4 September 1998 GST/HST Interpretation HQR0001280 - Application of the GST/HST to Supplies of Information Transmitted Using Satellite and Internet Technology by a Registered Non-resident Corporation

GST/HST Rulings and Interpretations
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Vanier, Ontario K1A 0L5

I refer to Ms. XXXXX memorandum of August 4, 1998 (File #: XXXXX, and my telephone conversation with XXXXX on August 12, 1998, concerning the application of the Goods and Services Tax/Harmonized Sales Tax (HST) to supplies made by the above-referenced registered non-resident.

XXXXX provided the following information in her memorandum and during our telephone conversation:

•   XXXXX is a registered non-resident corporation located in the United States that uses satellite and Internet technology to transmit information (e.g., commodities exchange information and weather) to its subscribers.

•   If a subscriber wants to receive the information by satellite, the subscriber must also lease data receiving equipment (i.e., satellite dish and receiver) from XXXXX retains ownership of the data receiving equipment at all times.

•   XXXXX has a warehouse in Canada and does have some data receiving equipment located in the warehouse. The warehouse is used mainly as a temporary storage place. When a subscriber enters into a contract with XXXXX the data receiving equipment may or may not be located in the Canadian warehouse. Many times XXXXX the data receiving equipment will need to be shipped from the United States to Canada to be given to the subscriber.

•   There are separate charges for the information service and the lease of the data receiving equipment.

•   Subscribers can, also, access the information over the Internet. In these cases, XXXXX only charges for its service.

Information Services

I agree with XXXXX decision that the information service supplied by XXXXX to its subscribers is deemed to be made outside Canada under the provisions of paragraph 142(2)(g) of the Excise Tax Act (Act). The fact that XXXXX transmits the information electronically to its customers in Canada does not change the place where the service is performed wholly in the United States XXXXX is, therefore, not required to collect and remit Division II tax.

Lease of Data Receiving Equipment

Policy Statement P-193 outlines the Department's position concerning the meaning of the phrase "a supply of tangible personal property otherwise than by way of sale, possession or use of the property is given or made available in (or outside) Canada to the recipient" for purposes of paragraphs 142(1)(b) and 142(2)(b) of the Act.

The policy states that the place where possession or use of the tangible personal property is given or made available can be determined based on the location of the property at the time the supply is made (i.e., at the time the agreement is entered into). Generally, the location can be determined by reference to the terms of the lease or rental agreement.

If the data receiving equipment being leased by XXXXX to a subscriber is located in Canada at the time the agreement is entered into, the supply is deemed to be made in Canada pursuant to paragraph 142(1)(b). Reference must then be made to section 144.1 of the Act and Schedule IX, Part II, section 2 to the Act for a determination as to which province the supply is made. If the supply is made in a participating province, XXXXX is required to collect and remit the HST at 15%. On the other hand, if the supply is made in a non-participating province, XXXXX is required to collect and remit the GST at 7%.

In those situations where the equipment being leased by XXXXX to a subscriber is located in XXXXX the United States at the time the agreement is entered into, the supply would be deemed to be made outside Canada pursuant to paragraph 142(2)(b). As a result, XXXXX is not required to collect and remit the tax under Division II.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6743.

Garry L. Ryhorchuk
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

NCS Subject Code:                 11680-1