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This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter TC-0002, May 2003
Thank you for your facsimile message, dated March 14, 2003, inquiring about the Ontario retail sales tax
(RST) status of telephone services provided in student residences.
This interpretation is based on the information provided and which is conveyed in the "Understanding of
Facts" portion of this ruling. Please review the information for its completeness and accuracy. If it is
determined that the information is incomplete or inaccurate, this interpretation will not be binding. In the
event that our understanding of the facts is incomplete or inaccurate, please notify the undersigned, in
writing, so that we may reconsider our opinion.
Understanding of Facts
It is our understanding that University A, will be installing a new telephone system and, will be providing
telephone lines in its student residences.
University A would like a written interpretation to determine if it is required to charge RST on its provision
of telephone services in the following circumstances:
- Phone service is billed separately to residents as an additional charge, not part of the room and board fee.
- Phone service is included as part of the room and board fee for all residents.
- Phone service is included as part of the room and board fee for all residents, with the option to opt out of the service and receive a discount.
- A number of the rooms are double rooms where, two residents will share a phone line. In these cases, the billed amount or discounted amount will be split between the two residents.
- There are other charitable organizations based on campus that will be charged by the University for telephone lines used.
Legislation and/or Administrative Policy
Under subsection 2(3) of the Retail Sales Tax Act (Act) every purchaser of a taxable service described in
clause (a) of the definition of "taxable service" must pay RST on the consumption or use of that taxable
service. The general rate of RST is 8% on the fair value.
Clause (a) in the definition of taxable service under section 1 of the Act states:
telecommunication services of all kinds, including without restricting the generality of the
foregoing, telephone and telegraph services, community antenna television and cable television,
transmissions by microwave relay stations or by satellite, and pay television, but not including public broadcasting services that are broadcast through the air for direct reception by the public without charge,
The definition of "telecommunication" is also contained in section 1 of the Act and states:
"telecommunication" means any transmission, emission or reception of signs, signals, writing,
images or sound or intelligence of any nature by wire, radio, visual or other electromagnetic or laser-based system, but does not include any transmission, emission or reception or class thereof that is prescribed by the Minister to be excluded for the purpose of this paragraph;
Section 5 in Regulation 1012 of the Act excludes certain persons providing telecommunications services
from the definition of "telecommunication" and states in part:
For the purpose of the definition of "telecommunication" in section 1 of the Act,
"telecommunication" does not include any transmission, emission or reception of a class of signs, signals, writing, images or sound or intelligence of any nature to provide a telecommunication service for which a charge is made by a person who,
(a) owns or operates,
(i) a hotel or motel,
(ii) an apartment or condominium,
(iii) a school or university,
(iv) a hospital, and
(v) a taxi company in respect of the use of two-way radios;
Analysis
Resellers of telecommunication services are required to charge RST on the sale of taxable
telecommunication services. These services include telephone services.
However, under section 5 of Regulation 1012 to the Act, universities providing internal
telecommunication services are NOT considered to be resellers and are not required to charge, collect
or remit RST on charges for the internal telecommunications services (e.g. telephone services). RST is to
be paid by universities on telecommunication services they purchase from carriers or resellers and on any
equipment purchased to provide these services.
Conclusion
University A is not required to charge, collect and remit RST on the telecommunications services (i.e.
telephone services) that it resells to its students in residence, nor to clients who maintain offices on the
university premises. University A must pay RST on all telecommunication services bought from
telecommunication carriers, as well as on the equipment (e.g. telephone handsets, etc.) purchased to
provide the telecommunications service.
Where University A provides telecommunication services (e.g. telephone lines) to clients who are located
off-campus, then University A is considered to be a reseller of telecommunications in these cases and
must charge, collect and remit RST on its billings to the off-campus clients. The rental or lease of
telephone handsets is a sale of tangible personal property and University A must charge, collect and remit
RST on its sales of these items to off-campus clients.
