Information and Disclaimer
This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter AG-0013, July 2003
Thank you for your facsimile message dated April 9, 2003, inquiring about the possibility of a refund of
Ontario retail sales tax (RST) paid on the purchase of an outdoor wood furnace.
This interpretation is based on the information provided and which is conveyed in the "Understanding of
Facts" portion of this ruling. Please review the information for its completeness and accuracy. If it is
determined that the information is incomplete or inaccurate, this interpretation will not be binding. In the
event that our understanding of the facts is incomplete or inaccurate, please notify the undersigned, in
writing, so that we may reconsider our opinion.
Understanding of Facts
It is our understanding that you have purchased an outdoor wood furnace under a supply and install
contract. The furnace is used to heat your residential home, office and a farm workshop. You would like
to know if a portion of the RST paid on the purchase of the furnace would qualify for a refund, as it used to
heat a farm workshop.
Legislation and/or Administrative Policy
Farm Equipment
Paragraph 7(1)13 of the Ontario Retail Sales Tax Act (Act) provides an exemption from RST on the
purchase of farm implements, farm machinery, farm equipment, farm supplies, agricultural products and
repair parts as defined by the Minister, that in his or her opinion are to be "used exclusively in the
business of farming by a person engaged in the business of farming". Exclusively means the item is
to be used 90% of the time in the business of farming.
Building Materials Incorporated into Farm Buildings
Paragraph 7(1)14 of the Act provides a conditional exemption for building materials (e.g. paint, nails,
lumber, etc.) purchased to build or modernize a structure or building used exclusively in the business of
farming by a person engaged in the business of farming. Exclusively means the building or structure
is used 90% of the time in the business of farming. Farmers, or contractors performing construction
contracts for farmers, may purchase tangible personal property (TPP) that will be incorporated into a farm
building/structure exempt from RST by providing the supplier with a Purchase Exemption Certificate (PEC). The exemption does not apply to TPP incorporated into residential premises, an office, a residential
garage, a road, a sidewalk, a bridge or a building or other structure prescribed by the Minister as not
entitled to the exemption.
Real Property vs. TPP
There are two types of property for RST purposes, tangible personal property (TPP) and real property.
TPP refers to free standing items. Real property means land and any item permanently attached to land.
Fixtures are items which upon installation are permanently attached to real property. Permanently
attached mean bolted, nailed, screwed, lagged, or in some other fashion permanently affixed. In some
cases items are considered to be fixtures if they are affixed to land by virtue of their size, weight, and
cannot be moved without disassembly.
Where a real property contractor supplies and installs items as fixtures to real property, the contractor is
considered to be the end user or purchaser of the items and is liable for RST on their cost of the items that
become real property or fixtures when installed. The RST paid on items for these contracts forms part of
the cost used by the contractor to determine the contract price. No RST should be charged or shown on
the invoice to the customer. The installation labour is not taxable.
Where a person supplies and installs items that remain free-standing TPP, the person must charge, collect
and remit RST on the total selling price of the item. This would include charges for delivery and
installation.
Analysis
Implements, machinery, and equipment designed for farm use, such as tractors, milking machines, farm
wagons, feed grinders, threshing machines, etc., can be bought by persons in the business of farming
without having to complete a PEC. Repairs to these items also qualify for exemption.
In order to claim farm exemptions on items that are not generally made for use exclusively in farming (e.g.
furnaces and auxiliary equipment and ventilation systems used exclusively to heat or ventilate barns and
other farm buildings), the purchaser must provide the vendor/supplier with a properly completed PEC. These exemptions must be claimed by issuing a PEC and do not extend to equipment for household use.
When a contractor supplies and installs a wood furnace for a farmer to heat a farm building, the contractor
may purchase the furnace exempt from RST by providing a properly completed PEC to the supplier. The
farmer must provide to the contractor with a signed declaration to the effect that the furnace is being
purchased and installed exclusively for farm purpose. When the contractor sells a wood furnace without
installation to a farmer that will be used to heat a farm building, the farmer may purchase the furnace
exempt from RST by providing a properly completed PEC.
It should be noted, that heating equipment used to heat non-farm or a combination of farm and
non-farm buildings (i.e., farmer's residence, workshop, etc.) is subject to RST.
Therefore, when a supplier/vendor (contractor) supplies and installs a wood furnace that will not be used
exclusively to heat a farm building, the contractor must pay RST on the cost of the furnace. The RST paid
on items for these contracts forms part of the cost used by the contractor to determine the contract price.
No RST should be charged or shown on the invoice to the client. The installation labour is not
taxable. If a contractor sells these items without installation, the contractor is required to charge and
collect RST from its clients.
Conclusion
Since your outdoor wood furnace is used to heat the combination of house, office and farm workshop, it is
not considered to be equipment used exclusively for farming.
However, if RST has been paid directly by you, in error, on the supply and installation of the outdoor wood
furnace, you may apply for a refund RST paid, based on the difference between the RST charged in error
by the contractor and the RST that should have been paid by the contractor on his costs. If the amount of
RST which should have been paid by the contractor on the cost of materials is not provided to you, the
maximum refund will be 12% of the RST shown on the invoice. We have enclosed a General Application
for a Refund of Retail Sales Tax form [PDF-485KB], which should be completed and submitted within four years from
the date the RST was paid.
If you have any further questions, please contact our office.
