Full HST (up to 15%) being charged on E-Books in Canada (books are 5% GST only)

[Ellie Kennard]

I have just been informed today that E-Book sellers have to charge the full HST (15% for us) for E-Books, where only 5% is charged on hard copy books. Is there any lobby group working to get the same rate for E-Books?

Makes it much more expensive to buy E-Books than hard copy ones, when they are both books!

[MelC]

Weird - Audio books are supposed to be being reduced to 5% from 13% originally according to the handy dandy charg - would have thought the same was true for electronic books which are not explictly listed. This would bring them in line with paper books where previously they would not have been. But you are correct as far as Kobo seems to be applying it - I paid HST on post-July 1 purchases and only GST on pre-purchases. There should be some saber rattling about this for sure. Curious to hear what the kobo rep has to say as they must have looked into this before they made their decision as to what to charge.

http://www.rev.gov.on.ca/en/taxchange/pdf/taxable.pdf

[Ellie Kennard]

I spoke to them on the phone and they said that's the way it is...

[MelC]

Originally Posted by Ellie Kennard

I spoke to them on the phone and they said that's the way it is...

I have written them an email asking them for their justification, pointing them to the chart and suggesting they provide me with the statutory reference for my edification. Will let you know what happens.

Mel

[Ellie Kennard]

Thanks Mel. Although I sent an email this morning and have not yet heard back. It was only by phoning that I got that reply.
Bizarrely enough when I made purchases in January of this year I paid no taxes on the books whatsoever. Even though we had HST of 13% in effect at the time. (Now, of course, it is up to 15% - not as bad as Finland at 25% Ouch!)

[MelC]

Whereabouts are you located?

Mel

[Ellie Kennard]

Nova Scotia

[MelC]

This is the response I received from Kobo. They clearly believe that HST is payable here but haven't pointed me to any specific sections supporting that analysis. I am trying the Ontario government next.

Holly, Jul 22 09:37 (EDT):
Hi Mel,
Thank you for contacting us with this issue:
Canadian residents are charged GST (Goods and Services Tax), and PST (Provincial Sales Tax) or HST (Harmonized Sales Tax) on their eBook purchases at checkout, depending on their province of residence. The taxation total is included below the subtotal for your book on the purchase page. This applies to on-line purchases and unfortunately, the book exemption for HST applies only to print books and not eBooks.
Sincerely,
The Kobo Team



Mel C., Jul 21 14:27 (EDT):
I note for my purchases after July 1, 2010 that you are charging the full
HST. I would appreciate understanding your basis for doing so as my copy of
the ontario guidelines on HST indicated that audiobooks were actually being
reduced to 5%. Under what category are your classifying the electronic
books if not under audiobooks which are also electronic files? Please point
me to the statutory reference as well for my edification.
http://www.rev.gov.on.ca/en/taxchange/pdf/taxable.pdf
see page 4.
Regards,
Mel C.

[Ellie Kennard]

I got a reply from my email yesterday afternoon, saying they were forwarding it to their accounts department.
This morning I forwarded them the link above and pointed out (as you did) that if audio books are exempt from PST then so should eBooks.
Let us know how you get on.
I am in NS, of course, so Ontario Gov't is not going to impact me, but precedence goes a long way, if you can get it changed there. I suspect it was just too new a product to be given any consideration.
Cheers!
Ellie

[HarryT]

Originally Posted by Ellie Kennard

I am in NS, of course, so Ontario Gov't is not going to impact me, but precedence goes a long way, if you can get it changed there. I suspect it was just too new a product to be given any consideration.
Cheers!
Ellie

If you want precedence, you should perhaps consider the fact that eBooks are charged the full rate of VAT throughout the EU, compared with the lower (or zero) rate applied to print books. The reason for it in the EU is that eBooks delivered electronically are considered to be an "eCommerce" transaction (ie the purchase of a service), rather than the purchase of physical goods, and services are not permitted to have any discounted VAT rate.

[Ellie Kennard]

Discouraging

[luqmaninbmore]

How do the EUs regressive tax policies have any relevance to the Canadian situation? If audiobooks are exempt, why on earth shouldn't ebooks be exempt?

[MelC]

I agree that UK legislation or tax treatment is unlikely to be a decisive factor here. The Canadian tax system bears absolutely no resemblance to the UK system. The materials distributed with the HST changes clearly state that "books" will be exempt and does not specify format. This is distinguishable from the other parts of the materials that state that "print newspapers" will be exempt or that "over the counter shrink-wrapped software" will not be exempt. You can't create distinctions as to format in other categories without that drawing an adverse (or from our perspective, positive) interpretation result elsewhere. Further audiobooks are also electronic text format books, are sold by identical means and should be subject to similar treatment. Of course it is all dependent on what the legislation actually says as opposed to their vague marketing pamphlets designed to keep us from rattling at the gates. I'm far too lazy to wade through the tax legislation (probably buried in a regulation somewhere) to find it personally without trying to make someone (aka Ontario Government), do it for me.

Mel

[MelC]

For all who are interested, here is the relevant excerpt from the interpretation bulletin I was given from CRA (Canada Revenue Agency). I haven't checked the act specifically but they do address ebooks pretty clearly in the interpretation as being non-exempt:

Goods qualifying for the rebate
The following goods will be qualifying books for purposes of the rebate:

a printed book or an update of a printed book;
an audio recording 90% or more of which is a spoken reading of a printed book (e.g., an “audio book”);
a bound or unbound printed version of scripture of any religion;
a printed book with a read-only medium that is wrapped, packaged or prepared for sale as a single product where the read-only medium contains material 90% or more of the value of which is reasonably attributable to a reproduction of the printed book and/or material that makes specific reference to the printed book and its content, and that supplements and is integrated with that content; and
a printed book with a read-only medium or a right to access a website (or both) that is wrapped, packaged or prepared for sale as a single product specially designed for use by students enrolled in a qualifying course where the read-only medium or website contains material related to the subject matter of the printed book.
The following goods, including anything having the following goods as its main part, will not be printed books for purposes of the rebate, and therefore, would not be qualifying books. As a result, no rebate will be available in respect of the provincial part of the HST payable on these goods:

a newspaper (A rebate is available on qualifying newspapers in Ontario. For more information, see GST/HST Info Sheet GI-060, Harmonized Sales Tax for Ontario - Point-of-Sale Rebate on Newspapers);
a magazine or periodical acquired otherwise than by way of subscription;
a magazine or periodical in which the printed space devoted to advertising is more than 5% of the total printed space;
a brochure or pamphlet;
a sales catalogue, a price list or advertising material;
a warranty booklet or an owner's manual;
a book designed primarily for writing on;
a colouring book or a book designed primarily for drawing on or affixing thereto, or inserting therein, items such as clippings, pictures, coins, stamps, or stickers;
a cut-out book or a press-out book;
a program relating to an event or performance;
an agenda, calendar, syllabus, or timetable;
a directory, an assemblage of charts or an assemblage of street or road maps, but not including a guidebook or an atlas that consists in whole or in part of maps other than street or road maps;
a rate book;
an assemblage of blueprints, patterns or stencils; or
an assemblage or a collection of, or any item similar to, the above items.
For purposes of the rebate, the term “printed book” has its ordinary meaning. Therefore, electronic and digital books will not qualify as printed books for purposes of the rebate.

Appendixes A to D to this info sheet contain examples of items that are, and are not, qualifying books for purposes of the rebate.

See GST/HST Memorandum 13.4, Rebates for Printed Books, Audio Recordings of Printed Books, and Printed Versions of Religious Scriptures, for descriptions of the above items excluded from printed books for purposes of the rebate.

Next step a letter to my provincial and federal MPs. Mobileread petition? What else can we come up with because this seems to be a ridiculous distinction to me.

Mel

[frozennorth]

I live in Alberta and since we only pay the 5%GST this change doesn't really affect me personally.

But I disagree with different taxes for printed books versus ebooks. A book is a book is a book. And since audio books also qualify for the reduced rate so should ebooks. They are both an electronic format. Contacting your MLA and MP about this would definitely be the next step. Basically I think the rules and regulations just never seem to keep up with technology.