On July 17, 2020, the Tax Court of Canada found in favour of the Canadian Legal Information Institute ("CanLII") (2020 TCC 56) on the basis that CanLII made a taxable supply with respect to the provision of a virtual library and is, consequently, entitled to claim input tax credits ("ITCs").
CanLII is a non-profit organization that operates and maintains a free, publicly-available virtual legal library. CanLII is funded by an annual levy paid by the Federation of Law Societies of Canada (the "Federation"). CanLII provides free access to legislation, case law, and commentary to lawyers across the county and the general public.
The Minister denied the ITCs on the basis that CanLII provided a service for no consideration and, consequently, made exempt supplies pursuant to section 10 of Part VI, Schedule V of the Excise Tax Act (Canada). ITCs are not available in respect of property or services acquired for the purpose of making exempt supplies.
The Minister argued that the Federation's obligation to pay the annual levy was discretionary and not "consideration" for the supply. The amount of the annual levy is determined by the Federation based on CanLII's recommendation.
ACJ Lamarre agreed with CanLII's arguments that the annual levy paid by the Federation was "consideration" and that a direct link existed between the levy and the supply of the virtual library. She also found that, unlike other provisions of the ETA, the identity of the recipient of the supply is, for purposes of section 10, not determinative as to whether the supply is taxable or exempt.
Ron Choudhury (Sales, Commodity and Indirect Tax) and David Chodikoff (Tax Disputes Resolution) of Miller Thomson represented CanLII in this successful Tax Court of Canada appeal.