Cloud computing services will soon be subject to Manitoba’s retail sales tax (“RST”). In its 2025 Budget, the Province announced an expansion of the RST to apply to cloud computing services. Generally, “cloud computing” refers to the delivery of computing services, such as data storage, networking, data processing, web hosting and other services, over the internet. The 2025 Budget indicates that technological changes in the industry are the reason for this expansion of the RST. These changes are intended to be effective January 1, 2026 and are projected to result in $16 million of increased tax revenue over a full year.

Draft legislation has not been released to amend The Retail Sales Tax Act (Manitoba) (the “Act”). However, Manitoba Finance has already updated Information Bulletin – RST 003, “Computer Software and Online Services” (PDF) (the “Bulletin”) to include details respecting how the Province will administer the RST to this new category of taxable service.

Businesses in Manitoba, and out-of-province and non-resident businesses, that make sales of cloud computing services to customers in Manitoba must prepare to comply with the new rules and the related collection and remittance obligations under the RST framework.

RST on software and cloud computing: The current rules

Under the current rules, software is considered a type of tangible personal property, so it is generally treated in a similar manner as other forms of taxable tangible personal property under the Act. The term “software” is defined broadly in the Act and generally means packaged or prewritten software programs or modifications to such programs, or the right to use such programs or modifications. In the increasingly complex digital world with various types of software and software-related services, it can be difficult to determine whether a particular product is considered “software” and subject to RST. The Bulletin provides some helpful guidance in this respect.

Per the Bulletin, RST applies to: (i) systems software, which is software that is fundamental to the operation of a computer; and (ii) application software, which includes off-the-shelf software, modifications, add-ons, upgrades and the right to use such application software.  RST applies to systems software and application software if it is located in Manitoba.

Currently, if a person located in Manitoba accesses software services over the internet (i.e. cloud computing services) and is charged for such access, such charges do not attract RST provided the software is installed on a server located outside of Manitoba. Under the proposed rules, this would change.

RST on software and cloud computing: The proposed rules

As noted above, draft legislation has not yet been released, so it is still not clear how the proposed rules will be implemented. The only insight at this time is provided in the Bulletin, which was updated in March 2025. The following are the key updates to the Bulletin that explain how RST will apply to cloud computing services:

  • Cloud computing services will be subject to RST if purchased for use on a device or by an individual that is ordinarily situated in Manitoba. If a mobile phone has a Manitoba area code, it will be considered to be ordinarily situated in Manitoba.
  • Cloud computing services include software as a service, platform as a service, and infrastructure as a service. Descriptions for each of these terms are provided in the Bulletin.
  • If cloud computing services are purchased for use both inside and outside Manitoba, RST may be prorated for the portion of the services that are reasonably allocated for use in Manitoba.

These changes are generally consistent with changes made to the application of provincial sales tax to software and cloud computing services in British Columbia and Saskatchewan.

It is important to note that the Bulletin does not have the force of law. It simply explains how Manitoba Finance intends to implement to Act in respect of software and computing services. Additional clarity may be available once draft legislation is released.

Next steps: What should you do?

Businesses that provide cloud computing services to customers in Manitoba should review the Bulletin, and amendments to the Act once they are released, in light of their own product offerings and consider their anticipated RST obligations early. Point of sale (POS) systems, check out procedures, invoicing templates, and agreements should be reviewed and updated where necessary. Further, businesses, including businesses outside of Manitoba and outside Canada, may now need to register for RST.

If you have any questions about the proposed expansion of RST or about how they may apply to your situation, please contact a member of the Miller Thomson LLP Sales, Commodity and Indirect Tax Group.