CanLII Entitled to $745,690 of Input Tax Credits

Canadian Legal Information Institute v. The Queen 2020 TCC 56

CANLII Decision Here


The Canadian Legal Information Institute (CanLII) claimed ITC’s for its April 2013 – June 2015 reporting periods.  The Minister denied the claim on the basis that CanLII provided a service for no consideration and therefore provided an exempt supply pursuant to section 10 of Part VI of Schedule V of the Excise Tax Act (“ETA”). The Tax Court of Canada (“TCC”) disagreed and allowed CanLII’s appeal.


This case involves a straight forward dispute between the Minister and CanLII.  As many readers are aware, CanLII is a not-for-profit corporation that operates an open-access virtual law library.  The library is open to all but used primarily by Canadian legal professionals. CanLII’s sole member is the Federation of Law Societies of Canada (Federation), which funds CanLII by collecting fees from 14 law societies in Canada.

How is CanLII funded?

CanLII’s CEO makes an annual report to the Federation and includes a draft budget stating the amount of revenue needed to operate CanLII for the upcoming year. The CEO recommends an amount per licensed legal professional of each law society to help the Federation divide the bill fairly among the various law societies. The Federation then determines the amount it will pay CanLII for the upcoming year. CanLII then invoices the Federation quarterly for its services. In the relevant years, the Federation paid CanLII between $2.8 and $3.1 million per year. It is critical to note that CanLII’s operational budget is solely financed by fees from the law societies and that CanLII could not operate without funding from the law societies.

Nature of the ITCs

CanLII incurred various expenses to operate its virtual library and on those expenses CanLII claimed ITCs which were at issue on appeal. The expenses include payments to tech firms for operating and maintaining the website, access to Quebec case law, and other digital services.

Decision & Analysis


The issue was was whether CanLII could claim ITCs for the GST that it paid to third-party service providers.

Position of Parties

The Crown argued that CanLII, a non-profit organization, gave the general public free access to its virtual library and therefore received no consideration for the supply. This position was based on two principal arguments.  First, the definition of consideration requires that there be an enforceable legal obligation to pay for a supply. Secondly, the Crown argued that there was no direct link tying the payments to the supply because the recipient of the supply was the public.

CanLII argued that it did receive consideration for the supply of the virtual library, even though the public had free access to it. CanLII argued that it received the consideration from the Federation and therefore made a taxable supply to the Federation. The Federation paid an annual levy to CanLII pursuant to the CanLII Governance Agreement.

In CanLII’s view, consideration would be any payment for a supply or any payment made in order to facilitate a supply. Thus, there would be no requirement that there be a legal obligation to pay.  In this case, it was the Federation and not the public who paid  CanLII so that CanLII could make the supply. CanLII could not have used the payments it received from the Federation for any other purpose since it did nothing other than operate the virtual library.

The TCC dismissed the Crown’s two arguments; namely,  that there was no legal obligation to pay and there was no direct link between the payment and the supply.  First, The Federation was obligated to pay CanLII pursuant to the combined operation of relevant by-laws and the Governance Agreement in place at the time. Second, the TCC agreed with CanLII that a direct link existed between the payment of the levy by the Federation and the supply of the virtual library. The funds flow from the Federation to CanLII for a single purpose. Without those funds, there would be no virtual library.  The appeal was allowed on the basis that CanLII made a supply to the Federation for consideration in the course of a commercial activity and thus made a taxable supply. CanLII was entitled to its ITCs.

Key Takeaway

The Court relied on the reasoning in the Supreme Court of Canada decision Calgary (City) v. Canada 2012 SCC 20.   There the SCC said that nothing in the ETA requires a supply to have only one recipient (para. 62). The Court also stated that even if the public remained a recipient of the supply, the identity of the recipient might not determine whether the supply is taxable or exempt (paras. 63). This is an important principle.  As long as a payment constitutes a consideration, the identity of the recipient of the supply is not determinative as to whether the supply is taxable or exempt.

by Amit Ummat LLB LLM CS*
*Certified Specialist (Taxation Law)
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