Production of Info-Commercials
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 Please be aware that any statute or policy referred to in this letter may have been superseded.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 retail sales tax 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 AGD-0002, April 2004
Thank you for your facsimile message of February 17, 2004, inquiring about the application of Ontario retail sales tax (RST) on the production and own-use of info-commercials.
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
Based on the information provided in your facsimile message and further to our telephone conversation of March 17, 2004, it is our understanding that you will be starting a new business in which you will be producing a directory of services offered by various small business. This will be done by placing several info-commercials (one info-commercial for each business) on a single DVD.
In order to produce each DVD, you have stated that you will:
- film and edit a short info-commercial for each client for which each client will pay a one time fee. You will retain ownership of the info-commercial and your clients will not be provided with copies.
- place between 30 and 40 info-commercials on a DVD, along with a menu system that will organize and categorize the info-commercials (similar to a directory).
- on behalf of your clients, produce several hundred copies of the original DVD and of which you will distribute free of charge to new residents in the area. This will be done to promote your clients' businesses
- charge each of your clients a fixed monthly fee for this advertising service.
You would like a written ruling outlining the RST implications for your proposed business.
Legislation and/or Administrative Policy
Advertising
The sale of advertising space is the provision of a non-taxable service. It is neither tangible personal property nor a taxable service.
When an ad agency provides its client with the following services without the sale of tangible personal property, the ad agency is considered to be providing non-taxable services:
- media planning
- market research
- producing and placing advertisements in advertising media
In these circumstances, the agency is considered to be the consumer and is liable for RST on all taxable goods and services used in the provision of these non-taxable services. The client is not to be charged RST for these non-taxable services.
Analysis and Conclusion
Based on our understanding of the facts, we have determined that you will be providing a non-taxable service, i.e., the provision of advertising space on DVDs that you will make, own, and distribute free of charge. As the provider of a non-taxable service you must pay RST on any taxable tangible personal property or taxable services you acquire in order to provide this advertising service. Therefore, you will be required to pay RST on:
- the production costs of each info-commercial you produce and of which you retain ownership; and
- each DVD copy that you produce and distribute free of charge.
You should not charge your clients RST on the "one time fee" for the production of the info-commercial, nor on the fixed monthly fee for your advertising service.
If you have any further questions, please contact our office.
ISBN 0-7794-2507-3
© Queen's Printer for Ontario, 2005
