RST Guide 510, August 2006
- This Guide explains how Retail Sales Tax (RST) applies to flooring materials. Please note that this Guide replaces the previous version dated June 2001.
Sale of Carpet, Broadloom And Other Flooring Materials
Not Installed
The sale of carpet, broadloom and other flooring materials without installation is considered a retail sale. Vendors who sell these items must charge, collect and remit RST on the total selling price. Any charges to the customer for delivery of these items are also taxable, even if the charges are shown separately on the invoice. (See RST Guide 602 - Delivery Charges). Those who sell carpet, broadloom and other flooring materials without installation must obtain a Vendor Permit from any Ontario Ministry of Revenue Tax Office.
Installed
If sellers of carpet, broadloom and other flooring materials also affix these items to the floor by either gluing, tacking, stapling, etc., they must pay the applicable RST to their suppliers on all items purchased.
Note: For the balance of this Guide, carpet, broadloom and other flooring materials will collectively be referred to as flooring materials.
If the above sellers also substantially sell flooring materials without installation, they may purchase all their flooring materials exempt from RST. If flooring materials are being installed, the seller must pay RST on the cost price of the materials removed from inventory in the same month they are removed from inventory. The RST to be paid should be reported on line 3 of the next applicable RST return.
RST must also be paid to suppliers on the purchase of installation materials such as glue, tacks, edging, threshold strip, etc. and on equipment used to do the installation.
The RST paid is part of the seller's cost and must not be quoted or billed separately to the customer.
The labour charge to permanently install flooring materials is exempt from RST.
A Vendor Permit is not required when all flooring materials sold are permanently installed by the seller, by gluing, tacking, stapling, etc.
Billing Options
Two Contracts
A seller may arrange two contracts with the same customer:
- The first contract is for the supply of flooring materials. Retail Sales Tax (RST) is to be charged on the full selling price of the flooring materials.
- The second contract is for installing the above items. The seller invoices labour only and does not charge RST. The seller must pay RST on the equipment and supplies used to install the flooring materials.
One Contract
A seller may have one contract for the sale and installation of flooring materials:
This type of contract is considered to be the sale of real property. As such, the seller must pay the RST on the cost of all flooring materials and supplies used. The customer must not be billed separately for RST. (See RST Guide 206 - Real Property and Fixtures).
Note: Contractors are responsible for determining if they must charge RST to customers or pay RST on the installed item. Contractors can be assessed by the ministry if they do not pay the applicable RST on items bought for a taxable contract.
Inventory
Sellers who have a Vendor Permit because they operate a retail outlet should buy flooring materials tax-exempt since the items are being resold. They should provide a valid Purchase Exemption Certificate to their suppliers when claiming an exemption from RST. (See RST Guide 204 - Purchase Exemption Certificates). As noted earlier, sellers must account for RST on the cost price of any materials removed from inventory for real property contracts. In this case, the RST is reported on line 3 of the RST return covering the month in which the flooring materials are removed from inventory.
Special Purchasers
Certain customers may be entitled to an exemption or refund of RST. If a contractor enters into real property contracts with farmers, diplomatic organizations, manufacturers, hospitals, or status Indians and band councils, they should refer to one of the following RST Guides: 400 - Manufacturers; 803 - Foreign Representatives and Officials; 807 - Farmers; or 808 - Status Indians, Indian Bands and Band Councils for more information.
Tenders issued by the federal government usually quote a "G" permit number and state they are exempt from Retail Sales Tax (RST). Contractors that enter into real property contracts with the federal government should not accept a "G" permit on these types of contracts and must pay RST on the materials used to fulfill the contract. In this situation, the federal government should not be billed separately for RST, but the contractor should recover the RST paid on the materials in the contract price. When these materials are not permanently attached to real property or do not directly service the building, contractors are not required to pay RST on such purchases and should quote the contract for these materials exempt from RST.
Other Services
Rentals
RST is to be paid on the rental of machines or equipment to clean flooring materials.
Repairs
A seller's labour charges to repair installed flooring materials are not subject to RST.
Cleaning
All cleaning services, including charges for finish protection, stain-guarding and waterproofing performed when cleaning, are non-taxable services, whether the carpets or rugs are cleaned in the customer's home or removed to the cleaner's establishment. The person who performs the cleaning or laundry services pays RST on all materials used or supplied, as well as on the cleaning equipment. RST must not be billed to the customer.
Legislative References
- Retail Sales Tax Act, Section 1, Subsection 2(7) and Paragraph 7(1)2
- Regulation 1012 under the Act, Subsections 6(1) and 6(2)
- Regulation 1013 under the Act, Subsection 3(2)
For More Information
The information contained in this publication is only a guideline. For more information, please contact the Ontario Ministry of Revenue at 1 866 ONT-TAXS (1 866 668-8297) or visit our website at ontario.ca/revenue.
© Queen's Printer for Ontario, 2006
ISBN 1-4249-1899-5
