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O. Reg. 282/04: DEFINITIONS, EXEMPTIONS AND REBATES

filed September 14, 2004 under Retail Sales Tax Act, R.S.O. 1990, c. R.31

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ontario regulation 282/04

made under the

retail sales tax act

Made: July 30, 2004
Filed: September 14, 2004
Printed in The Ontario Gazette: October 2, 2004

Amending Reg. 1012 of R.R.O. 1990

(Definitions, Exemptions and Rebates)

1. Regulation 1012 of the Revised Regulations of Ontario, 1990 is amended by adding the following sections:

1.1 (1) For the purposes of clause (c.1) of the definition of “taxable service” in subsection 1 (1) of the Act,

“to configure a computer program” means to perform work required to input customer-specific values and parameters into a computer program or hardware;

“to install a computer program” means to perform work required to load a computer program onto hardware in order to permit the user to set up or operate the computer program;

“to modify a computer program” means to change the source code of a computer program;

“to upgrade a computer program” means to remedy problems within a computer program or between computer programs, or provide an improvement to the computer program that is offered to or available to all licensees of that computer program.

(2) For the purposes of clause (d.1) of the definition of “taxable service” in subsection 1 (1) of the Act,

“service or maintenance of a computer program” means the installation, configuration, modification or upgrading of a computer program;

“warranty of a computer program” means an undertaking that the computer program will function as required by the purchaser or as guaranteed by the producer or vendor.

(3) Despite subsections (1) and (2), non-taxable services include,

(a) training with respect to the use of a computer program;

(b) advising users of a computer program;

(c) performing activities relating to the management of data;

(d) project planning, including the analysis of specifications, determination and verification of hardware and software prerequisites, scheduling, the preparation of reports, review of documentation and discussions of any kind; and

(e) testing a computer program, unless the testing is done in connection with a taxable service described in subsection (1) and the value of the taxable service exceeds 10 per cent of the value of the testing.

(4) For the purposes of clause (3) (e),

“value” means, with respect to a taxable service or testing,

(a) the cost of the taxable service or testing,

(b) the fair value of the taxable service or testing,

(c) the value of the time spent by or on behalf of the vendor to provide the taxable service or the testing; or

(d) the value as determined by any other reasonable method.

1.2 (1) If taxable and non-taxable services relating to a computer program are sold together on or after July 19, 2002 for one price, the fair value of the services sold to the purchaser is determined in accordance with this section for the purposes of subsection 2 (9) of the Act.

(2) Subject to subsections (3), (4) and (5), the fair value of the services sold to the purchaser is the price paid by the purchaser for all of the services.

(3) If all of the following circumstances exist, the fair value of the services sold to the purchaser is any separate and reasonable charge specified by the vendor for the taxable services:

1. The vendor specifies separate and reasonable charges for the taxable and the non‑taxable services.

2. The separate charges are clearly communicated to the purchaser.

3. The vendor maintains a record of the separate charges for the taxable services.

(4) If any of the following circumstances exist, the fair value of the services sold to the purchaser is zero:

1. The cost, to the vendor, of the taxable services sold to the purchaser is a maximum of 10 per cent of the cost, to the vendor, of the non-taxable services sold to the purchaser.

2. The fair value of the taxable services sold to the purchaser is a maximum of 10 per cent of the fair value of the non-taxable services, if each of them were to be sold separately to the purchaser.

3. The time spent by or on behalf of the vendor to provide the taxable services sold to the purchaser is a maximum of 10 per cent of the time spent by or on behalf of the vendor to provide the non-taxable services sold to the purchaser.

4. On the basis of any other reasonable determination, the taxable services component of a contract is a maximum of 10 per cent of the non-taxable services component of the contract.

(5) Subsection (4) applies to a contract entered into before September 14, 2004 for the sale of taxable and non-taxable services even if the contract specifies separate charges for the taxable and non-taxable services.

1.3 (1) If one or more computer programs are sold together with taxable and non-taxable services relating to computer programs on or after July 19, 2002 for one price, the fair value of the combined computer programs and services sold to the purchaser is determined in accordance with this section for the purposes of subsection 2 (9) of the Act.

(2) Subject to subsections (3), (4) and (5), the fair value of the combined computer programs and services sold to the purchaser is the price paid by the purchaser for all of the components.

(3) If all of the following circumstances exist, the fair value of the combined computer programs and services sold to the purchaser is any separate and reasonable charge specified by the vendor for the taxable computer programs and taxable services related to computer programs:

1. The vendor specifies separate and reasonable charges for the exempt and taxable computer programs and for the taxable and the non-taxable services.

2. The separate charges are clearly communicated to the purchaser.

3. The vendor maintains a record of the separate charges for the taxable computer programs and taxable services.

(4) If any of the following circumstances exist, the fair value of the combined computer programs and services sold to the purchaser is zero:

1. The cost, to the vendor, of the taxable computer programs and taxable services sold to the purchaser is a maximum of 10 per cent of the cost, to the vendor, of the exempt computer programs and non-taxable services sold to the purchaser.

2. The fair value of the taxable computer programs and taxable services sold to the purchaser is a maximum of 10 per cent of the fair value of the exempt computer programs and non-taxable services, if each of them were to be sold separately to the purchaser.

3. The time spent by or on behalf of the vendor to provide the taxable computer programs and taxable services sold to the purchaser is a maximum of 10 per cent of the time spent by or on behalf of the vendor to provide the exempt computer programs and non-taxable services sold to the purchaser.

4. On the basis of any other reasonable determination, the taxable computer programs and taxable services components of a contract are a maximum of 10 per cent of the exempt computer programs and non-taxable services components of the contract.

(5) Subsection (4) applies to a contract entered into before September 14, 2004 for the sale of combined computer programs and services even if the contract specifies separate charges for the exempt and taxable computer programs and for the taxable and non-taxable services.

2. (1) The definition of “modifications” in subsection 14.2 (1) of the Regulation is revoked and the following substituted:

“modifications” means changes other than upgrades made to the source code of a computer program;

(2) Subsection 14.2 (1) of the Regulation is amended by adding the following definition:

“upgrades” means improvements to a computer program that are offered to or available to all licensees of that computer program.

(3) Clause 14.2 (2) (c) of the Regulation is revoked and the following substituted:

(c) a modification is made before July 19, 2002 to a pre-written computer program solely to meet the specific requirements of a particular person and the price of, or payment for, the modification is separate from and is greater than the price of, or payment for, the computer program;

(c.1) one or more modifications are made to a pre-written computer program to meet the specific requirements of a particular person and the price of, or payment for, all such modifications made on or after July 19, 2002 is separate from and is greater than the price of, the payment for or the cost of the computer program;

(c.2) one or more modifications are made to a pre-written computer program by a particular person and the salary cost of making all such modifications made on or after July 19, 2002 is separate from and is greater than the price of, the payment for or the cost of the computer program;

(c.3) a combination of the modifications described in clauses (c.1) and (c.2) are made to a pre-written computer program and the price of, the payment for or the salary cost of all such modifications made on or after July 19, 2002 is separate from and is greater than the price of, the payment for or the cost of the computer program;

(4) Clause 14.2 (2) (e) of the Regulation is amended by striking out “(c)” and substituting “(c), (c.1), (c.2), (c.3)”.

(5) Clause 14.2 (2) (f) of the Regulation is amended by striking out “(c)” and substituting “(c), (c.1), (c.2), (c.3)”.

(6) Subsection 14.2 (4) of the Regulation is revoked and the following substituted:

(4) For the purposes of clause (2) (c), (c.1), (c.2), (c.3) or (d), the price of or payment for a pre-written computer program is the price paid for the initial licence and does not include the price paid for any additional licences acquired by the purchaser.

3. This Regulation shall be deemed to have come into force on July 19, 2002.

Made by:

Gregory Sorbara

Minister of Finance

Date made: July 30, 2004.