Information and Disclaimer
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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0005, October 2003
Thank you for your letter of September 24, 2003 regarding the application of Ontario retail sales tax (RST)
to phone cards.
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 you are the owner of Company A. You are requesting information on the
policy of the Retail Sales Tax Branch as it relates to the taxing of phone cards which are sold by your
store.
Legislation and/or Administrative Policy
The Ontario Retail Sales Tax Act (Act) requires every purchaser of taxable services to pay RST at the
applicable rate on the fair value of the service(s) in question. The general rate of RST is 8%.
Section 1 of the Act defines 'taxable service' to include telecommunication services of all kinds, including
telephone and telegraph services, community antenna television and cable television, and transmissions
by microwave relay stations or by satellite.
The term 'telecommunication' is defined in section 1 of the Act to mean:
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.
Subsection 5.1(5) of Regulation 1012 to the Act prescribes the following telecommunication services for
the purposes of clause (k) of the definition of 'sale':
Telecommunication services for which the purchaser prepays a specified amount of money
through the acquisition of a card or other device by means of which the purchaser acquires
access to telecommunication services up to the specified amount without further payment.
Clause (k) of the definition of 'sale' is found in section 1 of the Act and states that
"sale" means, ...
(11) the provision of such telecommunication services as the Minister may prescribe.
Analysis and Conclusion
The Act requires that RST be charged on telecommunication services of all kinds, including telephone
services. Telephone services are defined as the provision of communications by means of a telephone
system or network, including local and long distance telephone services.
Prepaid long distance and prepaid wireless phone cards meet the definition of ' a card or other device' for
which the purchaser pays a specified amount of money and which entitles the purchaser to acquire
telecommunication services up to the specified amount without any further payment. In other words, they
constitute prepaid telecommunication services. RST is, therefore, payable at the time of sale on the
amount paid by the purchaser to acquire the card.
By comparison, some cards use a microchip that electronically stores cash on the card. The card can be
replenished and may be used wherever the technology exists to purchase goods and services, including
telecommunications. The card is not a calling card but a reusable cash card that may be used to place
calls from pay phones. As a result, RST is not payable at the time of purchase of these cards but rather
will be collected by the telecommunications provider when the card is used to place a call.
