- The information in this Guide will help you if you are an Internet service provider (ISP) or web page designer. It explains how Retail Sales Tax (RST) applies to Internet related services, related computer programs and hardware. This Guide replaces all information pertaining to the application of RST to Internet services and web page designs as outlined in Retail Sales Tax Information Bulletin 1-98.
Internet Services
Examples of Internet
Services
If you provide any of the following Internet
related services, you are not required to charge your customer RST:
- membership or subscription fees to access the Internet
and/or World Wide Web
- Internet e-mail services
- arranging for live chat or conferencing sessions directly
on the Internet
- technical assistance and support (for example, assistance
or support either in person, over the phone, electronically, or via
e-mail, but not hands-on)
- web hosting and/or domain name registration
- advertising fees charged to place ads within a web
page
- real-time streaming video and/or audio.
As an Internet service provider you are providing your customer with
a non-taxable service. As a non-taxable service provider you must pay
RST on all your purchases of taxable goods, such as taxable computer programs,
and services such as telecommunication services. Your customers must also
pay RST to their telecommunications provider for the services they use
to access the Internet.
When, at no additional charge, you provide your customer with equipment
(for example, a modem or similar device) and/or a taxable computer program
that is necessary to access and use the Internet (for example, an Internet
browser), you must pay RST on the cost of this equipment and the computer
program. You do not charge your customer RST.
Rental of Equipment
When you charge a separate fee
for the rental of the equipment, and/or the taxable computer program,
you must charge your customer RST on the rental charge and/or licence
fee. In this situation, you may purchase the rental equipment and the
taxable computer program exempt from RST by providing your supplier with
a properly completed Purchase Exemption Certificate (PEC). For more information
about PECs please refer to RST Guide 204 - Purchase Exemption
Certificates
Wireless and Portable
Internet Devices
If you rent or sell wireless
portable devices, RST applies to the rental fee or selling price of these
goods. In addition, RST must be charged on telecommunication fees such as
cellular network access charges, usage/airtime, roaming, landline fees and
messaging as these services are taxable.
When you charge your customer for Internet access, the fee is non-taxable
provided you separate this charge from the taxable charges on your customer's
bill. When you bill your customer for both non-taxable and taxable goods or
services, you must separate the charges on the bill or the entire amount is
taxable.
Hardware that you sell or rent can be purchased exempt from RST by providing
your supplier with a properly completed PEC. To qualify for this exemption
the charge for the sale or rental of this equipment must be shown separately
from any other charges on your customer's billing.
Web Page Design
In most situations the creation of a
web page design is a non-taxable service provided the web page does not
contain a taxable computer program. When scripting language is used to
produce an applet within a design, we do not consider the applet to be a
taxable computer program because it is not in an executable format and
requires a web browser to interpret it.
If your web page design contains a taxable computer program then the
entire price of the design is taxable. You cannot separate the charge for
the taxable program from the other design related charges on your customer's
invoice to avoid charging RST on the entire amount.
If your web page design contains a custom computer program, you are not
required to charge RST on the sale. We consider a "custom computer
program" to be a computer program that is "designed and developed to
solely meet the specific requirements of, and that is intended for the
exclusive use of, a particular person." For information about computer
programs, please refer to RST Guide 650 - Computer Programs and
Related Services.
When is a Web Page Considered a Non-Taxable
Service?
You are not required to charge RST if your design
meets the following conditions:
- the design is transferred to your customer electronically,
or placed directly on a server which is connected to the Internet, and
- it is not provided in a hard copy version, such as
a disc, CD or paper copy, and
- the web page does not contain a taxable computer program.
You are not required to charge RST on proofs or approval sheets sent
to your customer before the concept is agreed upon. However, if you provide
a hard copy of your final design then RST applies to the total
charge. It is important that your contract with your customer details
your arrangements, such as whether you will deliver the web page electronically
or if the web page includes a custom computer program. In the case of
an audit, this information will help support your claim that you were
not required to collect RST.
As a web page designer and/or custom computer program developer, you
are required to pay RST on all your purchases of taxable goods and services,
including any licence fees or programs and telecommunication services,
that you use in providing your non-taxable service.
Sales made via the
Internet
If you sell taxable goods or services via the Internet you
must charge RST on the total value of the goods that are delivered
(physically or electronically) to Ontario, or the services that are
rendered in Ontario, regardless of where the sale takes place. With the
exception of computer programs, if the goods you sell are delivered
electronically, such as a magazine or a catalogue, and you do
not provide a hard copy you are not required to charge RST.
Total value includes the selling price in Canadian dollars plus
shipping/delivery/mailing charges, customs, duties and federal excise
taxes. Federal Goods and Services Tax (GST) and brokerage charges are
not included in determining the total value. On your website you must
inform your customers that RST is applicable to your sales of taxable
goods and services delivered in Ontario. If your goods or services are
delivered to customers outside of Ontario, you are not required to
charge RST. You are required to retain proof that the goods or services
were delivered to a customer located outside of Ontario.
"Right to Use" a Taxable Computer Program
If you charge a fee to provide your customer with the "right
to use" a taxable computer program that is located in, or is
downloaded to, a location in Ontario, you must charge RST on the fee.
RST applies to computer programs sold or leased regardless of how the
program is delivered, including charges for the right to use a taxable
computer program, even if there is no formal licencing agreement. Some
examples of taxable computer programs include Internet browsers, games,
spreadsheet programs, word processing programs, database programs,
pre-written "canned" or "off-the-shelf" computer programs and
upgrades.
If you charge a fee for the "right to use" a computer program
located outside Ontario RST does not apply, provided the program is not
downloaded to a location in Ontario.
Access to Information
If your site offers access to information only, such as an
on-line encyclopaedia or reference library, then RST does not apply.
This is considered to be access to information and is not taxable.
When is a Vendor Permit Required?
If you are located in or have a presence in Ontario, you must register
for a vendor permit and charge and collect RST on the total value of your
taxable sales delivered or taxable services provided in Ontario. If you
are not legally required to register, you may register voluntarily for
a vendor permit. In the case where you are not required to have a vendor
permit, it is your customer's responsibility to remit
the applicable taxes to the Retail Sales Tax Branch of the Ontario Ministry
of Finance.
For More
Information
The information contained in this publication is only a guideline. For more information, please
contact the Ontario Ministry of Finance at 1 866 ONT-TAXS (1 866 668-8297) or visit our
website at ontario.ca/finance.
To obtain an official interpretation on a specific situation, write to: Ministry of Finance, Tax
Advisory Services Branch, Retail Sales Tax Section, 33 King Street West, Oshawa ON L1H 8H5.
