{"id":32616,"date":"2025-05-08T08:44:00","date_gmt":"2025-05-08T12:44:00","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=32616"},"modified":"2025-05-07T20:41:49","modified_gmt":"2025-05-08T00:41:49","slug":"manitoba-moves-to-tax-the-cloud-how-will-the-expanded-rst-impact-your-business","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/manitoba-moves-to-tax-the-cloud-how-will-the-expanded-rst-impact-your-business\/","title":{"rendered":"Manitoba moves to tax the cloud \u2013 How will the expanded RST impact your business?"},"content":{"rendered":"\n

Cloud computing services will soon be subject to Manitoba\u2019s retail sales tax (\u201cRST\u201d). In its 2025 Budget, the Province announced an expansion of the RST to apply to cloud computing services. Generally, \u201ccloud computing\u201d 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.<\/p>\n\n\n\n

Draft legislation has not been released to amend The Retail Sales Tax Act <\/em>(Manitoba) (the \u201cAct<\/strong>\u201d). However, Manitoba Finance has already updated Information Bulletin \u2013 RST 003, \u201cComputer Software and Online Services\u201d (PDF)<\/a> (the \u201cBulletin<\/strong>\u201d) to include details respecting how the Province will administer the RST to this new category of taxable service.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

RST on software and cloud computing: The current rules<\/h2>\n\n\n\n

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 \u201csoftware\u201d 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 \u201csoftware\u201d and subject to RST. The Bulletin provides some helpful guidance in this respect.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

RST on software and cloud computing: The proposed rules<\/h2>\n\n\n\n

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:<\/p>\n\n\n\n