Online Directory

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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0004, August 2004

Thank you for your facsimile message, dated March 23, 2004, inquiring about the Ontario retail sales tax (RST) status of an online directory.

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 your company, Company A, has developed an online directory (the Directory) for use by the property and casualty insurance industry in Canada.

The Directory is an online listing of third party vendors (contractors and service providers) that insurance companies can recommend to policy owners should a loss be reported. This vendor selection online system allows an insurance company to match vendor skills and availability for specific types of work. The Directory is provided at no charge to insurance companies and/or their representatives.

However, in order to have their companies listed on the Directory, all vendors must register and pay an annual membership/listing fee.

After reviewing information from various RST publications, it is Company A's position that the membership/listing fee for the Directory is not subject to RST, and Company A has requested a written response to verify its understanding.

Legislation and/or Administrative Policy

Membership Fee

For RST purposes, a membership fee is a fixed amount paid to an organization to secure clearly identified future rights or privileges for the person who has paid the fixed amount. For example, in some cases the future privilege is the right to purchase, at a discount, tangible personal property (TPP) or prepared food products, or to purchase advance booking to a place of amusement. Such membership fees are not taxable.

Advertising

Many web pages contain electronic advertising or links to other businesses, clubs, associations, etc. Electronic advertisements, placed within a web page, can take on many forms such as a flashing banner at the top of a page. The sale of advertising space is the provision of a non-taxable service. It is neither TPP nor a taxable service. The provider of a non-taxable service must pay RST on any taxable TPP or taxable services needed in order to provide its non-taxable service.

Analysis and Conclusion

The membership/listing fee that Company A charges vendors is equivalent to the sale of advertising space. As it is neither TPP or a taxable service, Company A is not required to charge RST on the listing fee. However, Company A will be required to pay RST on any taxable TPP or taxable services it uses in order to provide the Directory.

Enclosed for further information is RST Guide #651 - Internet Related Services. If you have any further questions, please contact our office.

ISBN 0-7794-2507-3