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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0004, June 2000
We refer to your letter dated June 13, 2000 regarding the application of Ontario retail sales tax (RST) to
various pieces of machinery purchased by your client, Company C. We also acknowledge receipt of your
client's written authorization to forward our ruling to you on their behalf.
Understanding of Facts
It is our understanding Company C produces a newspaper at a single location. In September 2000, the
compilation of the newspaper will be done at a new location, including advertising, newsroom, photography,
typesetting and pagination will be performed.
At a second location, after printing is complete, comics, TV guides, advertising features printed as a
section of the newspaper and advertising flyers/inserts or supplements provided by others will be inserted,
as well as bundling and packaging them together with the newspaper.
In addition, the purchased equipment will be used to bundle and package newspapers that do not contain
comics, TV guides or advertising flyers/inserts or supplements and also bundle and package advertising
flyers/inserts or supplements provided by others for distribution separate from the newspaper.
Advertising features printed as a section of the newspaper are generally produced in-house. The comics,
TV guide and advertising flyers/inserts are printed by third parties.
You are asking about the tax status of the inserting, stacking, wrapping and strapping machines that are all
located at the second location.
Legislation and/or Administrative Policy
Persons who meet the definition of a manufacturer may claim the conditional exemption for prescribed
production equipment and processing materials.
Regulation 1013 Section 1 under the Ontario Retail Sales Tax Act (Act) states, in part, that:
"manufacturer" or "producer" means 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, but does not
include, ...."
Paragraph 7(1)40 of the Act exempts:
"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 manufacture or production of tangible personal property,
- directly in and exclusively for research into or the development of goods to be
manufactured or produced by any person,
- directly in and exclusively for research into or the development of manufacturing or
production processes for use by any person, or
- directly in and exclusively for more than one of the purposes described in subparagraphs
i, ii and iii,
but not machinery, equipment or processing materials that are used by persons prescribed by the
Minister or that are used in a manner, process, industry or enterprise prescribed by the Minister."
Analysis
We agree with your opinion that the assembly of the newspaper at the second location constitutes
manufacturing. We are enclosing Sales Tax Guide 400 "Manufacturers" for your information.
Conclusion
Company C may purchase the inserting, stacking, wrapping and strapping machines exempt from RST as
prescribed production equipment purchased by a manufacturer. The stacking, wrapping and strapping
machinery qualify as exempt packaging equipment because they are connected by a series of conveyors
to form a continuous line at the end of the manufacturing process.
If you have any further questions, please contact our office.
