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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0009, September 2004
Thank you for your facsimile of May 25, 2004 regarding the application of Ontario retail sales tax (RST) to
a telephone order management service (the Service).
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 inaccurate or incomplete, please notify the undersigned, in
writing, so that we may reconsider our opinion.
Understanding of Facts
It is our understanding that Company A supplies quick service foods to the public, specializing in fried
chicken. The Service carries out numerous functions on Company A's behalf. The Service, upon receipt
of a call from a customer, will direct the call to the appropriate Company A employee for response. If the
customer wishes to place an order, the employee will process the order and will also offer the customer
value-added options to their order. The customer's order is input into the system and forwarded to the
applicable restaurant so that the customer's order may be concluded. The Service is also responsible for
the resolving of customer enquiries, as well as to work directly with restaurants in order to resolve
customer complaints. The Service must also ensure that the delivery database is kept current.
On a regular basis, the Service prepares and provides a summary to Company A of the different products
that were ordered, as well as indicating the areas that the orders originated from. This service assists the
company with future promotion plans.
It is your belief that the functions fulfilled by the Service do not constitute a telecommunications service
and you request confirmation that Company A should not be charged RST for the services rendered.
Legislation and/or Administrative Policy
The Ontario Retail Sales Tax Act (Act) imposes retail sales tax at the rate of 8% on the purchaser of a
taxable service. The definition of "taxable service" in section 1 of the Act includes:
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
..."Telecommunication" is defined in section 1 of the Act to mean:
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 5.1(4) of Regulation 1012 to the Act prescribes the following telecommunication services for the
purposes of clause (k) of the definition of "sale":
- Telecommunication services that are transmitted and received within the province.
- Telecommunication services that are transmitted from or received within the province if
the instrument or facility for the emission, transmission or reception of the service in
respect of which the charge for the provision of the telecommunication service is, or is to
be, billed is ordinarily situated in the province.
- Telecommunication services that are transmitted from the province and with respect to
which the purchaser is not liable to pay tax on the telecommunication service to any other
jurisdiction.
- Private line telephone service which includes a service point in Ontario and which
is provided to a person who contracts in Ontario for the provision of the service.
- 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.
Section 24 of Regulation 1013 to the Act defines "telephone services" to mean, in part, the provision of
communications by means of a telephone system or network.
Analysis
A network service that provides users with the ability to transmit information, data or intelligence of any
nature is the provision of a taxable telecommunication service. The intent of the legislation is to tax the
charge made for the transmission of information or data, rather than any charges made for access to
information. If the service being purchased simply uses telecommunication services in its delivery, then it
is not a taxable telecommunications service.
For example, a pizza franchise operation may advertise a universal number a customer can call to order a
pizza. The order is taken by either the franchiser or a related company who relays the order to the
appropriate franchisee. The franchisee is not paying for the ability to communicate, but rather is paying for
services provided in processing the telephone calls into a pizza order. RST is not applicable on the
charge to the franchisee for this service. However, if the service is acquired to transmit or receive
messages or data, then it is a taxable telecommunications service.
Conclusion
Based on the information provided, Company A is paying the Service to provide a service to obtain and
gather information (orders) rather than paying the Service for the provision of a telecommunications
service. As such, RST does not apply to the billings by the Service to Company A for the telephone
management service. The Service must pay RST on any taxable telecommunications or equipment
purchased to provide the non-taxable service.
