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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0007, November 2000
Thank you for your letter of October 3, 2000 regarding the application of Ontario retail sales tax to your
business activities.
Understanding of Facts
We understand that Company A builds and sells custom display booths and signs for use at trade shows.
Equipment such as power saws and drills are used in the manufacture of wood cabinets and display units
and computers are used in the graphic design for lettering used on the displays and other signage. You
have requested written confirmation as to whether the aforementioned tools and computer may be
purchased exempt from RST.
Legislation and/or Administrative Policy
Section 1 of Regulation 1013 of the Ontario Retail Sales Tax Act (the Act) defines a "manufacturer" or
"producer" to mean "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 ...".
Paragraph 7(1)40 of the Act provides an exemption for production machinery, equipment and processing
materials purchased for the use of a manufacturer to be used primarily and directly in the manufacture or
production of tangible personal property. The equipment must be prescribed in subsection 14(1) of
Regulation 1012 to the Act and must not be excluded by subsection 14(1.1) of Regulation 1012 to the Act.
Cabinet builders and graphic designers, including the design and printing of lettering for the booths, qualify
as manufacturers provided the sales value of the goods they produce exceeds $5,000 in a fiscal year, or if
the manufactured cost of goods produced for own use exceeds $50,000 in a fiscal year. A business that is
considered a manufacturer may purchase all production equipment, used primarily and directly in
manufacturing (e.g., more than 50% of the time), exempt from RST. Such equipment would include power
saws, drills, computers, printers, graphic design software, and ink cartridges. In order to receive the
exemption, properly completed purchase exemption certificates (PECs) should be given to suppliers. Items
such as tables for the printer and computers would not qualify as exempt production equipment because
they are not used directly in the production process.
Where the same equipment is used to provide a non-taxable service, as well as in the production of tangible
personal property, a manufacturer would be entitled to an exemption/refund only on machinery and
equipment used primarily (e.g., more than 50%) in the production of tangible personal property. In
addition, to qualify for the exemption/refund, the machinery and equipment must be purchased in the year
in which you qualified as a manufacturer, i.e. value of goods produced for sale exceeded $5,000 in the
year the equipment was purchased.
Section 1 of the Act defines "taxable service" to include labour provided to install, assemble, dismantle,
adjust, repair or maintain tangible personal property.
Analysis & Conclusion
Trade show display booths are considered tangible personal property. In order for Company A to qualify
as a manufacturer of display booths for the purposes of the Act, it must have annual sales of display booths
which exceed $5,000. To qualify as exempt production machinery, each piece of equipment must be used
primarily, more than 50% of the time, in the production or manufacture of the display booths. Company A
may purchase such equipment exempt from RST by providing its' suppliers with properly completed PECs
or if RST has been paid on such equipment in error, Company A may apply to the Ministry for a refund of
the RST
The following are general guidelines for exhibits in the trade show industry. The following charges are
subject to RST:
- the sale of a trade show booth or exhibit (unless delivered by the vendor directly to a customer
located outside Ontario)
- design fees for new exhibits, refurbishing exhibits or booth layouts (done in Ontario); however, the
preparation of drawings, blueprints, etc. to convey ideas to customers, not resulting in the sale of
tangible personal property is a non-taxable service.
- transportation, on the initial sale, of exhibit materials to shows in Ontario when billed by the vendor;
- charges for labour and supervisory staff to install and dismantle the exhibit at a trade show site in
Ontario;
- installer's travelling time to show site in Ontario;
- rentals at trade show site (in Ontario) of furniture, plants, telephone, audio/visual equipment,
carpet, electrical outlets, telephone, plumbing fixtures, and related items;
- rental of panels, chairs, exhibits, etc. unless the rented items are delivered directly out of province
by the vendor. Goods rented to customers for use in other provinces are exempt from retail sales
tax provided the vendor delivers the goods out os province;
- rental of equipment in Ontario without an operator;
- contingency to cover cleaning materials, carpet tape, nails, hardware, wrapping materials, etc. to
be used on-site when installing the exhibit in Ontario.
The following charges are non-taxable services and are not subject to RST:
- transportation of the exhibit to shows in Ontario and/or back to the warehouse unless transportation
applies to the initial sale of goods to customers;
- transportation of exhibit materials to shows in other provinces or the United States;
- air flights of installers to trade show sites in Ontario provided it is not considered local travel;
- air flights of installers to trade shows outside of Ontario;
- installation and dismantling of exhibit outside of Ontario;
- labour to remove the exhibit from storage, check it over, load and unload from the delivery vehicle
at the storage site and show site, labour to reload at time of take-down and labour to place the
exhibit back in storage;
- storage of the exhibit (either in Ontario or outside of Ontario);
- rental of equipment, ie., forklift with an operator;
We have enclosed Ontario Retail Sales Tax Guide 204 - Purchase Exemption Certificates,
400 - Manufacturers, 402 - Printing and the General Application for Refund of Retail Sales Tax for your
information.
If you have any further questions, please contact our office.
