Canco, which sells consumer goods to retailers, acquires a licence to use a trademark in connection with the sale of goods in Canada or the U.S. from an arm’s length U.S. licensor (the "Licensor"), with the licence providing for the payment of royalties to the Licensor based on the number of production units sold. Are the royalties paid by Canco to the Licensor that are attributable to the goods sold through Canco’s U.S. subsidiary subject to Part XIII tax in light of the wording of s. 212(1)(d)(i) given that, under the Trademarks Act, the trademark is only used where the goods are sold? CRA responded:
Considering that the payments made … constitute royalties … they are therefore subject to paragraph 212(1)(d) without the need to refer to paragraph 212(1)(d)(i). The words "but not so as to restrict the generality of the foregoing” support such an interpretation.