TEI-Revenue Canada liaison meeting: excise tax questions - Tax Executives Institute

Tax Executive, The, Nov, 1998

2. When F gives the pens free to the unrelated financial institution, which in turn provides the pens for customer use, please confirm that the financial institution is not required to self assess GST since the pens were not acquired for use in a commercial or noncommercial activity.

8. A GST registered firm (GRF) establishes and maintains a series of call centres across Canada. Employees at the call centres provide technical information and answers to customer inquiries about GRF products. The cost of operating the call centres is part of the normal overhead cost of GRF's commercial activity. After establishing the call-centre infrastructure (e.g., the employees, the telecommunications network, and information distribution and database centres), GRF decides to market its call-centre services to others, whether GST registrants or non-registrants and whether resident or non-resident in Canada. Non-resident firm (NRF) decides to employ GRF's call-centre services. NRF provides technical information about NRF's products that GRF employees learn in order to respond to inquiries about NRF's products. A separate, incoming toll-free phone number is assigned for servicing NRF's products. Once the system is operational, NRF's customers, who are located in the United States and Canada, may call and obtain technical advice about NRF products from GRF's employees. GRF invoices NRF for this call-centre service.

Please confirm that:

1. GRF's service to NRF is zero rated under Section 7, Part V, Schedule VI of the ETA even though the personnel providing information and advice about NRF's products are located in Canada.

2. GRF's call-centre service is zero rated regardless of whether NRF is registered for GST.

3. It is irrelevant for purposes of zero rating the service that some of the NRF's customers phone the call centre from locations within Canada.

9. A GST registrant (R), which is engaged 100 percent in commercial activity geographically located in Canada, owns, maintains, and operates a computer facility that supports its regular business activities. The computer facility has excess capacity, which a non-resident firm (NRF) desires to use in order to test the readiness of NRF's software for its year 2000 implementation. NRF proposes the following:

   NRF will send its software to R either by physical media or electronically.
   R will either manually load or electronically accept NRF's software on its
   computer. At all times, all rights to the software belong to NRF. In order
   to test NRF's software, NRF will send test data to R either by physical
   media or electronically. R will invoice NRF only for the number of minutes
   that the NRF uses R's computer facility, i.e., for the time involved in
   loading the software and test data, executing the software test, and
   preparing a report of the results. The transaction is purely time sharing
   in nature and does not involve the leasing or renting of computers between
   NRF and R. When the software testing is completed, the software and test
   data will be returned to NRF or destroyed.