Digital Graphic Design
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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0003, March 2004
Thank you for your ruling request dated February 18, 2004 regarding the application of Ontario retail sales tax (RST) to digital graphic design work related to taxable publications.
Your letter pertains to a hypothetical situation. The Branch does not provide specific rulings concerning hypothetical situations as the information may not necessarily apply to the transactions of an actual taxpayer due to possible differences in the taxpayer's situation. However, we are providing you with a general ruling based solely on the information which you have provided. Please note that this is not a ruling specific to any one taxpayer.
Should you require a ruling for a specific client please provide us with the name of the client along with written authorization from the client to deal directly with you.
Understanding of Facts
A graphic designer receives material from his customer's annual reports in digital form. The graphic designer prepares the design work and sends the information to a printer in digital format (either by e-mail or disk, of which the graphic designer retains possession). At this point the graphic designer is finished with his part of the project and invoices the client for his work only. The printer invoices the client directly, not the graphic designer. You have asked if the graphic designer has to collect RST on this service assuming the annual reports are not otherwise exempt.
As a result of our telephone conversation, it is our understanding you also require a clarification of Interpretation Letter AGD-0001 as it applies to a graphic designer whose work is all in digital format.
The specific area of Interpretation Letter AGD-0001 that is causing you some concern are the first two sentences in the section entitled Artwork and/or Graphic Design Services which states:
"The creation of lay-outs, designs, typesetting, camera-ready or plate-ready artwork is the production of tangible personal property (TPP) and is taxable. The ad agency must charge, collect and remit RST on the charges to the clients that will be used, either by the ad agency or an outside printer, to produce taxable printed matter for the customer since the design forms part of the fair value of the printed matter."
Analysis & Conclusion
The above information was intended for graphic designers who produce TPP. This includes all artwork made in hard copy format ie. disks, CDs or paper copies. This does not include artwork transferred to a customer in electronic file format, or placed directly on a server which is connected to the Internet. Although annual reports are classified as a taxable book, digital artwork for these reports that always remains in a digital format is the provision of a non-taxable service.
Graphic designers who only provide artwork in a digital format (without the provision of a tangible hard copy format) are providing a non-taxable service. As the provider of a non-taxable service, the graphic designer should not charge RST to their customer. However, as the provider of a non-taxable service, the graphic designer must pay RST on any taxable materials or services it requires in order to provide its non-taxable service.
If you have any further questions, please contact our office.
ISBN 0-7794-2507-3
© Queen's Printer for Ontario, 2005
