- The information in this Guide explains how Retail Sales Tax (RST) applies to compressed gas cylinders. Please note that this Guide replaces the previous version dated March 2001.
Portable Gas Cylinders
Portable gas cylinders may be provided to a customer under an agreement that:
- gives the customer the right to the exclusive possession and use of the cylinders
- is for a fixed period during which the exclusive use is allowed, and
- requires the customer to pay a periodic charge for the exclusive use of the cylinders
For RST purposes, this type of agreement is considered a rental or lease agreement. The industry often refers to the above type of agreement as a "demurrage agreement", or "demurrage charge", or "loan agreement".
RST is to be collected on the total rental charge, including any charges associated with the rental of the cylinders such as maintenance and handling, as well as on any amount paid to exercise an "option to purchase" the cylinders at the end of the lease.
Distributors or lessors may purchase the portable cylinders exempt from RST if the cylinders are resold or leased to their customers. Distributors or lessors may also purchase parts, materials and labour to repair these cylinders exempt from RST. To claim an exemption, a valid Purchase Exemption Certificate must be given to the supplier. See RST Guide 204 - Purchase Exemption Certificates.
Exemptions
The RST status of the cylinders must be considered separately from the RST status of the gas contained therein. The exemption available to purchasers of manufactured gas is not affected by the RST status of the cylinders.
Rentals
Portable compressed gas cylinders may be rented exempt from RST by the following persons:
- hospitals when used only for patient care
- chronic invalids and persons with a physical disability when renting cylinders containing medical oxygen
- farmers for use in farming
- "G" permit holders
Manufacturers may rent cylinders exempt from RST only where the cylinders are used with equipment that qualifies as exempt manufacturing equipment, such as tow motors, fork lift trucks or welding and cutting equipment that use compressed gases to operate.
Fire extinguishers are exempt from RST as safety equipment when they are for the use of a manufacturer in the manufacturing area. In this case, any work performed to them would also be exempt. See RST Guide 400 - Manufacturers for further information.
Suppliers should ensure that their customers provide them with a valid Purchase Exemption Certificate for any of the above exempt circumstances. See RST Guide 204 - Purchase Exemption Certificates.
Persons who must pay RST on these cylinders include the following:
- physicians, dentists and veterinarians
- educational institutions (universities may purchase the cylinders exempt from RST only when they are used exclusively in research)
- railroad companies for use in repairing rolling stock or auxiliary equipment (unless they quote their "G" permit number)
- small repair shops, body shops, service stations
Stationary Bulk Units
Stationary bulk units are units that are supplied and installed, and are not intended to be moved. For RST purposes, these units are considered to be fixtures. As such, RST does not apply to the selling price of these units but the distributor or lessor is required to pay the RST at the time the units are purchased. The RST paid on the units is part of the distributor's or lessor's cost and should not be quoted or billed separately to customers.
Non - Returnable Gas Cylinders
Certain disposable types of gas cylinders may be purchased exempt from RST. The gas cylinders that qualify for exemption are only those sold with the product they contain, and are not intended to be returned for re-use.
Maintenance Compressed Gas Cylinders
Maintenance of compressed gas cylinders, including refilling, recharging and hydrostatic testing of compressed gas cylinders or fire extinguishers, is a taxable service and RST applies to the total charge for this service.
Visual safety testing and inspection of compressed gas cylinders and fire extinguishers is considered to be a non-taxable service. The company providing this service must pay RST on its purchase of any service tags, seals, etc. If any maintenance, including refilling or recharging, or repair work is done at the same time as the safety testing, RST is to be collected on the total charge made to the customer.
Manufactured or Natural Gas
"Manufactured gas" and "natural gas" intended to be used as a source of energy or as fuel for heating or lighting are exempt from RST. However, oxygen, acetylene, argon, nitrogen, carbon dioxide, compressed air, nitrous oxide, helium, or other gases used for other purposes are subject to RST.
Oxygen and acetylene may be purchased exempt from RST when used as a source of energy in a welding operation. However, other gases such as argon, nitrogen, carbon dioxide and helium used in welding as "shield" gases, do not qualify for exemption, as these gases are not being used as a source of energy, nor are they being used as a fuel for heating or lighting. Contractors are therefore required to pay RST on these gases when used in welding, including welding repairs to manufacturing equipment.
Manufacturers may be entitled to an exemption on the purchase of the above gases if these items qualify as processing materials.
Oxygen and compressed air used for life support systems by divers and others do not qualify for exemption, since these items are not used as sources of energy, nor as fuel for heating or lighting. However, portable cylinders containing oxygen and sold under a physician's prescription can be purchased exempt from RST.
Legislative References
- Retail Sales Tax Act, Paragraphs 7(1)13 and 7(1)38
- Regulation 1012 under the Act, Section 1 and Subsection 14(1)
- 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 Finance at 1 866 ONT-TAXS (1 866 668-8297) or visit our
website at ontario.ca/finance.
