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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0011, August 2004
Thank you for your facsimile, dated May 20, 2004, regarding Retail Sales Tax (RST) exemptions for
registrants under the International Registration Plan (IRP).
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
Further to our telephone conversations of June 29, 2004 and July 28, 2004, it is our understanding that
Company A provides tracking and messaging for the Canadian trucking industry. It also sells/rents
satellite equipment to transportation companies to install in their trucks. The drivers of the trucks use the
equipment to communicate with their dispatch centres. You indicated that the driver of the truck hears a
beep when the dispatch centre has sent him a message. The dispatch centre can program the sound
level and frequency of the beep. The driver must pull off the road and press a button to read the
message. If the driver wants to reply to the dispatch centre, he types in a message that gets transmitted
up to the satellite, down to Company A's master control centre and then to the customer's dispatch centre.
The messages are all text, there is no voice.
Company A also provides positioning details regularly to the trucker's dispatch as the dispatch can request
positioning of a truck at any time. Every time the truck has the ignition turned on/off, it automatically sends
the positioning details to the dispatch.
Company A charges a set monthly fee for the messaging services and it also bills for the actual
messaging used. The charge is based on the characters and number of messages used. Some
customers such as transportation companies choose to buy a messaging package that allows them to use
a predefined number of messages and characters. If they use in excess of the package, they are charged
additional amounts based on the overages. There are messages that are not included in the package
and they are billed as they are used only. You indicated that in some situations, this service is purchased
by a transportation company for resale to its drivers/broker drivers. In any case, when Company A bills its
clients, it provides a break-down of all messaging transmitted and/or received for each truck. You are
enquiring as to whether RST applies to the rental and sale of satellite equipment to transportation
companies registered with the IRP. You are also asking if Company A is required to charge RST on the
communication services (as described above) it provides to its clients.
Legislation and/or Administrative Policy
Clients may buy or lease multi-jurisdictional vehicles and multi-jurisdictional trailers without paying RST at
the time of sale or lease, on or after October 1, 2001. Capital equipment such as satellite systems that
are sold or leased with the intention of installing the equipment on multi-jurisdictional vehicles, may also be
eligible for the RST exemption. To obtain the RST exemption, clients must provide the supplier with a
properly completed Purchase Exemption Certificate (PEC) quoting the carrier's carrier account number.
Please refer to the enclosed RST Guide # 809 - Multi-jurisdictional Vehicle Tax Payable under the
International Registration Plan for more information.
With respect to telecommunication services, section 1 of the Ontario Retail Sales Tax Act defines "taxable
service" to mean telecommunication services of all kinds, including 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.
"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.
Under section 24 of Regulation 1013, "telephone services" means the provision of communications by
means of a telephone system or network and includes local and long distance telephone service, wide
area telephone service, foreign exchange telephone service and private line telephone service and
communication services between a cellular telephone that is located in Ontario at the time a call is placed
and a local cellular network in Ontario, including any long distance service required for the call.
Section 5.1 of Regulation 1012 to the Act prescribes, in part, the following telecommunication services for
the purposes of clause (k) of the definition of "sale":
(5) 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.
Analysis and Conclusion
Satellite equipment
Capital additions (e.g., satellite equipment, sleepers, tanks, etc.) made to a multi-jurisdictional vehicle
(including installation labour) prior to registration of the vehicle in IRP, are not subject to RST. When a
capital addition is purchased or leased, the value of the addition must be included in the vehicle taxable
value (VTV) of the truck at the time the new multi-jurisdictional vehicle (MJV) tax is calculated. In order to
purchase or lease capital additions exempt from RST, carriers or broker drivers must provide a properly
completed Purchase Exemption Certificate (PEC) quoting the carrier's IRP account number to Company A.
Capital additions (including installation labour) made to a multi-jurisdictional vehicle after registration of the
vehicle in IRP are subject to RST whether the equipment is purchased or leased.
It is the responsibility of the purchaser when claiming an exemption from RST to ensure that they meet the
qualifications for the exemption. If a properly completed PEC is not issued, Company A is responsible for
charging, collecting and remitting RST on their sales of satellite equipment, including installation charges.
Communication service - Messaging
The Act requires that RST be charged on telecommunication services of all kinds. This includes
telephone services. Telephone services are defined as the provision of communications by means of a
telephone system or network and includes local and long distance telephone services as well as
communication services between a cellular telephone located in Ontario at the time the call is placed and
a local cellular network in Ontario.
Under the Act, sellers of telecommunication services are providing a taxable service and must charge RST
when:
- the telecommunication service is transmitted and received in Ontario; or
- the telecommunication service transmitted 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
Ontario.
- the telecommunication service is transmitted from Ontario and the
purchaser of the telecommunication service is not required to pay retail
sales tax on the telecommunication service in any other jurisdiction.
A calling card is 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, it is prepaid telecommunication services. RST is payable on the amount
paid by the purchaser to acquire the card or other device at the time of sale.
Based on our understanding that the truck drivers are contacted (through a beeper) to be advised of their
messages and that the drivers are also capable of transmitting messages, the services provided by
Company A will be subject to RST as taxable telecommunication services.
We consider the sale of the messaging package (that allows the transportation company to use a
predefined number of messages and characters) to be the sale of prepaid telecommunication services.
As such, Company A is require to charge, collect and remit RST at the time the package is sold to Ontario
residents, not when and where the telecommunications service is actually being rendered to the client,
unless the client is entitled to claim an exemption from RST (e.g., reseller of the telecommunication
service) and provides a properly completed PEC to Company A.
Company A is also required to charge RST on any additional messages not included in the package
above, the set monthly service fee and any additional messaging used which meet any of the above a), b)
or c) criteria unless the client is entitled to claim an exemption from RST (e.g., resale) and provides a
properly completed PEC to Company A.
Company A may purchase telecommunication services for resale to its clients exempt from RST by
providing a properly completed PEC to its supplier.
Please note that there is no exemption from RST for telecommunication services purchased by IRP
registrants.
Positioning service
With respect to the positioning service Company A provides, the intent of the legislation is to tax the
charge made for the transmission of information, rather than any charge made for access to information.
In other words, if the service being purchased simply uses telecommunication services in its delivery, as it
appears to be the case for the service provided by Company A to its clients, then it is not taxable as
telecommunication service. If the service is acquired to transmit messages (e.g., messaging system
above), then it is a telecommunication service.
Therefore, based on the definition of telecommunication services (e.g., "transmission of.."), and our
understanding that the charges for the positioning service are not for the transmission of data, but to
provide information via satellite as to the location of vehicles in transit, it is our opinion that you are
providing a non-taxable service and are not a vendor of telecommunication services in this situation. As
the provider of a non-taxable service, Company A should not charge RST to its clients for the non-taxable
service. However, as indicated in our telephone conversation, if the positioning service charge is not
separated from the taxable telecommunication services, RST will apply to the total charge unless the client
is entitled to claim an exemption from RST and provides a properly completed PEC to Company A.
Company A must pay the applicable RST on any taxable equipment and taxable services purchased and
used to provide the non-taxable service to its clients. This would include any telecommunication services
purchased.
If a client qualifies for an exemption from RST (IRP registrants) on the purchase of satellite equipment or
telecommunication services, they must provide you with a properly completed PEC to claim the conditional
exemption. If the client does not provide you with a properly completed PEC, you must charge RST.
Please note that it is not your responsibility to police the Act. As a vendor, you are not required to
determine whether a client qualifies or is entitled to an exemption. As long as a client provides a properly
completed PEC, you may accept it and exempt the transaction.
