee for no consideration.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-8220.

Yours truly,

Daniel E.B. Chamaillard, Senior Technical Analyst
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate