Draft GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province

GST/HST Technical Information Bulletin B-103
June 2012

Note: This Technical Information Bulletin supersedes the version dated June 2010.

Table of Contents

• Introduction
  • Issues to consider in applying the place of supply rules
    • i) Single and multiple supplies
    • ii) Characterization of supplies
    • iii) Place of supply rules for Canada
    • iv) Tax status of supplies
• Tangible personal property
  • Tangible personal property supplied by way of sale
    • Delivery of tangible personal property on exercise of option
    • New place of supply rule for sales of specified motor vehicles
  • Tangible personal property supplied otherwise than by way of sale
    • Period of more than three months – Specified motor vehicle
    • Period of more than three months – Tangible personal property (other than a specified motor vehicle)
    • Period of three months or less
  • Railway rolling stock supplied otherwise than by way of sale
    • Rule 1
    • Rule 2
    • Rule 3
    • Rule 4
    • Rule 5
• Real property
  • Supply of real property partly in a province.
  • Lease intervals – Deemed supplies of real property
• Intangible personal property
  • Overview
  • Intangible personal property – General rules
    • General rule 1 – Intangible personal property that can only be used primarily in non-participating provinces
    • General rule 2 – Intangible personal property that can only be used primarily in participating provinces
    • General Rule 3 – Intangible personal property that can be used otherwise than only primarily in participating provinces and otherwise than only primarily outside participating provinces
    • General Rule 4 – Participating provinces with the same highest tax rate
  • Intangible personal property that relates to passenger transportation services
  • Intangible personal property that relates to tangible personal property
    • Rule 1 – Intangible personal property that relates to tangible personal property that is not ordinarily located primarily in participating provinces
    • Rule 2 – Intangible personal property that relates to tangible personal property ordinarily located primarily in participating provinces
    • Rule 3 – Highest tax rate
    • Rule 4 – Same highest tax rate
  • Intangible personal property that relates to real property
    • Intangible personal property that relates to real property in Canada and outside Canada
    • Rule 1 – Intangible personal property that relates to real property that is not situated primarily in participating provinces
    • Rule 2 – Intangible personal property that relates to real property situated primarily in participating provinces
    • Rule 3 – Highest tax rate
    • Rule 4 – Same highest tax rate
• Services
  • Overview
  • Services – General rules
    • General Rule 1 – Address in Canada obtained
    • General Rule 2 – No address in Canada obtained.
    • General Rule 3 – Same highest tax rate
  • Personal services
    • Rule 1
    • Rule 2
    • Rule 3
    • Rule 4
  • Services in relation to tangible personal property
    • Tangible personal property remains in the same province while the service is performed
    • Tangible personal property does not remain in same province while the service is performed
  • Services in relation to real property
    • Services in relation to real property situated in Canada and outside Canada
  • Services in relation to a location-specific event
  • Services rendered in connection with litigation.
  • Customs brokerage services
    • Rule 1
    • Rule 2
    • Rule 3
  • Repairs, maintenance, cleaning, adjustments, alterations and photographic-related goods
  • Services of a trustee in respect of a trust governed by an RRSP, RRIF, RESP, TFSA or RDSP
  • 1-900 or 976 service
  • Computer-related services and Internet access
    • Defined terms
    • Computer-related services and Internet access
  • Air navigation services
• Passenger transportation
  • Defined terms
  • Passenger transportation services
  • Tangible personal property and services supplied during passenger transportation services
    • Supplies made during international flight or international voyage
    • Tangible personal property and services supplied during passenger transportation services
  • Services related to the supply of passenger transportation services
    • Baggage charges
    • Child Supervision
    • Services related to a ticket, voucher or reservation
• Freight transportation services
  • Defined terms
  • Freight transportation service
    • Freight transportation service with a destination in more than one province
• Postage and mail delivery services
  • Defined terms
  • Postage stamp and mail delivery service
  • Postage meter
  • Permit imprint
  • Business indicia
• Telecommunication services
  • Defined terms
  • Billing location
  • Telecommunication service
  • Dedicated telecommunications channel
• Deemed supplies
  • Deemed supplies of property
  • Supplies deemed to be made in a province
• Appendix A – List of examples
• Appendix B – Sales of specified motor vehicles
• Appendix C – Place of supply rules for supplies of intangible personal property
• Appendix D – Place of supply rules for services

Introduction

Generally, before July 1, 2010, taxable supplies made in Canada were subject to the goods and services tax (GST) at a rate of 5% unless they were made in the participating provinces of Nova Scotia, New Brunswick or Newfoundland and Labrador, in which case they were subject to the harmonized sales tax (HST) of 13% (of which 5% represented the federal part and 8% the provincial part). Schedule IX to the Act and the previous Place of Supply (GST/HST) Regulations set out the place of supply rules to determine whether supplies that were made in Canada were made in those three participating provinces or in the rest of Canada.

The following changes occurred effective July 1, 2010:

• The Government of Ontario introduced a 13% HST, of which 5% represents the federal part and 8% the provincial part.
• The Government of British Columbia introduced a 12% HST, of which 5% represents the federal part and 7% the provincial part. On August 26, 2011, Elections BC announced that British Columbians have voted in favour of eliminating the HST in British Columbia. On February 17, 2012, the Department of Finance published a news release, Department of Finance Announces Transitional Rules for the Elimination of the Harmonized Sales Tax in British Columbia (2012-017), announcing proposed transitional rules for the provincial decision to eliminate the HST in British Columbia (B.C.). The proposed transitional rules specify how and when the B.C. part of the HST would cease to apply to transactions that straddle that date. The implementation date for the transition from the HST to the GST on taxable supplies made in B.C. would be April 1, 2013, subject to the approval of the British Columbia Legislature.
• The Government of Nova Scotia increased the provincial part of the HST from 8% to 10%. The HST rate in Nova Scotia is now 15%, of which 5% represents the federal part and 10% the provincial part. On April 2, 2012, the Government of Nova Scotia announced that the province's surplus will be significant enough in 2014 to lower the HST by one percentage point, and another percentage point in the following year, bringing the rate of the HST back to 13% in 2015.
• On April 18, 2012, the Government of Prince Edward Island announced they were entering into formal negotiations with the federal government to implement an HST, effective April 1, 2013. The combined HST rate will be 14% with a provincial part of 9% and a federal part of 5%.

Because different tax rates came into effect in July 1, 2010, and to modernize the rules, a number of changes were required to be made to the place of supply rules, including the introduction of some new place of supply rules. For this reason, the Place of Supply (GST/HST) Regulations were repealed and replaced by Part 1 of the New Harmonized Value-added Tax System Regulations, that set out the new place of supply rules applicable to certain supplies made:

• on or after May 1, 2010; and
• after February 25, 2010 and before May 1, 2010 unless any part of the consideration for the supply became due or was paid before May 1, 2010.

The place of supply rules explained in this publication are set out in Schedule IX and the New Harmonized Value-added Tax System Regulations . Under section 144.1, a supply is deemed to be made in a province if it is made in Canada and it is deemed to be made in the province under the place of supply rules in Schedule IX, but is deemed to be made outside the province in any other case. Also, a supply that is made in Canada that is not made in any participating province is deemed to be made in a non-participating province. Pursuant to section 3 of Part IX of Schedule IX, notwithstanding the place of supply rules in any other Part of Schedule IX, a supply of property or a service is made in a province if it is prescribed to be made in the province by Part 1 of the New Harmonized Value-Added Tax System Regulations. Unless otherwise indicated, all references to the place of supply rules in this publication are to these place of supply rules, and any references to the Regulations are to these regulations, unless otherwise indicated.

The GST (or federal part of the HST) is imposed under subsection 165(1) in respect of taxable supplies that are made in Canada. The provincial part of the HST is imposed under subsection 165(2) in addition to the federal part of the HST in respect of taxable supplies that are made in a participating province.

The provincial part of the HST does not always apply at the same rate to supplies made in the participating provinces, nor does it apply to supplies made outside the participating provinces. Consequently, the place of supply rules are complemented by new rules requiring self-assessment of the provincial part of the HST where personal property and services are brought into a participating province from a non-participating province, or another participating province or from outside Canada for consumption, use or supply in the participating provinces. These rules are set out in Division IV.1, Schedule X, and Part 5 of the New Harmonized Value-Added Tax System Regulations No. 2, including proposed amendments issued on January 28, 2011. Rebates of the provincial part of the HST paid on supplies of property or services made in the participating provinces may also be available if the property or services are removed from a participating province for consumption, use or supply outside the participating province. These rules are set out in Division VI and Part 5 of the New Harmonized Value-Added Tax System Regulations No. 2, including proposed amendments issued on January 28, 2011. In addition, changes have been made to the imported taxable supply rules to ensure that the provincial part of the HST applies consistently irrespective of whether a supply is made in Canada, or outside Canada. These rules are set out in Division IV.

It should be noted that generally, selected listed financial institutions (SLFIs), as defined in subsection 225.2(1), are not required to self-assess the provincial part of the HST under Division IV.1, and are not entitled to claim any rebates in respect of the provincial part of the HST. Also, SLFIs are not generally required to self-assess the provincial part of the HST under Division IV. Instead, SLFIs generally account for the provincial part of the HST through adjustments to their net tax calculation under subsection 225.2(2), and related regulations, including proposed regulations issued on January 28, 2011.

Issues to consider in applying the place of supply rules

The place of supply rules explained in this publication apply to determine whether a supply that is made in Canada is made in a province for purposes of determining whether the supply is made in a participating province and is consequently subject to the provincial part of the HST in addition to the federal part of the HST. This publication is intended to explain the application of these place of supply rules. However, there are several issues that must be considered in order to properly determine the application and relevancy of the place of supply rules.

i) Single and multiple supplies

In determining the place of supply, it is necessary to determine whether a transaction consisting of several elements is a single supply or multiple supplies. This is necessary because the application of certain place of supply rules can provide a different result depending on whether single or multiple supplies are involved, which can in turn result in the application of different tax rates. The determination of whether single or multiple supplies are made can also affect which place of supply rule applies. For instance, where it is determined that a single supply consisting of different types of elements is made, it would generally be the relevant general place of supply rule that would apply to that supply, rather than the specific place of supply rule that would apply to each of the elements of the supply if they were instead determined to be supplied separately.

For GST/HST purposes, the determination of whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies is based on a determination of fact. The following principles are used to determine whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies:

• Every supply should be regarded as distinct and independent.
• A supply that is a single supply from an economic point of view should not be artificially split.
• There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply.

There are various issues to consider in conducting a single/multiple supply analysis.

It is necessary to identify the various elements of a supply. An element of a supply is any property or service that could reasonably be supplied on its own. In identifying and analyzing the various elements of a package of property and/or services, a distinction must be made between elements that are actually supplied to the recipient and those that are simply inputs consumed or used in making a supply.

Consideration of the following issues can help to determine whether a transaction consists of a single supply or multiple supplies:

• Whether the property/services are provided by two or more suppliers.
• Whether there is more than one recipient.
• What the supplier is providing for the consideration received.
• Whether the recipient is made aware of the elements (in detail) that are part of the package.
• Whether, in the context of the particular transaction, the recipient has the option to acquire the elements separately or to substitute elements.

Incidental supplies

(Section 138)
If a single/multiple supply analysis concludes that there are multiple supplies, it is then necessary to determine whether one of those supplies is incidental to another and whether it may consequently be deemed to form part of a single supply pursuant to section 138. To be considered incidental, a supply generally plays only a minor or subordinate role in relation to the provision of another supply.

Section 138 deems a supply to form part of another supply provided that they are supplied together for a single consideration. For this provision to apply, it must be reasonably regarded that the provision of one property or service is incidental to the supply of the other. With respect to the conditions that must be met for section 138 to apply, see GST/HST Policy Statement P-159, Meaning of the Phrase "reasonably regarded as incidental" and GST/HST Policy Statement P-160, Meaning of the Phrase "where a particular property or service is supplied together with any other property or service".

There are also several legislative provisions that deem single or multiple supplies to be made, some of which are explained in the relevant sections of this publication.

The above explanation is merely intended to highlight the relevant issues to consider in conducting a single/multiple supply analysis. The determination of whether a single or multiple supplies are made requires consideration of the relevant facts of each case. The examples throughout this publication are based on an assumption of fact that single or multiple supplies are being made in those examples based on a single/multiple supply analysis. For further information regarding this issue, refer to GST/HST Policy Statement P-077, Single and Multiple Supplies.

ii) Characterization of supplies

The determination of the nature of a supply is relevant for various GST/HST purposes. It is relevant for purposes of the place of supply rules because there are different place of supply rules that apply to different types of supplies.

Defined terms

(Subsection 123(1))
There are several general legislative definitions that are relevant to the determination of the nature of a supply.

"Property" means any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money.

"Personal property" means property that is not real property.

"Real property" includes:

• in respect of property in the Province of Quebec, immovable property and every lease thereof,
• in respect of property in any other place in Canada, messuages, lands and tenements of every nature and description and every estate or interest in real property, whether legal or equitable, and
• a mobile home, a floating home and any leasehold or proprietary interest therein.

Tangible personal property generally means personal property that may be seen and touched, and that is movable at the time the supply is made. Intangible personal property generally means property other than tangible personal property and real property.

As an exception, the manner in which a supply of real property or tangible personal property is made can affect its characterization and the place of supply rules that consequently apply to that supply. For example, a supply, by way of lease, licence or similar arrangement, of the use or right to use real property or tangible personal property is deemed under the Act to be a supply of real property or tangible personal property, as the case may be. There are also different place of supply rules that apply to sales and leases of tangible personal property.

A "service" means anything other than:

• property,
• money, and
• anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person.

Determining whether a supply of intangible personal property or a service is made continues to be important for purposes of the general place of supply rules that apply to these types of supplies. The definition of property includes a right or interest of any kind and can therefore include a wide range of rights. A service generally includes anything other than property.

In determining whether a particular supply is a supply of intangible personal property or a supply of a service, a number of factors must be considered. The nature of the agreement between the supplier and the customer, and whether the agreement is in substance for work (or work and materials), or for property (including a right or interest of any kind) must be determined. A key factor in making the distinction between a supply of intangible personal property and a service is whether the supply includes the provision of any rights and if so, whether those rights are the predominant element of the supply. If the supply includes the provision of rights and the rights are the predominant part of the supply, the supply is likely a supply of intangible personal property. If the rights are merely incidental, the supply is likely a supply of a service.

Factors that generally indicate that a supply is one of intangible personal property are:

• a right in a product or a right to use a product for personal or commercial purposes is provided, such as:
  • intellectual property or a right to use intellectual property (e.g., a copyright), or
  • rights of a temporary nature (e.g., a right to view, access or use a product while on-line);
• a product is provided that has already been created or developed, or is already in existence;
• a product is created or developed for a specific customer, but the supplier retains ownership of the product; and
• a right to make a copy of a digitized product is provided.

Factors that generally indicate that a supply is a service are:

• the supply does not include the provision of rights (e.g., technical know-how), or if there is a provision of rights, the rights are incidental to the supply;
• the supply involves specific work that is performed by a person for a specific customer; and
• there is human involvement in making the supply.

There are specific place of supply rules that apply to supplies of specific types of property and services. Therefore, once a supply has been characterized as a supply of property or a service, it must sometimes also be determined whether it is a supply of a specific type of property or service. For example, in some cases it is necessary to determine whether a supply that is made is a supply of a general service or a service in relation to tangible personal property.

A supply that has been characterized as a specific type of supply for which there is a specific place of supply rule may be subject to the general place of supply rule for that type of supply where the conditions for the application of the specific place of supply rule have not been met.

The manner in which a supply is made can also affect its characterization and the place of supply rules that consequently apply to that supply. For example, a supply made by way of lease, licence or similar arrangement, of the use or right to use real property or tangible personal property is deemed under the Act to be a supply of real property or tangible personal property, as the case may be. There are also are different place of supply rules that apply to supplies of tangible personal property made by way of lease, licence or similar arrangement.

There are more specific legislative definitions and interpretative positions that are relevant to the determination of the nature of certain supplies as explained in this publication.

iii) Place of supply rules for Canada

The place of supply rules explained in this publication only apply to determine whether a supply that is made in Canada is made in a province. Before considering the application of the place of supply rules, it is therefore necessary to determine whether the supply is made in Canada. Different place of supply rules determine whether a supply is made in or outside Canada for purposes of determining whether the GST or the federal part of the HST applies to the supply. These rules, that are also based on the nature of the supply that is made, are explained in GST/HST Memorandum 3.3, Place of Supply. In some cases, a supply may be deemed to be made outside Canada based on the status of the recipient, such as with respect to supplies involving drop-shipments as explained in GST/HST Memorandum 3.3.1 Drop-Shipments. In other cases, a supply may be deemed to be made outside Canada based on the status of the supplier such as where the supply is made by a non-resident who is not registered and is not carrying on business in Canada. If a supply is made outside Canada based on these place of supply rules, it is not necessary to consider the application of the place of supply rules explained in this publication.

iv) Tax status of supplies

The place of supply rules explained in this publication are only relevant for purposes of determining whether a supply is made in a province for purposes of determining whether the provincial part of the HST is payable in respect of taxable supplies that are made in Canada. Such a determination is not necessary with respect to exempt supplies (supplies included in Schedule V) in respect of which tax is not payable and zero-rated supplies (supplies included in Schedule VI) in respect of which the rate of tax is 0%. For more information on zero-rated and exempt supplies, refer to Chapters 4 and 5 of the GST/HST Memoranda Series.

Tangible personal property

For the purposes of the place of supply rules that determine whether a supply is made in a province,

• a floating home and a mobile home that is not affixed to land are each deemed to be tangible personal property and not real property; and
• where an agreement for a supply of tangible personal property is entered into but the property is never delivered to the recipient, the property is deemed to have been delivered where the property was to be delivered, as the case may be, under the terms of the agreement.

Tangible personal property supplied by way of sale

(Section 1 of Part II of Schedule IX)

The place of supply rules for sales of tangible personal property have not changed. A "sale", in respect of property, includes any transfer of the ownership of the property and a transfer of the possession of the property under an agreement to transfer ownership of the property.

Generally, a sale of tangible personal property is deemed to be made in a province if the supplier delivers the property or makes it available in the province to the recipient of the supply.

This rule is generally based on the province in which legal delivery of the goods to the recipient occurs which can generally be determined by reference to the terms of the agreement for the sale of the goods and the applicable sale of goods law.

A new place of supply rule which is explained later would apply with respect to the sale of a specified motor vehicle in certain circumstances.

Deemed delivery
(Section 3 of Part II of Schedule IX)

The above place of supply rule is generally based on the province in which legal delivery of the goods to the recipient occurs. However, for the purposes of this rule, tangible personal property is also deemed to be delivered in a particular province, and not in any other province, if the supplier either:

• ships the property to a destination in the particular province that is specified in the contract for carriage of the property;
• transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination;
  This rule requires the supplier to be sufficiently involved in securing the transportation of the good by the common carrier or consignee. The supplier must retain a common carrier or consignee on behalf of the recipient (rather than on the supplier's behalf or on behalf of a person other than the recipient) to have the good shipped to a province pursuant to terms negotiated, and instructions provided, by the supplier. A supplier that merely contacts a common carrier or consignee to indicate that the good is ready to be transported pursuant to an arrangement that has already been established by the recipient with the carrier or consignee, or that is merely made aware of such an arrangement, is not considered to have retained the carrier or consignee on behalf of the recipient.
• sends the property by mail or courier to an address in the particular province.

Delivery of tangible personal property on exercise of option

(Subsection 136.1(1.1))

For GST/HST purposes, a recipient of a supply by way of lease, licence or similar arrangement of tangible personal property that exercises an option to purchase the property under the arrangement is, for greater certainty, deemed to take delivery of the property supplied by way of sale at the place and time at which the recipient ceases to have possession of the property as a lessee and begins to have possession of the property as a purchaser. Therefore, the place of supply rules for the sale of the tangible personal property are based on the place at which the recipient begins to have possession of the property as a purchaser rather than the place where the recipient first obtained possession of the property as a lessee.

New place of supply rule for sales of specified motor vehicles

A "specified motor vehicle" is defined in the Act to mean a vehicle that is, or that would be, if it were imported, classified under one of several tariff items in Schedule I to the Customs Tariff. Generally, this includes all motor vehicles, other than racing cars classified under heading number 87.03, and any prescribed motor vehicles.

As explained in GST/HST Info Sheet GI-119, Harmonized Sales Tax – New Place of Supply Rule for Sales of Specified Motor Vehicles, for purposes of administrative simplification, the Department of Finance has indicated that it intends at the earliest opportunity to recommend a regulatory change to the place of supply rules made under the Excise Tax Act that would deem the supply of a specified motor vehicle by way of sale to be made in the particular province in which the vehicle is registered if that registration occurs within seven days after the day on which delivery of the vehicle to the recipient in a participating province (other than the particular province) occurs. The proposed regulatory change would be published in the Canada Gazette in accordance with the federal regulatory process and would come into force at that time. However, it will be proposed that the regulatory change have retrospective application in some circumstances to July 1, 2010.

In anticipation of the recommendation by the Department of Finance of such a regulatory change and to allow affected parties to benefit from the administrative simplification that it would provide, the CRA has begun administering the new place of supply rule, where suppliers choose to apply the rule. Therefore, as an exception to the general place of supply rule for sales of goods, where a supplier makes a supply by way of sale of a specified motor vehicle, the supply would be administratively considered by the CRA to be made in a particular province if:

• the vehicle is registered (other than on a temporary basis) by or on behalf of the recipient under the laws of the particular province relating to the registration of motor vehicles within seven days after the day on which the vehicle is delivered or made available to the recipient in a participating province (other than the particular province), and
• the supplier maintains evidence satisfactory to the Minister of National Revenue of that registration.

The documentary evidence that a supplier would be required to maintain in its records to substantiate the application of the new place of supply rule would be:

• a dated copy of the permanent registration of the vehicle in the province in the recipient's name, and
• a copy of the vehicle purchase agreement, or other sales document such as a bill of sale, that indicates the date of delivery of the vehicle.

In order to substantiate to the relevant vehicle registration authority of a particular participating province that self-assessment of the provincial part of the HST is not required when the vehicle is registered in the particular participating province, a recipient would be required to make available to the vehicle registration authority a copy of the vehicle purchase agreement or other sales document such as a bill of sale showing the date of delivery of the vehicle in another participating province and that the provincial part of the HST in respect of the particular participating province is payable, or has been paid, in respect of the supply.

Based on the recommendation to be made by the Department of Finance, the new administrative place of supply rule would apply to:

• any supply of a specified motor vehicle made by way of sale on or after the date of final publication of the regulatory change in the Canada Gazette; and
• any supply of a specified motor vehicle made by way of sale on or after July 1, 2010, and before the date of final publication of the regulatory change in the Canada Gazette, in respect of which the rule has been applied (i.e. based on the rule, the supplier has collected the provincial part of the HST, if any, of the province in which the vehicle was registered within seven days after the day on which it was delivered or made available to the recipient).

Appendix B includes a table that provides an overview of the application of the provincial part of the HST to sales of vehicles in various circumstances, including those in which the new administrative place of supply rule has been applied by the supplier. For further information, see GST/HST Info Sheet GI-119, Harmonized Sales Tax – New Place of Supply Rule for Sales of Specified Motor Vehicles.

Tangible personal property supplied otherwise than by way of sale

The place of supply rules for tangible personal property supplied otherwise than by way of sale have not changed.

Deemed supply of tangible personal property
(Subsection 136(1))

A supply, by way of lease, licence or similar arrangement, of the use or right to use tangible personal property is deemed to be a supply of tangible personal property.

Period of more than three months – Specified motor vehicle

(Subparagraph 2(b)(i) of Part II of Schedule IX)

A specified motor vehicle is defined to mean a vehicle that is, or that would be, if it were imported, classified under certain tariff items in Schedule I to the Customs Tariff. Generally, this includes almost all motor vehicles, other than racing cars classified under tariff heading number 87.03, and any prescribed motor vehicles.

A supply of a specified motor vehicle otherwise than by way of sale under an arrangement under which continuous possession or use of the vehicle is provided for more than three months is deemed to be made in a province if the vehicle is required to be registered under the laws of the province relating to the registration of motor vehicles at the time the supply is made.

Lease intervals – Deemed supplies of tangible personal property

(Subsection 136.1(1))

Where a supply of property is made by way of lease, licence or similar arrangement for consideration that is attributable to a period (referred to as a "lease interval") that is the whole or a part of the period during which possession or use of the property is provided under the arrangement, a separate supply of the property for separate consideration is deemed to be made by the supplier and received by the recipient for each lease interval. The supply for each lease interval is deemed to be made on the earliest of

• the first day of the lease interval,
• the day on which the lease payment attributable to that interval becomes due, and
• the day that payment is made.

The separate supplies of tangible personal property that are deemed to be made for each lease interval can be subject to HST at a different rate to the extent that those supplies can be deemed to be made in a different province based on the application of the place of supply rules for tangible personal property supplied otherwise than by way of sale. Therefore, the province in which a supply of a specified motor vehicle for each lease interval is made and the applicable rate of tax can vary based on the province in which the vehicle is required to be registered at a particular time.

Period of more than three months – Tangible personal property (other than a specified motor vehicle)

(Subparagraph 2(b)(ii) of Part II of Schedule IX)

A supply of tangible personal property (other than a specified motor vehicle) by way of lease, licence or similar arrangement for more than three months is deemed to be made in a province if the ordinary location of the property, as determined at the time the supply is made, is in the province. Again, a separate supply of the property is deemed to be made for each lease interval on the earliest of

• the first day of the lease interval,
• the day on which the lease payment attributable to that interval becomes due, and
• the day that payment is made.

Ordinary location of property

(Section 4 of Part I of Schedule IX)

For purposes of the place of supply rules, the ordinary location of property is deemed to be the location where the supplier and the recipient mutually agree that the ordinary location of the property is to be at a particular time. In other words, the mutual agreement of the supplier and recipient is determinative even where the property is actually located at a different place at the relevant time from what had been agreed upon. The mutual agreement of the parties may change from time to time. Therefore, even if the original written agreement for a supply of property specified that the property would be located in a particular province, the parties may mutually agree subsequent to the signing of the contract that the property is to be moved at a particular time to a location in another province. In this case, the latter location would be the ordinary location of the property at that particular time.

Period of three months or less

(Paragraph 2(a) of Part II of Schedule IX)

A supply of tangible personal property otherwise than by way of sale under an arrangement under which continuous possession or use of the property is provided for a period of no more than three months is deemed to be made in the province in which the supplier delivers the property or makes it available to the recipient of the supply.

Deemed delivery

(Section 3 of Part II of Schedule IX)

This place of supply rule is generally based on the province in which legal delivery of the property to the recipient occurs. However, for purposes of this rule, tangible personal property is also deemed to be delivered in a particular province, and not in any other province, if the supplier either:

• ships the property to a destination in the particular province that is specified in the contract for carriage of the property;
• transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination; or
• sends the property by mail or courier to an address in the particular province.

Single determination of place of supply based on initial delivery

(Section 4 of Part II of Schedule IX)

The province in which the supply of tangible personal property is made in the case of a lease, licence or similar arrangement of three months or less is determined only once based on the initial delivery of the property and does not change for subsequent lease intervals, if any, under the arrangement.

Railway rolling stock supplied otherwise than by way of sale

(Section 26 of Part 1 of the Regulations)

The place of supply rules for a supply of railway rolling stock otherwise than by way of sale have not changed.

Rule 1

A supply of railway rolling stock otherwise than by way of sale is made in a province if the supplier delivers the rolling stock or makes it available to the recipient of the supply in that province.

This place of supply rule is generally based on the province in which legal delivery of the rolling stock to the recipient occurs. However, for purposes of the rule, the rolling stock is also deemed to be delivered in a particular province, and not in any other province, if the supplier ships the rolling stock to a destination in the province that is specified in the contract for carriage of the rolling stock or transfers possession of the rolling stock to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the rolling stock to such a destination.

Rule 2

Despite Rule 1, the province in which the supply of the rolling stock is determined to be made for the first lease interval is the province in which all supplies of the rolling stock for subsequent lease intervals are deemed to be made.

Rule 3

Subject to Rule 4 and Rule 5, if continuous possession or use of railway rolling stock is given by a supplier to a recipient throughout a period under two or more successive leases, licenses or similar arrangements entered into between the supplier and the recipient (i.e., where the arrangement is renewed), the rolling stock is deemed to have been delivered or made available to the recipient under each of those arrangements at the location at which it is delivered or made available to the recipient under the first of those arrangements.

Rule 4

A special transitional rule applies where a supply of railway rolling stock is made under a particular lease agreement that is in effect on April 1, 1997, and under the particular agreement, the rolling stock was delivered or made available to the recipient before that day. In this case,

• the rolling stock is deemed to have been delivered or made available to the recipient under the particular agreement outside the participating provinces; and
• if the recipient retains continuous possession or use of the rolling stock under an agreement (the "renewal agreement") with the supplier that immediately succeeds the particular agreement, Rule 3 applies as if the renewal agreement were the first arrangement between the supplier and the recipient for the supply of the rolling stock.

Rule 5

A special transitional rule applies where a supply of railway rolling stock is made under a particular lease agreement that is in effect on July 1, 2010, and under the particular agreement, the rolling stock was delivered or made available to the recipient in Ontario or British Columbia before that day. In this case,

• the rolling stock is deemed to have been delivered or made available to the recipient under the particular agreement outside the participating provinces; and
• if the recipient retains continuous possession or use of the rolling stock under an agreement (the "renewal agreement") with the supplier that immediately succeeds the particular agreement, Rule 3 applies as if the renewal agreement were the first arrangement between the supplier and the recipient for the supply of the rolling stock.

Example 21
A company in Ontario enters into a lease agreement to supply a railway car to a company in Quebec. The Quebec company takes delivery of the railway car in Ontario.

The supply of the railway car throughout the period covered by the lease is made in Ontario because the railway car is delivered to the recipient in Ontario. As a result, the lease payments for the railway car are subject to HST at a rate of 13%.

Real property

(Section 1 of Part IV of Schedule IX)

The place of supply rule for supplies of real property has not changed. A supply of real property is deemed to be made in a province if the property is situated in the province.

Deemed supply of real property
(Subsection 136(1))

A supply, by way of lease, licence or similar arrangement, of the use or right to use real property is deemed to be a supply of real property.

Supply of real property partly in a province

(Section 136.2)

For purposes of determining in which participating province, if any, a taxable supply of real property is made and determining the provincial part of the HST payable, if any, in respect of the supply, a deeming rule applies where the supply of real property includes the provision of real property that is partly situated in a particular province and partly in one or more other provinces or outside Canada. In this case, the provision of the part of the real property that is situated in the particular province and the provision of the part of the real property that is situated in the other province or outside Canada are each deemed to be a separate taxable supply made for separate consideration equal to the portion of the total consideration for all the property that is reasonably attributable to each part of the real property. As a result, it is only the provision of the part of the real property that is situated in the participating provinces that is subject to HST.

A purported single supply of real property that is situated in a particular province and in one or more other provinces or outside Canada may, in fact, be separate supplies of real property—a supply of real property made in the particular province and a separate supply of real property made in each other province or outside Canada.

Lease intervals – Deemed supplies of real property

(Subsection 136.1(1))

Where a supply of property is made by way of lease, licence or similar arrangement for consideration that is attributable to a period (referred to as a "lease interval") that is the whole or a part of the period during which possession or use of the property is provided under the arrangement, a separate supply of the property for separate consideration is deemed to be made by the supplier and received by the recipient for each lease interval. The supply for each lease interval is deemed to be made on the earliest of

• the first day of the lease interval,
• the day on which the lease payment attributable to that interval becomes due, and
• the day that payment is made.

Intangible personal property

(Division 2 of Part 1 of the Regulations)

Overview

The place of supply rules for supplies of intangible personal property have changed significantly. Although the general rules continue to be based on the location where the rights may be used, some of these rules are now also generally based on the home or business address of the recipient (or another address of the recipient) in Canada that the supplier obtains in the ordinary course of its business. However, the general rules are subject to specific place of supply rules that can apply to certain types of intangible personal property.

Where the specific place of supply rules do not determine the place of supply of a particular type of intangible personal property because the conditions for the application of those rules are not met, it is the general place of supply rules that determine the place of supply of the intangible personal property. For example, there are specific place of supply rules for supplies of intangible personal property that are, or are similar to, passenger transportation passes that entitle an individual to passenger transportation services. However, where it is not possible to determine the place of supply of the intangible personal property that is a passenger transportation pass under the specific rules for such supplies (which for example can be the case due to a lack of restrictions regarding the place where the intangible personal property may be used), the place of supply are determined under the general place of supply rules.

Note: Appendix C contains a flow chart that summarizes the place of supply rules for supplies of intangible personal property.

Intangible personal property – General rules

(Sections 6, 7, 8 and 11 of Division 2 of Part 1 of the Regulations)

There are four general place of supply rules that apply to supplies of intangible personal property that can be summarized as follows:

• Supplies of intangible personal property that can be used in Canada that can only be used primarily ^{Footnote 1} outside the participating provinces are deemed to be made in a non-participating province and subject to GST.
• Supplies of intangible personal property that can be used in Canada that can only be used primarily in the participating provinces are deemed to be made in a participating province and subject to HST.
• The place of supply for supplies of intangible personal property that can be used in Canada and can be used other than only primarily in the participating provinces and other than only primarily outside the participating provinces depends on a number of additional factors.
• Another rule applies where the above rules do not apply because two or more relevant participating provinces have the same highest rate for the provincial part of the HST (the "tax rate").

The general place of supply rules can require a determination of the extent, if any, to which the use of the Canadian rights ^{Footnote 2} is limited to one or more provinces. The terms of the agreement for the supply governing the use of the rights generally determine the extent, if any, to which the rights can be used in one or more provinces. The use of the rights may be limited to one or more provinces by the nature of the rights being supplied without such a restriction being explicitly stated in the terms of the agreement. For instance, if as a matter of fact, the right that is supplied could only ever be used from a single location in a single province, then the use of the right would be considered to be limited to that province regardless of whether this is explicitly stated in the terms of the agreement. If there are no limitations with respect to the province in which the rights can be used and it is possible for those rights to be used in a particular province, then the rights can be, but are not limited to being, used in that particular province.

General rule 1 – Intangible personal property that can only be used primarily in non-participating provinces

(Section 7 of Division 2 of Part 1 of the Regulations)

A supply of intangible personal property in respect of which the Canadian rights can only be used primarily in non-participating provinces is made in a non-participating province.

General rule 2 – Intangible personal property that can only be used primarily in participating provinces

(Section 6 of Division 2 of Part 1 of the Regulations)

Rule 2A – Intangible personal property that can only be used primarily in participating provinces with province of primary use

(Subsection 6(1) of Division 2 of Part 1 of the Regulations)

If the Canadian rights in respect of a supply of intangible personal property can only be used primarily in the participating provinces, the supply is made in a participating province if an equal or greater proportion of the Canadian rights cannot be used in another participating province.

This rule applies where the Canadian rights can only be used primarily in the participating provinces and the province in which the greatest proportion of those rights can be used can be determined because the use of at least some of those rights is specifically limited to one or more of those provinces. This rule does not apply if the use of the rights is not specifically limited to one or more of the participating provinces, which would be the case, for example, if the rights can be used on an unlimited basis in more than one of those provinces.

Generally, four rules apply where the Canadian rights in respect of a supply of intangible personal property can only be used primarily in participating provinces, but Rule 2A does not apply because it is not possible to determine the participating province in which the greatest proportion of those rights can be used. This would be the case where there are no limitations with respect to the extent to which the rights can be used in any of those provinces.

Rule 2B – Intangible personal property that can only be used primarily in participating provinces with no province of primary use

(Subsection 6(2) and section 11 of Division 2 of Part 1 of the Regulations)

If the value of the consideration for the supply of the intangible personal property is $300 or less, the supply is made in a participating province if:

• the supply is made through a "specified location" of the supplier (a permanent establishment of the supplier or a vending machine) located in the province in the presence of an individual who is, or who acts on behalf of, the recipient, and
• the intangible personal property can be used in the province.

Permanent establishment
(Subsections 132.1(2) and (3))

Subsection 132.1(2) generally defines "permanent establishment" for the purposes of section 132.1 and Schedule IX. The definition relies on the meanings assigned to "permanent establishment" under certain provisions of the Income Tax Regulations. The definition also relies on the definition of "business" under subsection 248(1) of the Income Tax Act, which is defined to mean a profession, calling, trade, manufacture or any undertaking and generally an adventure or concern in the nature of trade, but does not include an office or employment.

In the case of an individual, the estate of a deceased individual or a trust that carries on a business, the meaning of "permanent establishment" is as defined for purposes of Part XXVI of the Income Tax Regulations. It therefore includes a fixed place of business of the individual including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop, or a warehouse. Also, if an individual carries on business through an employee or agent, established in a particular place, who has general authority to contract for his employer or principal or who has a stock of merchandise owned by his employer or principal from which he regularly fills orders which he receives, the individual is deemed to have a permanent establishment in that place. If an individual uses substantial machinery or equipment in a particular place at any time in a taxation year, the individual is deemed to have a permanent establishment in that place. For purposes of this definition, the fact that an individual has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise, does not on its own mean that the individual has a permanent establishment.

The same definition under Part XXVI of the Income Tax Regulations also applies with respect to the permanent establishment of a member of a partnership, where the member is an individual, the estate of a deceased individual or a trust, and the establishment relates to a business carried on through the partnership.

In the case of a corporation that carries on a business, the meaning of "permanent establishment" is as defined under Part IV of the Income Tax Regulations. It therefore includes a fixed place of business of the corporation, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop, or a warehouse. Also,

• where the corporation does not have any fixed place of business, it means the principal place in which the corporation's business is conducted;
• where a corporation carries on business through an employee or agent, established in a particular place, who has general authority to contract for his employer or principal or who has a stock of merchandise owned by his employer or principal from which he regularly fills orders which he receives, the corporation is deemed to have a permanent establishment in that place;
• an insurance corporation is deemed to have a permanent establishment in each province and country in which the corporation is registered or licensed to do business;
• where a corporation, otherwise having a permanent establishment in Canada, owns land in a province, such land is deemed to be a permanent establishment;
• where a corporation uses substantial machinery or equipment in a particular place at any time in a taxation year, it is deemed to have a permanent establishment in that place;
• if, but for this bullet, a corporation would not have a permanent establishment, the corporation is deemed to have a permanent establishment at the place designated in its incorporating documents or bylaws as its head office or registered office;
• the fact that a corporation has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise shall not on its own mean that the corporation has a permanent establishment; and
• the fact that a corporation has a subsidiary controlled corporation in a place or a subsidiary-controlled corporation engaged in trade or business in a place does not on its own mean that the corporation is operating a permanent establishment in that place.

The same definition under Part IV of the Income Tax Regulations also applies with respect to the permanent establishment of a member of a partnership, where the member is a corporation and the establishment relates to a business carried on by the partnership.

Where a member of a particular partnership is also a partnership, the permanent establishment of the member is determined by the other rules under subsection 132.1(2), provided the establishment relates to a business carried on by the particular partnership.

Finally, under subsection 132.1(2), where a person's permanent establishment cannot be determined using the rules above, the meaning of "permanent establishment" of the person is as defined under Part IV of the Income Tax Regulations as if the person were a corporation and its activities were a business for purposes of the Income Tax Act.

Subsection 132.1(3) provides that a prescribed person, or a person of a prescribed class, is deemed, under prescribed circumstances and for prescribed purposes, to have a permanent establishment in a prescribed province. Under subsection 2(1) of the New Harmonized Value-Added Tax System Regulations No. 2, the classes of persons that are prescribed for purposes of subsection 132.1(3) are:

• charities;
• non-profit organizations; and
• selected public service bodies as defined in section 259.

"Selected public service body" is defined in section 259 to mean:

• a school authority, a university or a public college that is established and operated otherwise than for profit;
• a hospital authority;
• a municipality;
• a facility operator; or
• an external supplier.

Under subsection 2(2) of Part 1 of the New Harmonized Value-Added Tax System Regulations No. 2, such a person is deemed to have a permanent establishment in a province if a place in the province would be a permanent establishment (as defined for the purposes of Part IV of the Income Tax Regulations) of the person under the following circumstances:

• the person were a corporation; and
• the person's activities were a business for the purposes of the Income Tax Act.

Rule 2C – Address in Canada obtained

(Paragraph 6(2)(b) of Division 2 of Part 1 of the Regulations)

If Rule 2B does not deem the supply to be made in a participating province, the supply may be deemed to be made in a participating province if the supplier obtains an address of the recipient in the province in the ordinary course of business. Specifically, the supply of the intangible personal property is made in a participating province if:

• in the ordinary course of business of the supplier, the supplier obtains an address that is
  • if the supplier obtains only one address that is a home or business address in Canada of the recipient, the home or business address in Canada of the recipient obtained by the supplier,
  • if the supplier obtains more than one such address, the home or business address in Canada of the recipient that is most closely connected with the supply, or
  • in any other case, the address in Canada of the recipient that is most closely connected with the supply;
• the address is in the province; and
• the intangible personal property can be used in the province.

For an explanation of how to determine the relevant address of the recipient for purposes of this rule, see the explanation under General Rule 1 of the general place of supply rule for services explained below.

Rule 2D – Highest tax rate

(Paragraph 6(2)(c) of Division 2 of Part 1 of the Regulations)
If the supply of intangible personal property is not deemed to be made in a participating province under Rule 2B or Rule 2C, the supply is made in the participating province for which the tax rate is the highest among the tax rates for the participating provinces in which the property can be used.

If a supply of intangible personal property cannot be determined under Rule 2D to be made in a single participating province because the highest tax rates for two or more participating provinces are the same, see General Rule 4 below.

General Rule 3 – Intangible personal property that can be used otherwise than only primarily in participating provinces and otherwise than only primarily outside participating provinces

(Section 8 of Division 2 of Part 1 of the Regulations)

Generally, three rules apply where the Canadian rights in respect of a supply of intangible personal property can be used otherwise than only primarily ^{Footnote 3} in participating provinces and otherwise than only primarily outside participating provinces. Basically, these rules can apply where the Canadian rights in respect of the property are not limited to being used only primarily in the participating provinces or to being used only primarily outside the participating provinces. Also, these rules can result in the supply of intangible personal property being deemed to be made in a province that is not a participating province.

Rule 3A – Consideration of $300 or less

(Paragraph 8(a) of Division 2 of Part 1 of the Regulations)

If the value of the consideration for the supply of the intangible personal property is $300 or less, the supply is made in a province if:

• the supply is made through a specified location of the supplier (a permanent establishment of the supplier or vending machine) located in the province in the presence of an individual who is, or who acts on behalf of, the recipient; and
• the intangible personal property can be used in the province.

Rule 3B – Address in Canada obtained

(Paragraph 8(b) of Division 2 of Part 1 of the Regulations)

If Rule 3A does not deem the supply to be made in a province, the supply may be deemed to be made in a province if the supplier obtains an address of the recipient in the province in the ordinary course of business. Specifically, the supply of the intangible personal property is made in a province if:

• in the ordinary course of business of the supplier, the supplier obtains an address that is
  • if the supplier obtains only one address that is a home or business address in Canada of the recipient, the home or business address in Canada of the recipient,
  • if the supplier obtains more than one such address, the home or business address in Canada of the recipient that is most closely connected with the supply, or
  • in any other case, the address in Canada of the recipient that is most closely connected with the supply;
• the address is in the province; and
• the intangible personal property can be used in the province.

For an explanation of how to determine the relevant address of the recipient for purposes of this rule, see the explanation under General Rule 1 of the general place of supply rule for services explained below.

Rule 3C – Highest tax rate

(Paragraph 8(c) of Division 2 of Part 1 of the Regulations)

If Rule 3A or Rule 3B does not deem the supply of the intangible personal property to be made in a province, the supply is made in the participating province for which the tax rate is the highest among the tax rates for the provinces in which the property can be used. If a supply of intangible personal property cannot be determined under Rule 3C to be made in a single participating province because the highest tax rate for two or more participating provinces are the same, see General Rule 4 below.

General Rule 4 – Participating provinces with the same highest tax rate

(Section 11 of Division 2 of Part 1 of the Regulations)

If a supply of intangible personal property cannot be determined under Rule 2D or Rule 3C to be made in a single participating province, because the highest tax rates for two or more of the participating provinces (each of which is referred to here as a "specified province") are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to such an address.

Intangible personal property that relates to passenger transportation services

(Section 22 of Division 4 of Part 1 of the Regulations)

Special place of supply rules apply to a supply of intangible personal property that is, or is similar to, a passenger transportation pass entitling an individual to one or more passenger transportation services:

• If, at the time the supply is made, the supplier can determine that each passenger transportation service covered by the passenger transportation pass could not begin otherwise than in the same participating province and would terminate in Canada, the supply is made in that participating province.
• If, at the time the supply is made, the supplier can determine that each passenger transportation service covered by the passenger transportation pass could not begin otherwise than in a non-participating province or would terminate outside Canada, the supply is made in a non-participating province.

If these rules do not determine the place of supply of the intangible personal property (for instance, where the passenger transportation services covered by the passenger transportation pass may not always begin in the same participating province), the place of supply of the intangible personal property is determined under the general place of supply rules for intangible personal property explained in "Intangible personal property – General rules".

Intangible personal property that relates to tangible personal property

(Section 10 of Division 2 of Part 1 of the Regulations)

The general place of supply rules for supplies of intangible personal property do not apply to supplies of intangible personal property that relates to tangible personal property such as option to purchase tangible personal property. These types of supplies are subject to specific place of supply rules.

Generally, a supply of intangible personal property is considered to relate to tangible personal property if the intangible personal property relates to specific tangible personal property. It excludes a supply of a right to use tangible personal property by way of lease, licence or similar arrangement, since such a supply is deemed to be a supply of the tangible personal property that is subject to different place of supply rules.

Rule 1 – Intangible personal property that relates to tangible personal property that is not ordinarily located primarily in participating provinces

(Paragraph 10(b) of Division 2 of Part 1 of the Regulations)

A supply of intangible personal property that relates to tangible personal property that is ordinarily located in Canada is made in a non-participating province if the tangible personal property that is ordinarily located in Canada is not ordinarily located primarily^{Footnote 4} in participating provinces.

Rule 2 – Intangible personal property that relates to tangible personal property ordinarily located primarily in participating provinces

(Paragraph 10(a) of Division 2 of Part 1 of the Regulations)

A supply of intangible personal property that relates to tangible personal property is made in a participating province if

• the tangible personal property that is ordinarily located in Canada is ordinarily located primarily ^{Footnote 5} in participating provinces, and
• an equal or greater proportion of the tangible personal property is not ordinarily located in another participating province.

Ordinary location of property

(Section 4 of Part I of Schedule IX)

Rule 3 – Highest tax rate

(Paragraph 10(a) of Division 2 of Part 1 of the Regulations)

If Rule 2 does not result in the supply being made in a province because the tangible personal property is ordinarily located in equal proportions in two or more participating provinces, the intangible personal property is deemed to be supplied in the participating province among those provinces for which the tax rate is the highest.

Rule 4 – Same highest tax rate

(Section 11 of Division 2 of Part 1 of the Regulations)

If a supply of intangible personal property cannot be determined under Rule 3 to be made in a single participating province, because the tax rates for two or more of the participating provinces (each of which is referred to here as a "specified province") are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to such an address.

Intangible personal property that relates to real property

(Section 9 of Division 2 of Part 1 of the Regulations)

The general place of supply rules for supplies of intangible personal property do not apply to supplies of intangible personal property that relates to real property. These types of supplies are subject to specific place of supply rules.

Real property is defined to include:

• in respect of property in the Province of Quebec, immovable property and every lease thereof,
• in respect of property in any other place in Canada, messuages, lands and tenements of every nature and description and every estate or interest in real property, whether legal or equitable, and
• a mobile home, a floating home and any leasehold or proprietary interest therein.

Based on this definition, except for property in Quebec, there are very few supplies of intangible personal property relating to real property that would not be deemed to be a supply of real property. As a result, the place of supply rules explained in this section would only apply in a few circumstances. An example of a supply of intangible personal property relating to real property to which the rules could apply would be a supply of a vacation club membership relating to vacation resorts.

Intangible personal property that relates to real property in Canada and outside Canada

(Section 142)

A supply of intangible personal property that relates to real property is deemed to be made in Canada if the real property is situated in Canada and is deemed to be made outside Canada if the real property is situated outside Canada. As a result, where the real property is both situated in Canada and outside Canada, the proportion of the supply of the intangible personal property that relates to the real property that is situated in Canada is considered to be made in Canada while the proportion of the supply of the intangible personal property that relates to the real property that is situated outside Canada is considered to be made outside Canada. As a result, it is only the proportion of the supply of the intangible personal property that relates to real property that is situated in Canada that may be deemed to be made in a participating province and subject to HST.

Rule 1 – Intangible personal property that relates to real property that is not situated primarily in participating provinces

(Paragraph 9(b) of Division 2 of Part 1 of the Regulations)
A supply of intangible personal property that relates to real property is made in a non-participating province if the real property that is situated in Canada is not situated primarily ^{Footnote 6} in participating provinces.

Rule 2 – Intangible personal property that relates to real property situated primarily in participating provinces

(Paragraph 9(a) of Division 2 of Part 1 of the Regulations)

A supply of intangible personal property that relates to real property is made in a participating province if

• the real property that is situated in Canada is situated primarily in participating provinces, and
• an equal or greater proportion of the real property is not situated in another participating province.

Rule 3 – Highest tax rate

If Rule 2 does not result in the supply being made in a province because the real property is ordinarily located in equal proportions in two or more participating provinces, the intangible personal property is deemed to be supplied in the participating province among those provinces for which the tax rate is the highest.

Rule 4 – Same highest tax rate

(Section 11 of Division 2 of Part 1 of the Regulations)

If a supply of intangible personal property cannot be determined under the previously explained rules to be made in a single participating province, because the highest tax rates for two or more of the participating provinces (each of which is referred to here as a "specified province") are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to such an address.

Services

(Division 3 of Part 1 of the Regulations)

Overview

The place of supply rules for certain services have changed significantly. The general rules are now generally based on the home or business address of the recipient (or another address of the recipient) in Canada that the supplier obtains in the ordinary course of its business. However the general rules are subject to specific place of supply rules that can apply to certain types of services. Where the specific place of supply rules do not determine the place of supply of a particular type of service because the conditions for the application of those rules are not met, it is the general place of supply rules that determine the place of supply of the service.

Note: Appendix D contains a flow chart that summarizes the place of supply rules for supplies of services.

For purposes of the place of supply rules that apply to services, the following rules apply:

Deemed performance
(Section 3 of Part I of Schedule IX)

Where an agreement for a supply of a service is entered into but the service is never performed, the service is deemed to have been performed where the service was to be performed, as the case may be, under the terms of the agreement.

Ongoing services
(Subsection 136.1(2))

Where a supply of a service is made for consideration that includes a payment that is attributable to a period (referred to as a "billing period") that is the whole or a part of the period during which the service is or is to be rendered under the arrangement, a separate supply of the service for separate consideration is deemed to be made by the supplier and received by the recipient for each billing period. The supply for each billing period is deemed to be made on the earliest of

• the first day of the billing period,
• the day on which the payment attributable to that period becomes due, and
• the day that payment is made.

The separate supplies of the services that are deemed to be made for each billing period can be subject to HST at a different rate to the extent that they can be deemed made in a different province based on the place of supply rules for services.

Services – General rules

(Section 13 of Division 3 of Part 1 of the Regulations)

There are three general place of supply rules that apply to supplies of services. Generally, the first general rule applies where the supplier obtains an address in Canada of the recipient, while the second general rule applies where such an address is not obtained and is based on the location of the performance of the service. The third general rule applies where the second general rule does not apply because the service is performed equally in two or more participating provinces having the same highest tax rate.

General Rule 1 – Address in Canada obtained

(Subsection 13(1) of Division 3 of Part 1 of the Regulations)

A supply of a service is made in a province if, in the ordinary course of business of the supplier, the supplier obtains an address in the province that is

1. if the supplier obtains only one address that is a home or a business address in Canada of the recipient, the home or business address in Canada obtained by the supplier,
2. if the supplier obtains more than one address described in paragraph (A), the address described in that paragraph that is most closely connected with the supply, or
3. in any other case, the address in Canada of the recipient that is most closely connected with the supply.

General Rule 1 is generally based on the location of the recipient, which is generally accomplished by determining the place of supply based on an address in Canada of the recipient that the supplier obtains in the ordinary course of its business.

The rule does not require a supplier to obtain an address of the recipient that the supplier does not already obtain in the ordinary course of its business. The determination of the relevant address in respect of a supply under Rule 1 is based on the facts taking into account the ordinary business practice of each supplier with respect to each supply.

An address of the recipient obtained by a supplier is only relevant for purposes of this rule if it is obtained in the ordinary course of the supplier's business practices in connection with the supply. On the other hand, any address of the recipient obtained in the ordinary course of business of the supplier should be taken into consideration in applying the rule. The relevant address of the recipient also does not have to be an address obtained in respect of every supply made to the recipient for it to be considered a relevant address obtained in the ordinary course of business. An address of the recipient obtained by a supplier in the ordinary course of business could therefore include:

• an address of the recipient from which the supplier is hired in connection with a supply pursuant to an agreement for the supply (the "contracting address");
• an address of the recipient that the supplier deals with in connection with a supply; or
• a billing address of the recipient in connection with a supply.

The rule is straightforward, particularly where a supplier only obtains a single address of the recipient in the ordinary course of its business. However, where a supplier obtains several addresses of the recipient that are connected to the supply, a determination must be made with respect to which of these addresses is the address that is most closely connected to the supply.

Although a supply of a service may be deemed to be made in a particular province based on General Rule 1, self-assessment of the provincial part of the HST by the recipient in respect of the service may still be required in some cases where it is established that the service is acquired for consumption, use or supply in another province. General Rule 1 is not intended to replace the self-assessment provisions by requiring a supplier to determine the province in respect of which the recipient has acquired the service for consumption, use or supply, which in some cases can be in multiple provinces. The self-assessment rules complement the place of supply rules and account for different tax rates.

The type of address obtained must be an address of the recipient that represents an actual specific physical location that is situated in a province. For instance, an e-mail address or an IP address obtained by a supplier that does not represent a specific physical location address of the recipient is not relevant for purposes of General Rule 1.

The address obtained by the supplier in the ordinary course of business must be an address of the "recipient" of the supply who, under subsection 123(1), is generally the person who is liable under the agreement for the supply to pay the consideration payable for the supply.

A "recipient" of a supply of property or a service means

1. where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration,
2. where paragraph (a) does not apply and consideration is payable for the supply, the person who is liable to pay that consideration, and
3. where no consideration is payable for the supply,
   1. in the case of a supply of property by way of sale, the person to whom the property is delivered or made available,
   2. in the case of a supply of property otherwise than by way of sale, the person to whom possession or use of the property is given or made available, and
   3. in the case of a supply of a service, the person to whom the service is rendered,

and any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply.

(A) Single business address or home address in Canada obtained

(Paragraph 13(1)(a) of Division 3 of Part 1 of the Regulations)

Paragraph (A) of Rule 1 provides that a supply of a service is made in a province if, in the ordinary course of business of the supplier, the supplier obtains an address in the province, that is, if the supplier obtains only one address, a home or business address in Canada of the recipient.

This part of the rule applies where the supplier obtains a single business or home address of the recipient in the ordinary course of its particular business. The business or home address of the recipient is considered to be the type of address that provides the closest approximation of the location of the recipient.

Generally, a business address is considered to be an address at which a business is located. A business address can therefore include, among other things, the address of an office, a branch, a factory or a workshop of the recipient. A PO Box, that is a locked compartment within a Post Office, is not considered to be a business address. However, a PO Box address can be considered to be another address of the recipient for purposes of the third part of the rule as explained later.

Generally, a home address means the address at which the primary residence of an individual is located.

This is straightforward to the extent that it is based on information that the supplier already obtains in the ordinary course of business. For purposes of paragraphs (A) and (B) of the rule which are based on a specific type of address, it must be reasonable for the supplier to be able to conclude that the type of address obtained is a business address of the recipient based on information that is available to the supplier. For example, if an online supplier asks its customers to provide what it identifies on its Web site as a "business address" (for example, for billing purposes) and this is the only address of the recipient that the supplier obtains in the ordinary course of business, the supplier is not required to verify whether the address provided by the recipient is actually a business address of the recipient. This part of the rule also applies if the supplier obtains a "business address" that the supplier knows is a business address based on the supplier's knowledge of the recipient (for instance, based on interactions that the supplier has with the recipient).

(B) Multiple business or home addresses in Canada obtained

(Paragraph 13(1)(b) of Division 3 of Part 1 of the Regulations)

Paragraph (B) of Rule 1 provides that if the supplier obtains more than one business or home address in Canada of the recipient described in paragraph (A), the supply of the service is made in the province in which the business or home address that is most closely connected with the supply is located.

A supplier can obtain multiple business addresses of the recipient in the ordinary course of its business. To the extent that the obtained addresses of the recipient do not vary (as is typically the case for online suppliers), the relevant address of the recipient for purposes of the place of supply rule should also not vary. However, if the addresses of the recipient vary from supply to supply, the relevant address may also vary for purposes of the place of supply rule. Since the business or home addresses obtained by each supplier can vary, the address that is most closely connected with the supply is not necessarily the same for all suppliers, or the same for all suppliers in a given industry, or even the same with respect to all supplies made by the same supplier. The determination of the relevant address in respect of a supply under this place of supply rule is made according to the ordinary business practice of each supplier with respect to each supply.

The rule does not provide the option of selecting a particular address of the recipient among several addresses obtained in the ordinary course of business of the supplier. Rather, the rule requires a determination of the address of the recipient that is most closely connected with the supply where multiple addresses are obtained.

The business address of the recipient from which the supplier is hired pursuant to the agreement for the supply (the "contracting address") is generally the address that is most closely connected with the supply. This address will therefore determine the province in which the supply of the service is made where it is in Canada and is obtained by the supplier in the ordinary course of its business. The determination of the place of supply can therefore be made with certainty at the time the supply is first made where the contracting address is identified in the agreement for the supply or, if it is not identified in the agreement, has otherwise been obtained by the supplier in the ordinary course of its business. Where the recipient is a corporation, the contracting address could be the corporation's head office.

If the contracting address of the recipient is not obtained, the address most closely connected with the supply would be the business address of the recipient that the supplier has the most contact with and that the supplier mostly uses in connection with the supply.

(C) Address in Canada other than a business or home address obtained

(Paragraph 13(1)(c) of Division 3 of Part 1 of the Regulations)

Paragraph (C) of Rule 1 further provides that if the supplier does not obtain a home or business address in Canada of the recipient in the ordinary course of its business, but in the ordinary course of business of the supplier, the supplier obtains another address in Canada of the recipient, the supply is made in the province in which the address that is most closely connected with the supply is located.

For purposes of this part of the rule, there is no requirement for the address of the recipient to be an address at which the recipient is located.

The types of addresses that could fall under this part of the rule could include an address of the recipient such as a billing address. The address must be obtained by the supplier for a legitimate underlying business reason. This address may correspond to an address that is in fact a business address or home address of the recipient but that the supplier does not know is a business or home address because it is not the supplier's ordinary business practice to obtain this type of address. For instance, this could be the case where the supplier does not require recipients to identify the address as being a business or a home address.

General Rule 2 – No address in Canada obtained

(Subsection 13(2) of Division 3 of Part 1 of the Regulations)

Rule 2A – Canadian element not performed primarily in participating provinces

(Paragraph 13(2)(b) of Division 3 of Part 1 of the Regulations)

If Rule 1 does not deem the supply of the service to be made in a province and the Canadian element of the service is not performed primarily in participating provinces, the supply is made in a non-participating province.

Rule 2B – Participating province of greatest proportion of performance

(Subparagraph 13(2)(a)(i) of Division 3 of Part 1 of the Regulations)

Unlike Rule 1 which is generally based on the location of an address in Canada of the recipient, Rule 2 is generally based on where the service is performed. If Rule 1 does not deem the supply of the service to be made in a province and the Canadian element ^{Footnote 7} of the service is performed primarily ^{Footnote 8} in participating provinces, the supply is made in a participating province if an equal or greater proportion of the Canadian element of the service is not performed in another participating province.

Although the word "performed" is not defined in the Act, the place where a service is performed is traditionally the place where the person physically doing the work is situated at the time the work is being conducted. For example, if a supplier in a non-participating province sends a technician to a participating province to provide programming services, the service is considered to be performed in the participating province since the service is physically performed in that province.

Where all of the activities carried out by the supplier in performing a service are clearly undertaken in a province (i.e., the employees performing the service are in the province, or the supplier's equipment used to provide the service is located in the province), the place of performance of the service is in the province.

Where part of the activities carried out by the supplier in performing a service are carried out in a province, the place of supply of the service can be considered to be in the province. For example, a supplier may prepare a report in a province in respect of programming services carried on outside the province. As the report is a component of the services supplied, the place where the report is prepared must be considered when determining the place of supply.

Electronic commerce allows services to be provided remotely. A supplier can provide a service to a customer in another province without physically being in that other province. For example, a supplier can have a technician perform work from a province by electronically accessing a customer's computer located in another province, rather than sending the technician to the other province. Work is being performed both at the location of the service provider, as well as the location of the customer's property that is the object of the service. It is therefore necessary to take into account the location of the customer's property when determining the place of performance.

Whether a service is performed in whole or in part in a province is a question of fact. Each supply of a service must be examined on a case-by-case basis to determine whether that service is performed in whole or in part in a province. However, a supply of a service is performed at least in part in a province if:

• the service requires a person to perform a task (i.e., the supplier acts through one or more of its employees), and the person performing or physically carrying out the task is situated in the province at the time the activity is done;
• the service includes operations performed by a supplier's equipment (e.g., computer equipment), and the equipment is located in the province;
• the supply involves doing something to or with a recipient's equipment by accessing it from a remote location, and the recipient's equipment is located in the province (however, this does not apply to a service wholly performed outside the province, where the results are subsequently delivered electronically to a recipient's computers in another province, e.g., a programming service carried out at the supplier's location in a province and e-mailed to a recipient in another province); or
• any activity related to the performance of the service is undertaken in the province.

Rule 2C – Highest tax rate

(Subparagraph 13(2)(a)(ii) of Division 3 of Part 1 of the Regulations)

If Rule 2B does not deem the supply of a service to be made in a participating province because the service is performed equally in two or more participating provinces, the service is supplied in the participating province that has the highest tax rate among the participating provinces for which no greater proportion of the service is performed in another participating province.

General Rule 3 – Same highest tax rate

(Section 18 of Division 3 of Part 1 of the Regulations)

If a supply of a service cannot be determined under Rule 2C to be made in a single participating province because the highest tax rates for two or more participating provinces are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to the business address of the supplier that is most closely connected with the supply.

Personal services

(Sections 17 and 18 of Division 3 of Part 1 of the Regulations)

In certain circumstances, there are specific place of supply rules that can apply to the supply of a personal service, which is generally a service that is all or substantially all ^{Footnote 9} performed in the presence of the individual to whom it is rendered. A personal service can include a service that is all or substantially all performed in the presence of a group of individuals to whom the service is rendered.

An advisory service means a service of giving an opinion, or counsel, or of recommending a plan or course of action.

A consulting service means a service of providing information, instruction or expert advice. A consultant generally provides services relating to a field of specialized knowledge or training.

An advisory or consulting service may address business, management, marketing, data processing, public relations or other issues or problems faced by the client. An advisory or consulting service is not considered to include any work that might be undertaken or performed as a result of the plans or recommendations accepted by the client or the advice provided to the client.

A professional service is generally defined in terms of the individual providing the service. If the person making the supply of the service is other than an individual, for example, a partnership or company, the status of the individual professional or professionals assigned to provide the service will be considered in determining whether the service is a professional service.

A professional service refers to a service provided by an individual whose vocation or occupation requires special, usually advanced, education and skills. The individual providing the service may be a member of a professional association, a professional corporation or a similar body, which is recognized by a statute in at least one province or territory or by one federal body, and which enforces standards of professional practice as well as a code of ethics. However, a professional service will be considered to include the services provided by articling or other students and support staff, to the extent that their services are intended to assist the professional in the provision of the professional's service and are undertaken under the supervision of the professional.

Finally, the duties and labour performed in the provision of the professional service must be related to the vocation or occupation of the individual.

Rule 1

If all or substantially all of a service is performed in the presence of the individual to whom it is rendered and the Canadian element of the service is not performed primarily ^{Footnote 10} in participating provinces, the supply is made in a non-participating province.

Rule 2

A supply of a service that is all or substantially all ^{Footnote 11} performed in the presence of the individual to whom it is rendered is made in a participating province if the Canadian element of the service is performed primarily in participating provinces and an equal or greater proportion of the service is not performed in another participating province.

Generally, a supply of a service that is performed in the presence of the individual to whom it is rendered but that is not performed all or substantially all in the presence of the individual is subject to the general place of supply rules for services unless another specific rule applies.

Rule 3

If the above rule does not result in the supply of the service being made in a participating province because the service is equally performed in two or more participating provinces, the supply is made in the participating province among those provinces that has the highest tax rate for which no greater proportion of the service is performed in another participating province.

Rule 4

If a supply of a service cannot be determined under the above rule to be made in a single participating province because the highest tax rates for two or more of the participating provinces (each of which is referred to here as a "specified province") are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to the business address of the supplier that is most closely connected with the supply.

Services in relation to tangible personal property and real property
There are specific place of supply rules that apply to services in relation to tangible personal property and services in relation to real property. The rules therefore require a determination of whether a supply of a service is in relation to tangible personal property or in relation to real property.

Whether a service is considered to be in relation to tangible personal property or real property depends on whether there is a direct connection between the service and the property taking into account the objective of the service and the particular circumstances of each case. There are several guidelines that are used to determine whether there is a direct connection between a service and tangible personal property or real property.

It must first be determined whether the service is designed, developed or undertaken to fulfill or serve a particular need or requirement arising from or relating to the property. This guideline involves determining the purpose or objective of the service. The purpose or objective of the service may often be determined by examining a written contractual agreement for the supply between the supplier and the recipient of the service. If there is no formal written agreement, other documentation, such as purchase orders, correspondence between the parties or invoices or receipts may be useful in establishing the purpose or objective of the service.

It must then be determined whether the relationship between the purpose or objective of the service and the property is direct rather than merely indirect. If something else comes between the service and the property, the connection will not be considered to be direct.

A service and property would generally be regarded as being in relation to each other pursuant to the above guidelines if the purpose of a service is to:

• physically count the property,
• appraise or value the property,
• physically protect or secure the property, or
• enhance the value of the property.

Similarly, if the service is aimed at effecting or dealing with the transfer of ownership of, claims on or rights to the property, or determining title to the property, the service will generally be regarded as being in relation to the property.

Finally, in order for a service to be considered a service in relation to particular tangible personal property or real property that is situated at a particular location, and in order to apply the place of supply rules for these types of services, the service must relate to specific property that can be determined to be situated at a particular location at a particular time. If the service does not relate to specific property, the service will generally be considered to be a service that is subject to the general place of supply rules for services.

Services in relation to tangible personal property

(Sections 15, 16 and 18 of Division 3 of Part 1 of the Regulations)

The application of the specific rules that apply to supplies of services in relation to tangible personal property is generally based on whether the property remains in the same province while the service is performed.

Generally, in order to apply these place of supply rules, it is necessary to determine where the tangible personal property is situated when the service begins to be performed and while the service is performed. In cases where it is not possible for a supplier to make such a determination, the supply of the service is generally subject to the general place of supply rules for services.

Tangible personal property remains in the same province while the service is performed

(Section 15 of Division 3 of Part 1 of the Regulations)

Rule 1

A supply of a service in relation to tangible personal property that is situated in one or more provinces at the particular time when the Canadian element of the service begins to be performed and that at all times when the Canadian element of the service is performed, remains in the province in which it was situated at the particular time, is made in a non-participating province if at the particular time the tangible personal property is not situated primarily in participating provinces.

Rule 2

A supply of a service in relation to tangible personal property that is situated in one or more provinces at the particular time when the Canadian element of the service begins to be performed and that at all times when the Canadian element of the service is performed, remains in the province in which it was situated at the particular time, is made in a participating province if at the particular time:

• the property is situated primarily in participating provinces, and
• an equal or greater proportion of the property is not situated in another participating province.

Rule 3

If Rule 2 does not result in the supply of the service being made in a participating province because the greatest proportions of the tangible personal property are equally situated in two or more participating provinces, the service is supplied in the participating province among those provinces that has the highest tax rate.

Rule 4

If a supply of a service cannot be determined under Rule 3 to be made in a participating province because the highest tax rates for two or more of the participating provinces (each of which is referred to here as a "specified province") are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to the business address of the supplier that is most closely connected with the supply.

Tangible personal property does not remain in same province while the service is performed

((Section 16 of Division 3 of Part 1 of the Regulations)

Rule 1

A supply of a service in relation to tangible personal property that is situated in one or more provinces at the particular time when the Canadian element of the service begins to be performed and that at any time during the period when the Canadian element of the service is performed does not remain in the province in which it was situated at the particular time, is made in a non-participating province if:

• the tangible personal property is not situated primarily in participating provinces at all times when the service is performed, or
• the Canadian element of the service is not performed primarily in participating provinces.

Rule 2

A supply of a service in relation to tangible personal property that is situated in one or more provinces at the particular time when the Canadian element of the service begins to be performed and that at any time during the period when the Canadian element of the service is performed does not remain in the province in which it was situated at the particular time, is made in a participating province if:

• the property is situated primarily in participating provinces at any time when the service is performed,
• the Canadian element of the service is performed primarily in participating provinces, and
• an equal or greater proportion of the service is not performed in another participating province.

Rule 3

If Rule 2 does not result in the supply of the service being made in a participating province because the greatest proportions of the service are equally performed in two or more participating provinces, the supply is made in the participating province among those provinces that has the highest tax rate.

Rule 4

If a supply of a service cannot be determined under Rule 3 to be made in a participating province because the highest tax rates for two or more of the participating provinces (each of which is referred to here as a "specified province") are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to the business address of the supplier that is most closely connected with the supply.

Services in relation to real property

(Sections 14 and 18 of Division 3 of Part 1 of the Regulations)

There are specific place of supply rules that apply to supplies of services in relation to real property.

These place of supply rules require a determination of the proportion of real property that is situated in a province. The determination of the relevant proportion of the real property that is situated in a province is based on the physical size of the entire real property (for example, based on square footage, square yards or acres) pursuant to its legal description. The value of the real property or the number of properties (unless they are of equal size) is not relevant to this determination.

Services in relation to real property situated in Canada and outside Canada

(Section 142)

A supply of a service that relates to real property is deemed to be made in Canada if the real property is situated in Canada and is deemed to be made outside Canada if the real property is situated outside Canada. As a result, where the real property is both situated in Canada and outside Canada, the proportion of the service that relates to the real property that is situated in Canada is considered to be made in Canada and the proportion of the service that relates to the real property that is situated outside Canada is considered to be made outside Canada. As a result, it is only the provision of the proportion of the service that relates to real property that is situated in Canada that may be deemed to be made in a participating province and subject to HST.

Rule 1

A supply of a service in relation to real property that is situated in Canada and that is not situated primarily ^{Footnote 12} in participating provinces is made in a non-participating province.

Rule 2

A supply of a service in relation to real property is made in a participating province if the real property that is situated in Canada is situated primarily in participating provinces and an equal or greater proportion of the real property is not situated in another participating province.

Rule 3

If Rule 2 does not result in the supply of the service being made in a participating province because the greatest proportions of the real property are equally situated in two or more participating provinces, the supply of the service is made in the participating province among those provinces that has the highest tax rate.

Rule 4

If a supply of a service cannot be determined under Rule 3 to be made in a participating province because the highest tax rates for two or more of the participating provinces (each of which is referred to here as a "specified province") are the same, the supply is made in the specified province among those provinces where the business address of the supplier that is most closely connected with the supply is located or, if such an address is not located in one of the specified provinces, in the specified province that is closest in proximity, determined in any reasonable manner, to the business address of the supplier that is most closely connected with the supply.

Services in relation to a location-specific event

(Section 28 of Division 5 of the Regulations)

There is a specific place of supply rule that applies to supplies of services that relate to a location-specific event. A supply of a service in relation to a performance, athletic or competitive event, festival, ceremony, conference, or similar event is made in a province if the service is to be performed primarily at a location of the event in the province. Generally, if the conditions for the application of this place of supply rule are not met, the supply of the service is subject to the general place of supply rules for services.

The fact that a service is performed at the location of an event does not mean that it relates to the event. To be considered to be a service in relation to a location-specific event, there must be a direct connection between the service and the event. Specifically, the object of the service must be the event itself and not something else. Generally, this would include services supplied to an organizer of an event, such as event planning and the performance of the event.

The list of events in the Regulations is not exhaustive. However, the event must be one that is similar in nature to the events that are listed in the rule.

Services rendered in connection with litigation

(Section 27 of Division 5 of Part 1 of the Regulations)

A supply of a service that is rendered in connection with criminal, civil or administrative litigation in a province (other than a service rendered before the commencement of such litigation) that is under the jurisdiction of a court or other tribunal established under the laws of a province, or in the nature of an appeal from a decision of a court or other tribunal established under the laws of a province, is made in that province. A supply of such a service rendered before the commencement of such litigation is subject the general place of supply rules for services.

Commencement of Criminal, Civil or Administrative litigation
Criminal litigation
Criminal litigation generally commences on the day an "information", for Summary Conviction Proceedings, or an "indictment", for Indictable Offences, is filed or sworn with the court. The resulting laying of the complaint, charge or accusation has the effect of crystallizing the commencement of criminal litigation.

Civil litigation
Civil litigation generally commences on the day that the originating process (i.e., Statement of Claim, Writ of Summons in the province of Quebec, Notice of Application, Petition, etc.) is filed with the court in accordance with the rules of civil procedure in a particular provincial or territorial jurisdiction.

Administrative litigation
The time when the administrative litigation commences will normally be based on the procedural requirements imposed by the relevant legislation, or the "rules" of natural justice if no legislation exists, under which the administrative litigation will be brought.

The following are events that are considered to constitute the commencement of administrative litigation:

• Section 10 of the Competition Act states that the Commissioner of Competition shall conduct an inquiry into allegations brought forth by a complainant. The day the Commissioner receives the complaint will be the day on which administrative litigation commences.
• The date on which a notice, appeal, application, request, etc. is received by the administrative body. For example, where a neighbourhood association disputes a new municipal by-law that will allow for the development of a parking lot on land reserved for recreational activities, the litigation will have commenced on the day the association files its brief with the provincial Municipal Board.
• The date on which the Board or Tribunal's clerk or registrar receives a copy of the application or complaint. For example, where a taxpayer initiates an appeal to an assessment with the Tax Court of Canada, litigation will have commenced on the day the registrar of the Tax Court accepts receipt of the appeal, etc.
• The date on which the aggrieved party files a complaint with a Board. For example, where a tenant wishes to object to a landlord's rent increase before a Rent Control Hearings Board, litigation will have commenced on the day the tenant lodges his objection or complaint with the Board.
• Where no specific statutory procedure dictates the date on which litigation commences, under these circumstances, litigation will be considered to have commenced on the day a board, body or agency which is empowered or authorized to act is made aware of a complainant's intentions.

Meaning of the expression "in connection with" criminal, civil or administrative litigation
The expression "in connection with" generally means that there is a relation between things, one of which is bound up with, involved in another, or again having to do with. The words include matters occurring prior to as well as subsequent to or consequent upon, as long as they are related to the principal thing. However, before a service can be considered to be "in connection with" litigation, there should be evidence to the effect that from a particular point in time the object of the supplier's services directly relates to the intended or contemplated legal or administrative proceedings for litigation purposes.

For greater certainty, the following guidelines are considered to determine whether the services rendered are in connection with criminal, civil or administrative litigation:

1. Was the service designed, developed or undertaken to meet the need or requirement arising from criminal, civil or administrative litigation? In other words, were the services rendered in order to comply with the rules of criminal, civil or administrative procedure?
2. Is the relationship between the purpose or object of the service and litigation sufficiently close? For example, in preparation for the trial, a lawyer consults with a specialist on maritime law to confirm whether he can act as an expert witness on the client's behalf. Since the purpose of the consultation is to enable the lawyer to obtain a witness necessary to advance his client's case, a reasonable functional relationship exists between the legal service and litigation.
3. In criminal matters, the supply of most if not all of the legal services made by a defence lawyer in a specific case would usually be in connection with criminal litigation; the object and purpose of the services directly relate to criminal matters.
4. Documentation such as copies of agreements, requests for advisory, professional or consulting services, the supplier's accounting records, demand letters, copies of objections or appeals, etc., would usually indicate the purpose or objective of the service rendered in relation to civil or administrative proceedings.

Customs brokerage services

(Section 25 of Division 5 of Part 1 of the Regulations)

A customs brokerage service means a service in respect of the importation of goods that consists of arranging for the release of imported goods (as defined under subsection 2(1) of the Customs Act) or of fulfilling, in respect of the importation, any requirement under the Customs Act or the Customs Tariff to account for the goods, to report, to provide information or to remit any amount.

Rule 1

The supply of a customs brokerage service in respect of imported goods accounted for as commercial goods (as defined under subsection 212.1(1)) under section 32 of the Customs Act is made in the province in which the goods are situated at the time of their release. "Commercial goods" means goods that are imported for sale or for any commercial, industrial, occupational, institutional or other like use.

Rule 2

The supply of a customs brokerage service in respect of imported goods that are not accounted for as commercial goods is made in a participating province if tax, calculated at the tax rate for the participating province, is imposed under subsection 212.1(2), or would be so imposed if various provisions did not apply in respect of the importation, such as:

• subsection 212.1(3) which applies to imported goods accounted for as commercial goods, imported specified motor vehicles, or imported mobile homes or floating homes that have been used or occupied in Canada by any individual;
• subsection 212.1(4) which applies to certain goods imported by or on behalf of persons who are resident in the Nova Scotia offshore area or the Newfoundland offshore area; and
• section 213 which relieves imported goods that qualify as non-taxable importations from the imposition of the GST or federal part of the HST.

Rule 3

In any other case, the supply of the customs brokerage service is made in a non-participating province.

Other services supplied by customs brokers would generally be subject to the general place of supply rules for services.

Repairs, maintenance, cleaning, adjustments, alterations and photographic-related goods

(Section 29 of Division 5 of Part 1 of the Regulations)

No changes have been made to the place of supply rule that applies where a supplier receives tangible personal property of another person for the purpose of either

• supplying a service of repairing, maintaining, cleaning, adjusting or altering the property, or
• producing a negative, transparency, photographic print or other photographic-related good.

The supply of the service (and of any property supplied in connection with it) or of the photographic-related good is made in a province if the supplier delivers the property or the photographic-related good in that province to the recipient of the supply after the service or production of the photographic-related good is completed. Where the relevant conditions have been met, this place of supply rule overrides the place of supply rule for supplies of services in relation to tangible personal property and the general place of supply rules for supplies of tangible personal property.

A service of repairing a good generally means a service of restoring a good to its original operating condition after damage or wear including the fixing or replacement of parts of the good.

A service of maintaining a good generally means a service that preserves or provides for the preservation of the good in good condition.

A service of cleaning a good generally means a service of making a good free of dirt, marks, stains or unwanted matter including by washing, brushing or wiping the good.

A service of adjusting a good generally means a corrective action to bring a good into a proper state or condition to conform to a standard.

A service of altering a good generally means a service that changes a good without changing its essential character. It excludes a service that destroys the essential character of a good or results in the creation of a new or commercially different good with different essential characteristics. It excludes a service of manufacturing or producing a good.

Generally, tangible personal property is considered to be delivered where its possession is transferred. However, for purposes of this rule, tangible personal property is also deemed to be delivered in a particular province, and not in any other province, if the supplier either

• ships the property to a destination in the province that is specified in the contract for carriage of the property or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination; or
• sends the property by mail or courier to an address in the particular province.

Services of a trustee in respect of a trust governed by an RRSP, RRIF, RESP, TFSA or RDSP

(Section 30 of Division 5 of Part 1 of the Regulations)

For purposes of this place of supply rule, the following terms have the meaning assigned by subsection 248(1) of the Income Tax Act:

• RRSP means a registered retirement savings plan,
• RRIF means a registered retirement income fund,
• RESP means a registered education savings plan,
• TFSA means a tax free savings account,
• RDSP means a registered disability savings plan.

A supply of a service in respect of a trust governed by an RRSP, an RRIF an RESP, an RDSP or a TFSA provided by a trustee of the trust is made in a province if the mailing address of the annuitant of the RRSP or RRIF or of the subscriber of the RESP or of the holder of the RDSP or TFSA is in that province.

Generally, where the service in respect of the trust is provided by a person other than the trustee of the trust, the place of supply of the service is determined by the general place of supply rules for services.

1-900 or 976 service

(Section 31 of Division 5 of Part 1 of the Regulations)

A supply of a service provided by telephone and accessed by calling a number beginning with the digits 1-900 or containing the local telephone prefix 976 is made in the province in which the telephone call originates.

Computer-related services and Internet access

(Section 32 of Division 5 of Part 1 of the Regulations)

Defined terms

Canadian rights in respect of intangible personal property, means that part of the property that can be used in Canada.

A computer-related service means:

• a technical support service that is provided by means of telecommunications and relates to the operation or use of computer hardware or software; or
• a service involving the electronic storage of information and computer-to-computer transfer of information.

A final recipient in respect of a computer-related service or access to the Internet, means a person that is the recipient of a supply of the service or access and that acquires it otherwise than for the purpose of supplying it to another person.

Computer-related services and Internet access

The place of supply rules for supplies of computer-related services and Internet access have not changed. Generally, the rules depend on whether the supply is made to a single final recipient or to multiple final recipients.

These rules override other place of supply rules that could otherwise apply to the supplies of computer-related services and Internet access. For instance, a supply of Internet access is a supply of a telecommunication service consisting of the making available of telecommunications facilities. However, the place of supply rule explained in this section overrides the application of the place of supply rules for telecommunication services with respect to the supply of Internet access.

Single final recipient

If there is to be a single final recipient of a supply of a computer-related service or Internet access made by a particular supplier, and the recipient acquires the supply under an agreement with either the particular supplier or another supplier, the supply is made in a province if the final recipient avails itself of the service or access at a single ordinary location in that province, and

• the particular supplier maintains information sufficient to determine that location; or
• it is the normal business practice of the particular supplier to obtain information sufficient to determine that location.

In any other case where there is to be a single final recipient of the supply, the supply is made in a province if the mailing address of the recipient of the supply is in that province.

Multiple final recipients

A different place of supply rule applies if there are to be multiple final recipients of a supply of a computer-related service or Internet access made by a particular supplier and each final recipient acquires the supply under an agreement with either the particular supplier or another supplier and, in the case of each final recipient, there is a single location at which the final recipient avails itself of the service or access, and

• either the particular supplier maintains information sufficient to determine that location; or
• it is the normal business practice of the particular supplier to obtain information sufficient to determine that location.

In this case, the supply of the computer-related service is made in the province, if any, that would be determined, under the general place of supply rules for services if the service were performed in each province in which, and to the same extent to which, the final recipients avail themselves of the service. The supply of Internet access is made in the province that would be determined under the place of supply rules for intangible personal property if the Internet access were attainable in each province in which, and to the same extent to which, the final recipients avail themselves of the Internet access. In other words,

• the general place of supply rules for services apply to the supply of a computer-related service, and
• the general place of supply rules for intangible personal property apply to the supply of Internet access.

In any other case, where there are to be multiple final recipients of the supply, the supply of the computer-related service or Internet access are made in a province if the mailing address of the recipient is in that province.

Air navigation services

(Section 33 of Division 5 of Part 1 of the Regulations)

The place of supply rules for supplies of air navigation services have not changed.

A supply of an air navigation service (as defined in subsection 2(1) of the Civil Air Navigation Services Commercialization Act) is made in a province if the leg of the flight in respect of which the services are performed originates in that province.

For purposes of this place of supply rule, a leg of a flight of an aircraft means a part of the flight that begins

• where passengers embark or disembark the aircraft,
• where freight is loaded on the aircraft or unloaded from it, or
• where the aircraft is stopped to allow for its servicing or refuelling,

and that ends where it is next stopped for any of those purposes.

Passenger transportation

(Division 4 of Part 1 of the Regulations)

There are place of supply rules for passenger transportation that override the previously explained place of supply rules.

Defined terms

(Section 1 of Part VI of Schedule IX and section 20 of Division 4 of Part 1 of the Regulations)

A continuous journey of an individual or a group of individuals means the set of all passenger transportation services provided to the individual or group for which a single ticket or voucher in respect of all the services is issued. A continuous journey also exists where two or more tickets or vouchers are issued in respect of two or more legs of a single journey of the individual or group on which there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, and all the tickets or vouchers are issued by the same supplier or by two or more suppliers through one agent acting on behalf of all the suppliers. This is provided that either:

• all such tickets are supplied at the same time and evidence satisfactory to the Minister is maintained by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued, or
• the tickets or vouchers are issued at different times and evidence satisfactory to the Minister is submitted by the supplier or agent that there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued.

The origin of a continuous journey means the place where the passenger transportation service that is included in the continuous journey and that is first provided begins.

The leg of a journey on a conveyance means a part of the journey that:

• begins where passengers embark or disembark the conveyance or where it is stopped to allow for its servicing or refuelling, and
• ends where it is next stopped for any of those purposes.

A stopover, in respect of a continuous journey of an individual or a group of individuals, means any place at which the individual or group embarks or disembarks a conveyance used in the provision of a passenger transportation service included in the continuous journey, for any reason other than transferring to another conveyance or to allow for servicing or refuelling of the conveyance. However, in the case of a continuous journey of an individual or group of individuals that does not include transportation by air and the origin and termination of which are in Canada, a stopover does not include any place outside Canada where, at the time the journey begins, the individual or group is not scheduled to be outside Canada for an uninterrupted period of at least 24 hours during the course of the journey.

The termination of a continuous journey means the place where the passenger transportation service that is included in the continuous journey and that is last provided ends.

Passenger transportation services

(Section 21 of Division 4 of Part 1 of the Regulations)

The supply of a passenger transportation service is made in a participating province if:

• the passenger transportation service is part of a continuous journey in respect of which there is a ticket or voucher, issued in respect of the particular passenger transportation service included in the continuous journey that is provided first, specifying the origin of the continuous journey and the origin is a place in the participating province, and the termination and all stopovers in respect of the continuous journey are in Canada;
• the passenger transportation service is part of a continuous journey in respect of which there is no ticket or voucher, issued in respect of the particular passenger transportation service included in the continuous journey that is provided first, specifying the origin of the continuous journey and the passenger transportation service included in the continuous journey that is provided first cannot begin otherwise than in the participating province, and the termination and all stopovers in respect of the continuous journey are in Canada; or
• the passenger transportation service is not part of a continuous journey and the passenger transportation service begins in the participating province and ends in Canada.

The supply of a passenger transportation service is made in a non-participating province if:

• the passenger transportation service is part of a continuous journey in respect of which there is a ticket or voucher, issued in respect of the particular passenger transportation service included in the continuous journey that is provided first, specifying the origin of the continuous journey and the origin is a place outside the participating provinces, or the termination or a stopover in respect of the continuous journey is outside Canada;
• the passenger transportation service is part of a continuous journey in respect of which there is no ticket or voucher, issued in respect of the particular passenger transportation service included in the continuous journey that is provided first, specifying the origin of the continuous journey and the passenger transportation service included in the continuous journey that is provided first cannot begin in a participating province, or the termination or a stopover in respect of the continuous journey is outside Canada; or
• the passenger transportation service is not part of a continuous journey and the passenger transportation service begins outside the participating provinces or ends outside Canada.

Tangible personal property and services supplied during passenger transportation services

Supplies made during international flight or international voyage

(Section 180.1)

A supply of tangible personal property or a service (other than a passenger transportation service) is deemed to be made outside Canada and is therefore not subject to tax if

• it is made to an individual on board an aircraft on an international flight or a vessel on an international voyage, and
• physical possession of the property is transferred to the individual, or the service is wholly performed, on board the aircraft or vessel.

An international flight means any flight (other than a flight originating and terminating in Canada) of an aircraft that is operated by a person in the course of a business of supplying passenger transportation services.

An international voyage means any voyage (other than a voyage originating and terminating in Canada) of a vessel that is operated by a person in the course of a business of supplying passenger transportation services.

Tangible personal property and services supplied during passenger transportation services

(Section 23 of Division 4 of Part 1 of the Regulations)

The place of supply rule for tangible personal property and services supplied during passenger transportation services have changed. If a supply of tangible personal property or a service (other than a passenger transportation service) is made to an individual on board a conveyance in the course of a business of supplying passenger transportation services and the property or service is delivered, performed or made available on board the conveyance during any leg of the journey that begins in any province and ends in any province, the supply of the property or service is made in the province in which that leg of the journey begins.

Services related to the supply of passenger transportation services

(Sections 4 and 4.1 of Part VI of Schedule IX)

Baggage charges

(Section 4 of Part VI of Schedule IX)

The place of supply rule for a supply made by the supplier of a passenger transportation service of a service of transporting an individual's baggage in connection with the passenger transportation service has not changed. The supply is made in the same province in which the supply of the passenger transportation service is made.

Child Supervision

(Section 4 of Part VI of Schedule IX)

The place of supply rule for a supply made by the supplier of a passenger transportation service of a service of supervising an unaccompanied child in connection with the passenger transportation service has not changed. The supply is made in the same province in which the supply of the passenger transportation service is made.

Services related to a ticket, voucher or reservation

(Section 4.1 of Part VI of Schedule IX)

The place of supply rule for a supply made by a supplier of a passenger transportation service of a service of issuing, delivering, amending, replacing or cancelling a ticket, voucher or reservation for the passenger transportation service has not changed. The supply is made in the same province in which the supply of the passenger transportation service would be made, if it were completed in accordance with the agreement for that supply.

Freight transportation services

(Sections 1 and 5 of Part VI of Schedule IX)

Defined terms

(Section 1 of Part VI of Schedule IX)

A freight transportation service means a service of transporting tangible personal property and, for greater certainty, includes a service of delivering mail. A freight transportation service also includes any other property or service supplied to the recipient of the freight transportation service by the supplier of the freight transportation service if the other property or service is part of or incidental to the freight transportation service, whether there is a separate charge for the other property or service. However, a freight transportation service does not include a service provided by the supplier of a passenger transportation service of transporting an individual's baggage in connection with the passenger transportation service (refer to "Tangible personal property and services supplied during passenger transportation services").

The destination of a freight transportation service means the place specified by the shipper of the property (usually on the bill of lading or other shipping documents) where possession of the property is transferred to the person to whom the property is consigned or addressed by the shipper.

Freight transportation service

(Section 5 of Part VI of Schedule IX)

The place of supply rule for supplies of freight transportation services has not changed. A supply of a freight transportation service is made in a province if the destination of the service is in the province.

Freight transportation service with a destination in more than one province

(Section 136.3)

Where a supply of a freight transportation service has destinations in more than one province, the provision of the service of transporting the goods destined for each province is deemed to be a separate supply made for separate consideration equal to the portion of the total consideration for the supply that is reasonably attributable to the transportation of the goods to that province. As a result, if a deemed separate supply of a freight transportation service has a destination in a participating province, that supply is deemed to be made in that province for consideration equal to the portion of the total consideration that is reasonably attributable to that service and subject to HST. If a deemed separate supply of a freight transportation service has a destination in a non-participating province, that supply is deemed to be made in that province for consideration equal to the portion of the total consideration that is reasonably attributable to that service and subject to GST.

Postage and mail delivery services

(Part VII of Schedule IX)

Defined terms

(Section 1 of Part VII of Schedule IX)

A postage stamp means a stamp authorized by the Canada Post Corporation for use as evidence of the payment of postage, but does not include a postage meter impression, a permit imprint or any "business reply" indicia or item bearing that indicia.

A permit imprint means an indicia the use of which as evidence of the payment of postage exclusively by a person is authorized under an agreement between the Canada Post Corporation and the person, but does not include a postage meter impression or any "business reply" indicia or item bearing that indicia.

Postage stamp and mail delivery service

(Section 2 of Part VII of Schedule IX)

The place of supply rules that apply to postage and mail delivery services have not changed.

A supply of a right to a mail delivery service as evidenced by a postage stamp or a postage-paid card, package or similar item (other than an item bearing a "business reply" indicia) that is authorized by the Canada Post Corporation is made in the province in which the supplier delivers the stamp or item to the recipient.

Generally, tangible personal property is considered to be delivered where its possession is transferred. However, for purposes of this rule, tangible personal property is also deemed to be delivered in a particular province, and not in any other province, if the supplier either

• ships the property to a destination in the province that is specified in the contract for carriage of the property or transfers possession of the property to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the property to such a destination; or
• sends the property by mail or courier to an address in the particular province.

The supply of a mail delivery service for which the postage stamp or similar item is used as evidence of the payment of postage for the mail delivery service is made in the province in which the stamp or item is delivered.
However, this rule does not apply in circumstances where:

• the supply of the service is made pursuant to a bill of lading; or
• the consideration for the supply of the service is $5 or more and the address to which the mail is sent is not in a participating province.

In both cases, the place of supply rules explained in the section "Freight transportation service" apply to determine the place of supply of the mail delivery service which is based on the destination of the mail delivery service.

Postage meter

(Section 3 of Part VII of Schedule IX)

If the payment of postage for a mail delivery service supplied by the Canada Post Corporation otherwise than pursuant to a bill of lading is evidenced by a postage meter impression printed by a meter, the supply of the service is made in a province if the ordinary location of the meter is in the province when the recipient of the supply pays an amount to the Corporation for the purpose of paying that postage. The ordinary location of the meter at a particular time is deemed to be the location that the supplier and the recipient mutually agree is the ordinary location of the meter at that time and this location may change from time to time.

Where the exclusion applies because the supply is made pursuant to a bill of lading, the supply is subject to the general place of supply rule for freight transportation services which is based on the destination of the service.

Permit imprint

(Section 4 of Part VII of Schedule IX)

If the payment of postage for a mail delivery service supplied by the Canada Post Corporation otherwise than pursuant to a bill of lading is evidenced by a permit imprint, the supply of the service is made in the province in which the recipient of the supply deposits the mail with the Corporation in accordance with the agreement between the recipient and the Corporation authorizing the use of the permit imprint.

Where the supply is made pursuant to a bill of lading, the general place of supply rule for freight transportation services applies which is based on the destination of the service.

Business indicia

(Section 5 of Part VI of Schedule IX)

When an item bearing a "business reply" indicia is used, the place of supply rule for freight transportation services applies to determine the place of supply of the mail delivery service which is based on the destination of the mail delivery service.

Telecommunication services

(Part VIII of Schedule IX)

The place of supply rules that apply to supplies of telecommunication services have not changed.

Defined terms

(Subsection 123(1))

A telecommunication service means:

• the service of emitting, transmitting or receiving signs, signals, writing, images or sounds or intelligence of any nature by wire, cable, radio, optical or other electromagnetic system, or by any similar technical system, or
• making available for such emission, transmission or reception telecommunications facilities of a person who carries on the business of supplying services referred to above.

For GST/HST purposes, including the place of supply rules, it is important to distinguish between a supply that is a supply of a telecommunication service, and the use of telecommunications as a means by which other property and services are supplied.

A supply is generally considered to be a supply of a telecommunication service where its predominant purpose is to:

• provide for the emission, transmission or reception of signs, signals, etc. (e.g., voice or data) through a telecommunications network or similar technical system;
• make available a telecommunications facility for the emission, transmission or reception of signs, signals, etc. through a telecommunications network or similar technical system; or
• provide a means through which other services or intangible personal property (e.g., content in a digitized format) are delivered, rather than to provide the services or intangible personal property.

A supply is not generally a supply of a telecommunication service where:

• a telecommunication service is used or consumed by the supplier in making a supply of a service or property (other than a telecommunication service);
• it includes the provision of a telecommunication service, but only as a means of delivering another service or property; or
• it is incidental to the supply of another service or property.

The fact that a supply may be characterized as a telecommunication service based on the above definition and characterization indicators does not mean that the supply is subject to the place of supply rules for telecommunication services. For example, a supply of Internet access the predominant purpose of which is to provide a connection allowing for the transmission and reception of data over the Internet is a supply of a telecommunication service consisting of making available telecommunications facilities. However, the supply would be subject to the more specific place of supply rule that applies to supplies of Internet access. A supply of a service that merely uses telecommunication facilities as an input such as a supply of a Web site hosting service would not be considered to be a supply of a telecommunication service based on the above definition and characterization indicators.

A telecommunications facility means any facility, apparatus or other thing (including any wire, cable, radio, optical or other electromagnetic system, or any similar technical system, or any part thereof) that is used or is capable of being used for telecommunications.

A telecommunications channel means a telecommunications circuit, line, frequency, channel, partial channel or other means of sending or receiving a telecommunication but does not include a satellite channel.

Billing location

(Section 1 of Part VIII of Schedule IX)

For purposes of the place of supply rules that determine the province in which the supply of a telecommunication service is made, the billing location for a telecommunication service is in a province if the fee for the service is charged or applied to an account that the recipient has with the supplier of the service and the account relates to telecommunications facilities that are used or are available for use by the recipient to obtain telecommunication services and all of those facilities are ordinarily located in the province. The ordinary location of the telecommunications facilities at a particular time is deemed to be the location that the supplier and the recipient mutually agree is the ordinary location of the telecommunications facilities at that time and this location may change from time to time.

If the fee for the service is not charged or applied to an account that the recipient has with the supplier of the telecommunication service, the billing location is considered to be in a province if the telecommunications facility used to initiate the service is located in that province.

Telecommunication service

(Section 2 of Part VIII of Schedule IX)

A supply of a telecommunication service of making telecommunications facilities available (other than a service of granting sole access to a telecommunications channel) is made in a province if:

• all of the facilities are ordinarily located in that province; or
• where not all of the facilities are ordinarily located in the province, the invoice for the supply is sent to an address in that province.

For other types of supplies of telecommunication services (other than a service of granting sole access to a telecommunications channel), the supply is made in a province if the telecommunication:

• is both emitted and received in that province;
• is either emitted or received in that province and the billing location for the service is located in that province; or
• is emitted in the province and received outside the province and the billing location for the service is not in a province where the telecommunication is emitted or received.

Dedicated telecommunications channel

(Section 3 of Part VIII of Schedule IX)

A supply of a telecommunication service of granting sole access to a telecommunications channel is made in a province if it is deemed to be made in the province based on the application of a specific place of supply rule that deems there to be separate supplies of the service. Specifically, a supply of a service of granting sole access to a telecommunications channel for transmitting telecommunications between two provinces is deemed to be a separate supply of the service made in each of those provinces as well as a separate supply in any province between them. The consideration for the deemed supply in each province is calculated based on the part of the overall distance over which the telecommunication would be transmitted that would occur in the particular province if the telecommunication were transmitted solely by means of cable and related facilities located in Canada that connected, in a direct line, the transmitters for emitting and receiving the telecommunications.

Deemed supplies

Part IX of Schedule IX sets out a number of rules that override the place of supply rules in Schedule IX explained in previous sections of this publication in circumstances where supplies are deemed to be made pursuant to various provisions of the Act.

Deemed supplies of property

Notwithstanding the place of supply rules explained in previous sections of this publication, a supply of property that is deemed under sections 129, 129.1, 171, 171.1 and 172, subsections 183(1) and (4) and 184(1) and (3) and sections 196.1 and 268 to have been made or received at any time is made where the property is situated at that time.

Supplies deemed to be made in a province

Notwithstanding the place of supply rules in Schedule IX that are explained in previous sections of this publication, a supply of property or a service is made in a province if the supply is deemed to be made in the province under Part IX of the Act or regulations made under that Part. In addition to the drop-shipment provisions, other examples could be:

• subsection 163(2.1) that deems the provincially taxable portion of a tour package in respect of a participating province to be a supply made in that province; and
• subsection 178.8(4) that applies where a specified supply of imported goods is made outside Canada where the goods are deemed to be supplied in Canada and more specifically, in the province in which the goods are released, where the supplier and recipient of the goods enter into an agreement to have the supplier, rather than the recipient, be the person entitled to an input tax credit for the tax on the importation of the goods (for more information, refer to GST/HST Policy Statement P-125, Input Tax Credit Entitlement For Tax On Imported Goods).

Enquiries by telephone

All technical publications related to the GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech.

Appendix A – List of examples

Appendix B – Sales of specified motor vehicles

1. ON=Ontario, NS = Nova Scotia, NB = New Brunswick, BC = British Columbia, NL = Newfoundland and Labrador
2. In addition to the 5% federal part of the HST (i.e. the GST) and where the new administrative place of supply rule has been applied by the supplier.
3. The new rule would not apply where vehicle delivery and vehicle registration occur in the same province. In this case, the place of supply will be the province of vehicle delivery based on the general rule

Appendix C – Place of supply rules for supplies of intangible personal property

Appendix D – Place of supply rules for services