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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0010, February 2001
Thank you for your facsimile message of January 19, 2001 inquiring about the application of Ontario retail
sales tax (RST) on the purchase of paper balers.
Understanding of Facts
It is our understanding that your company, Company A, as a paper recycler, produces waste paper
products.
Company A is planning to purchase paper baling machines for use at outside source locations. The
paper from these baling machines would then be shipped to Company A's plant for further processing.
Company A would like to know if the purchase of the paper baling machines would attract RST.
Legislation and/or Administrative Policy
Paragraph 7(1)40 of the Ontario Retail Sales Tax Act (Act) provides an exemption for production
machinery and states in part:
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,
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.
Subsection 14(1) of Regulation 1012 to the Act prescribes, for the purposes of paragraph 7(1)40 of the
Act, machinery, equipment and processing materials and states in part:
Machinery and apparatus used primarily and directly in,
- the manufacture or production of tangible personal property, ...
Section 1 of Regulation 1013 further defines a "manufacturer" or "producer" 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.
Analysis & Conclusion
The prerequisite to qualify for such exemptions from RST is that an entity must, at the time the exemption is
being sought, satisfy the definition of a manufacturer.
Also, the legislation is specific in that the machinery and apparatus must be used primarily and directly in
the manufacture or production of tangible personal property.
Based on our understanding that the balers will be used off the manufacturing premises to bale raw
materials and will not be used primarily and directly in the manufacture of waste paper products, and, will
only be used for baling paper, Company A must pay RST on the balers.
If you have any further questions, please contact our office.
