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 Please be aware that any statute or policy referred to in this letter may have been superseded.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 MF-0001, May 2000
Further to our letter of March 6, 2000, this is to advise you that your request for a ruling concerning the
application of Ontario retail sales tax with respect to lab supplies has been re-assigned to me. I apologize
for the delay.
Understanding of Facts
It is our understanding that Company A is in the business of applying anti-corrosive coatings to auto parts
to prevent them from rusting. Company A is required to complete numerous tests on each batch of coated
parts to ensure quality standards are met. You enquired as to whether the acquisition of lab supplies and
materials are taxable or exempt from retail sales tax.
Legislation and/or Administrative Policy
Paragraph 7(1)40 of the Ontario Retail Sales Tax Act (Act) provides an exemption for production
equipment and is stated, in part, as follows:
Such machinery, equipment or processing materials as may be prescribed by the Minister
that are purchased to be used by a manufacturer or producer,
- directly in the manufacturer or production of tangible personal property,
A "manufacturer" or "producer" is defined in section 1 of Regulation 1013 to the Act as "a person who
manufactures, fabricates, produces or assembles as applicable, tangible personal property for sale, where
the fair value of such tangible personal property sold to others exceeds $5,000, or where the fair value of
such tangible personal property manufactured for that person's own use exceeds $50,000 in the fiscal year...".
Equipment used to test and inspect work-in-process or finished goods is exempt. This includes lab
equipment used by the manufacturer or producer to test the quality of the product.
Analysis
If a business meets the definition of a manufacturer, it may claim an exemption from retail sales tax on
purchases of testing equipment and processing materials by providing suppliers with properly completed
purchase exemption certificates (PEC). For further information regarding the use of PECs, please refer to
the enclosed Retail Sales Tax Guide 204 - Purchase Exemption Certificates.
Conclusion
Based on the information provided, it is our opinion that Company A meets the definition of a manufacturer
and therefore, may claim the conditional exemption at paragraph 7(1)40 of the Ontario Retail Sales Tax
Act for production machinery and equipment and processing materials. The supplies and materials which
are used to test goods in process may be purchased exempt from retail sales tax by providing its suppliers
with a properly completed PEC.
If you have any further questions, please contact our office.
