Beginning January 1, 2026, Manitoba retail sales tax (RST) will be imposed on cloud computing services, which include software subscriptions, data storage, and remote computing processes. The fiscal Impact for 2025 – 2026 is estimated to be $4.0 million. Forecasting techniques, assumptions, and data methods were not disclosed in the budget.

Services related to computing, such as data processing, data backup, information retrieval, consulting, engineering studies, procurement, staff training, and help desk support, are generally exempt from taxation unless they are bundled with the purchase of software or hardware. For these services to qualify for exemption, they must be itemized separately on the invoice, and the supplier must demonstrate that these exempt services were not a prerequisite for acquiring other taxable services or software. If data processing, data backup, or information retrieval was offered as part of a cloud computing service, they will be subject to Manitoba 7% RST after December 31, 2025. 

Payments made before January 1, 2026 for services that commence prior to January 1, 2026 will not incur tax, even if the service period extends beyond that date. Resident and non-resident registrant providers of SaaS, PaaS, and IaaS are obligated to collect RST on these services. Cloud computing services encompass: 

1.       Software as a Service (SaaS): 

SaaS refers to the delivery of fully functional software applications via the internet, with the provider overseeing all components, including infrastructure, application, and data management. 

2.       Platform as a Service (PaaS): 

PaaS involves providing hardware and software resources necessary for application development through the cloud. Platform as a Service (PaaS) is a cloud computing framework that offers a comprehensive platform, including hardware, software, and infrastructure, enabling developers to create, deploy, and oversee applications without the challenges associated with managing the foundational technology infrastructure.

3.       Infrastructure as a Service (IaaS): 

Infrastructure as a Service (IaaS) is a cloud computing framework that offers on-demand access to virtualized computing resources, including servers, storage, and networking. This model enables businesses to lease these resources rather than maintain physical hardware, resulting in enhanced flexibility, reduced costs, and simplified management.