The acquisition by a company of Amazon cloud infrastructure services is not subject to PST
The court ruled that the purchase of Amazon cloud infrastructure services by a company is not subject to BC PST.
Hootsuite, a company that offers an online social media management system to its clients, utilized Amazon Web Services (AWS) to host its platform, as it didn't have its own servers and storage facilities.
The Ministry of Finance assessed BC PST on Hootsuite, arguing that its access to AWS software virtually constituted the provision of software program.
However, in this instance, the crucial differentiation lies in understanding the difference between software and software program.
The difference between software and software program lies in the level of user interaction. Software is a broad term that refers to any computer program or code that is used to perform a task or a set of tasks. On the other hand, a software program is a specific type of software that requires user interaction to operate. A software program is designed to be an application that users can interact with and create an output based on those interactions with the program.
In other words, a software program is a more specialized type of software that requires user input to operate, while software is a general term that can refer to any computer program or code.
The judge declared that Hootsuite did not utilize any software program, as found in the ruling becasue the fundamental nature of this product is to provide an on-demand computer infrastructure service and as such, the products are not subject to PST.
Additionally, the jude stated that the crucial differentiation between "software" and a "software program" as per the PSTA is that a software program require the buyer to use the software as an application. This implies that the user must be capable of interacting with the software and generating an output based on those interactions with the program.
Using this differentiation, it was determined that Hootsuite did not use a software program because the AWS programs were not something that it interacted with, but used software.
After conducting a similar analysis, it was concluded that the technical support offered by AWS to Hootsuite through an online chat feature provided via a web interface (known as the "Console") did not involve Hootsuite using a software program. Furthermore, the primary nature of the service provided here was AWS technical expertise rather than software.
The Ministry assessed Hootsuite for using taxable communication services through its access to dedicated telecommunication service in the U.S. and technical support from AWS. However, the judge determined that these services fell under an exemption in the Regulations for telecommunication services that were considered "merely incidental" to a contract for non-taxable services.
SUMMARY AND CONCLUSION
The acquisition of Amazon cloud infrastructure services to host a company's platform to provide an on-demand computer a service that provides the basic foundation or framework for a system or application, are not subject to PST.
The distinction between "software" and a "software program" holds significant importance in regards to PST and could have potential consequences for other companies that use cloud infrastructure services, given that software is exempt from PST whereas a software program is not.
Disclaimer:
“Please note that the information provided in this article is of a general nature and may not be accurate for your specific situation. The information is current as of the date of posting and is not intended to provide legal advice. It's always recommended that you consult with a professional accountant and lawyer for personalized guidance and advice."
