28 June 2001 GST/HST Interpretation 25769 - Web Site Design and Maintenance Services

Dear XXXXX:

Thank you for your letter of December 16, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of web site design and maintenance services.

Your request has been transferred from the XXXXX Technical Interpretation Services Centre to the Border Issues Unit of the General Operations and Border Issues Division of the Excise and GST/HST Rulings Directorate for response.

In accordance with GST/HST Memoranda Series Section 1.4, an application ruling can only be issued with reference to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and where the taxpayer has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. We are pleased to issue you an interpretation which will elaborate on how the GST/HST applies to the supply described in your letter.

The following information was taken from your letter and our subsequent telephone conversation:

•   XXXXX has been contracted to design and maintain a web site for a client who is not resident in Canada.

•   XXXXX is resident in Canada and is registered for GST/HST purposes with business number: XXXXX.

•   XXXXX is situated in, and performs all of the services in respect of the supply to the non-resident in the province of XXXXX.

•   Upon designing the web site, XXXXX sends the site and its complement of web pages electronically to a web server situated outside Canada. XXXXX then maintains the web site electronically from its place of business in XXXXX.

•   The web site design and maintenance service does not include web hosting services.

Interpretation Requested

What is the GST/HST status of the supply of web site design and maintenance services by XXXXX to a non-resident client where the services are performed entirely in the province of XXXXX?

Interpretation Given

A taxable supply of a service made in Canada is generally subject to GST/HST at the rate of 7% (15% when made in a participating province: Nova Scotia, New Brunswick, or Newfoundland) on the value of the consideration for the supply unless the supply is zero-rated (taxed at 0%).

Considering that the web site design and maintenance services supplied by XXXXX to the non-resident client are performed entirely in the province of XXXXX, the supply is deemed to be made in that non-participating province and subject to GST at 7% unless it is zero-rated.

Section 7 of Part V of Schedule VI to the Act is the relevant zero-rating provision. With some exclusions, section 7 of Part V of Schedule VI to the Act zero-rates the supply of a service made to a non-resident person. For additional information regarding this zero-rating provision we are enclosing GST/HST Memoranda Series Chapter 4.5.3 Exports - Services and Intellectual Property.

Based on the description of the supply provided, it appears that none of the exclusions in section 7 of Part V of Schedule VI to the Act are relevant and the supply of the service by XXXXX to the non-resident client is zero-rated.

XXXXX must verify and maintain evidence that the recipient is not resident in Canada for the supply to be treated as a zero-rated supply. GST/HST Memoranda Series Chapter 4.5.1 Exports - Determining Residence Status has been enclosed for your review. Appendix A of this Memorandum describes the documentation that the Canada Customs and Revenue Agency will generally accept as proof that a person is not resident in Canada.

Where XXXXX client is resident in Canada the zero-rating provisions in section 7 of Part V of Schedule VI to the Act do not apply and the supply is subject to GST at 7%.

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.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8812.

Yours truly,

Jeffrey Frobel
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate