Double Taxation of Software and Other Emerging Software Issues |
 | Conflicting administrative policies and vague legislation can result in double taxation for remote users of software. The objective of this session is to understand the problems in applying PST to transactions involving remote access to software, and to examine the provincial responses to these problems. PST rules do not apply easily to transactions involving provision of software, or access to software, via the Internet. The legislation does not provide guidance in determining where electronic software transactions take place or where the use of the software is made. While Ontario has filled the gap by adopting the so-called "server rule" under which PST applies based on where the software is stored electronically, other provinces such as BC impose tax based on the location of the user. In the result, the same licence fee may be taxed in two provinces. Which province is right requires an examination of fundamental questions such as where and how software is used, and when does a province have jurisdiction to tax the software transaction. Similar concerns arise in determining how tax applies to Application Service Providers (ASPs). These are firms that host what are typically specialized software programs on servers which are assessed remotely by clients via the Internet. While PST administrators appear to have assumed that ASPs sell or license software, it is yet to be determined whether they are more properly viewed as providing a service involving the delivery of outsourced IT functions. After reviewing this session, you will understand the interpretive issues surrounding the taxation of remotely accessed software, the relevant provincial administrative policies established to fill legal gaps, and will have an understanding of the arguments that may be raised against the administrative policies. |
2007 Commodity Tax Symposium, October 1-3, 2007, Ottawa, ON Audio synchronized to PowerPoint presentation: 54 slides, length 01:09:24 (Archive) Technical Paper: 31 pages |
