Hi Paul,Blazin_Sunfire wrote: ↑Apr 24th, 2014 10:12 amHello,
my company is registered for HST. It is a website owner, and maker of mobile apps that we gain revenue from. Essentially we make money on either app sales, or ad revenue within the apps, and website. We charge HST and remit for all Canadian sales (which make up only 5% or so of sales.) My question is, what type of good (exempt, zero rated, HST applicable) is the ad revenue which comes solely from US sources like google. As well, what about the US app sales i.e. on google play store/other stores?
Since only a small portion of HST is collected from the small number of CAD sales, we end up getting money back due to ITC. Can we get input tax credits on all our expenses to run the business even if only a small portion of income has HST charged to the customers?
I look forward to your response!
Thank you in advance,
I'll answer your second question first.
You can get full ITCs, even to the extent the expenses that give rise to the ITCs relate to US sales, because you are not engaged in exempt activities.
The question of whether your app sales and ad revenues are subject to GST/HST (i.e., taxable), exempt, or zero-rated is a bit more tricky. Even without all the facts, it's relatively easy to rule out exempt because there likely is not a specific exemption that applies to these revenues. It therefore must be determined if your US revenues are taxable or zero-rated.
Section 7 of Part V of Schedule VI to the ETA zero-rates:
[INDENT]7. A supply of a service made to a non-resident person, but not including a supply of
[INDENT](a) a service made to an individual who is in Canada at any time when the individual has contact with the supplier in relation to the supply;
(a.1) a service that is rendered to an individual while that individual is in Canada;
(b) an advisory, consulting or professional service;
(c) a postal service;
(d) a service in respect of real property situated in Canada;
(e) a service in respect of tangible personal property that is situated in Canada at the time the service is performed;
(f) a service of acting as an agent of the non-resident person or of arranging for, procuring or soliciting orders for supplies by or to the person;
(g) a transportation service; or
(h) a telecommunication service.[/INDENT][/INDENT]
If your advertising service is supplied to a non-resident, it should be zero-rated under this provision, as long the service does not fall into paragraphs (a) to (h).
Section 10.1 of Part V of Schedule VI to the ETA zero-rates:
[INDENT]A supply of intangible personal property made to a non-resident person who is not registered under Subdivision d of Division V of Part IX of the Act at the time the supply is made, but not including
[INDENT](a) a supply made to an individual unless the individual is outside Canada at that time;
(b) a supply of intangible personal property that relates to
[INDENT](i) real property situated in Canada,
(ii) tangible personal property ordinarily situated in Canada, or
(iii) a service the supply of which is made in Canada and is not a zero-rated supply described by any section of this Part or Part VII or IX;[/INDENT]
(c) a supply that is the making available of a telecommunications facility that is intangible personal property for use in providing a service described in paragraph (a) of the definition “telecommunication service” in subsection 123(1) of the Act;
(d) a supply of intangible personal property that may only be used in Canada; or
(e) a prescribed supply.[/INDENT][/INDENT]
The apps sold to non-residents who are not registered for GST/HST should be zero-rated under this provision, unless they fall into paragraphs (a) to (e).