Canadian GST/HST Rules for ISP and Web Hosts

[aslam]

Hello all fellow Canadian WHMCS suppliers,

 

I have noticed some scattered discussion in various other threads and confusion about the GST/HST rules for businesses based in Canada selling ISP and web hosting services to customers in Canada. There were a couple of suggestions to create a thread dedicated to this topic. Today I spent a few of hours on the phone and on the CRA website getting a clear answer on this topic and so here are my findings for the benefit of all:

 

First off, when reading these documents and talking to them you'll see/hear the word "supplies" a lot and I had some initial confusion as to what qualifies as supplies when you're delivering a service like web or application hosting. Well when I spoke to them today, I got a clear ruling that according to the CRA definition, the word "supplies" refers to tangible goods, intangible goods, as well as services.

 

Now the next question is, what type of good are we providing. Well, according to document b-090, Sec III, Example 9, web-hosting is considered a service.

 

Now that we know that we need to figure out where the service is deemed to be "made" in order to figure out whose tax rate to charge. According to document b-103, Sec 5, XI, Example 105 the hosting service "supply" is considered to be "made" in the province of the customer's address. And according to that same document in Sec 1, 1st paragraph, 1st line, we are required to charge tax based on the rate in the province that the supply is deemed to be "made".

 

So I asked them for a formal ruling as to what this means to me as an offsite backup hosting provider in BC and their response was that according to the current rules and as of July 1, 2010, I am required to charge 12% HST to consumers in BC; 13% to consumers in ON, NB and Nfld; 15% to consumers in NS; and 5% to consumers in all other provinces and territories.

 

I hope that helps and avoids others from having to go through what I did today. Here are links to the documents I referenced above:

b-090

b-103

 

Also, if you want a clear ruling on the tax issue based on your specific circumstances, you can call CRA's GST/HST Ruling Line at 1-800-959-8287 like I did, but be prepared to get your hands dirty and to accept the way that they define words like "supply" and "made" because it is different than conventional thinking.

 

Aslam

[Derek]

That is correct, you should currently also be charging 5% GST right now for another few weeks to everyone that is buying within Canada but you do not need to charge GST/HST to Non-Canadian clients... This also only applies if you are doing more then $30,000 in Canadian sales per year.

[wpeters]

Thank you for the information. This is good to know.

 

Now, how do I set up these tax rates in WHMCS?