RST Information Notice, September 2005

• This notice explains how Retail Sales Tax (RST) applies to pay-per-view services provided to hotel guests.  As outlined below, the application of RST depends on the agreement between the pay-per-view service provider and the hotel.

Background

For RST purposes, pay-per-view services are taxable telecommunication services.  The agreement between the hotel and the telecommunication service provider will determine if the hotel should charge, collect and remit RST from its guests, or if the service provider should charge, collect and remit RST from the hotel.

Pay-per-view services are normally provided to hotel guests in one of two ways:

• a telecommunication service provider will supply the equipment and telecommunication services to provide pay-per-view services to hotel guests, or
• the hotel will purchase the equipment and telecommunication services to provide the pay-per-view services to guests.

In both cases, the charge for the services will be shown on the guest's invoice from the hotel.

When a Hotel Must Charge RST

Pay-per-view services are considered to be provided directly to the hotel guests by the service provider, and not by the hotel, when the hotel enters into an agreement with the service provider and conditions such as the following exist:

• the telecommunication service provider supplies the equipment and telecommunication services required to provide pay-per-view services to hotel guests
• the service provider retains ownership of the equipment and sets the fees for the pay-per-view services
• the fees collected by the hotel remain the property of the service provider (excluding the RST that is payable to the Minister of Finance)
• the hotel is paid a commission by the service provider
• hotel guests order movies directly through the system provided to them by the service provider.

Under this kind of arrangement, the hotel is not purchasing pay-per-view services but is acting as an agent of the service provider by charging the guests for the services and by collecting and remitting the RST. RST is payable at the rate of eight per cent. The hotel, as a deemed vendor, is required to remit directly to the Minister of Finance the RST it collects from guests.  The service provider remains liable for the tax if the hotel does not remit.

The payment of a commission, by the service provider to the hotel, does not give rise to any RST liability as no taxable service is rendered by the hotel.

When a Hotel is NOT Required to Charge RST

Where a hotel purchases the required equipment and telecommunication services to provide pay-per-view services, the hotel is not required to charge, collect and remit RST on the sale of the services to guests.  The hotel is required to pay RST on the purchase of the equipment and telecommunication services.

For More Information

For more information, please contact the nearest Ontario Ministry of Revenue Tax Office listed under Taxes - Provincial (Retail) Sales Tax in the blue pages of your telephone directory, or visit our website at ontario.ca/revenue.

© Queen's Printer for Ontario, 2005

ISBN 0-7794-8953-5