Reinforced Concrete Used in the Construction of Exempt Production Machinery or Equipment
RST Information Notice, August 2003
About this Notice
The 2002 Ontario Budget included a provision to exempt from Retail Sales Tax (RST) reinforced concrete used to make structures that are integral component parts of exempt production machinery or equipment, under certain conditions. This Notice provides details of the conditions under which the reinforced concrete may be purchased exempt from RST.
Background
Prior to the 2002 Ontario Budget, reinforced concrete poured into forms off-site to build a structure that was used directly and exclusively as an integral component of exempt production machinery or equipment was exempt from RST. However, concrete poured onsite to create the same structure was taxable.
Effective June 18, 2002, reinforced concrete poured on-site to make structures that are integral component parts of exempt production machinery or equipment is exempt from RST. For purposes of the exemption, "reinforced concrete" means ready-mix concrete and includes any embedded or attached reinforcing material.
When is Reinforced Concrete Exempt?
To qualify for the exemption from RST, the reinforced concrete must be used in the construction of a structure for the use of a manufacturer for at least one of the following purposes:
- directly and exclusively (i.e., 90% or more) as an integral component of exempt production machinery or equipment
- directly and exclusively to detect, prevent, measure, treat, reduce or remove pollutants to water, soil or air, but only if the pollutants are attributable to the manufacture or production of tangible personal property (TPP)
- as a foundation or base that forms an integral part of exempt production machinery or equipment, but only if the structure is required by engineering specifications for the purpose of vibration protection or elevation in order to permit gravity feeds during the manufacturing or production process
- as an elevated access to exempt production machinery or equipment for operational and maintenance purposes.
Examples of such structures, include, but are not limited to:
- supports and connections for process piping and flare stacks
- cooling towers
- concrete lining in mining shafts
- concrete used as a fire retardant on structural steel that qualifies as exempt production machinery or equipment
- environmental treatment apparatus and equipment
- above ground bases and foundations that are built to seismic and gravitational specifications and form an integral part of exempt production machinery or equipment
- catwalks, platforms, walkways and similar structures, if they provide an elevated access to exempt production machinery or equipment for operational and maintenance purposes.
When is Reinforced Concrete Taxable?
Reinforced concrete is not exempt from RST when it is used in the construction of:
- a building
- floors and walls of a building
- bases and foundations that merely provide a platform for machinery and equipment
- environmental containment slabs
- facilities for the handling, storage or transfer of materials (excluding facilities used for the control of pollutants attributable to the manufacture of TPP).
Reinforced Concrete Purchased by Manufacturers
Manufacturers who purchase reinforced concrete (without installation), for use in the construction of exempt production machinery or equipment, must provide the seller with a properly completed Purchase Exemption Certificate (PEC) to claim the exemption from RST (see RST Guide 204 - Purchase Exemption Certificates).
Where a manufacturer purchases reinforced concrete for a taxable use, the manufacturer cannot issue a PEC and must pay RST on the purchase price of the reinforced concrete, including any charges for delivery or installation.
Reinforced Concrete Used in Construction Contracts
Where a concrete manufacturer, concrete supplier or real property contractor supplies and installs reinforced concrete for a manufacturer, and the concrete structure will be real property or a fixture attached to real property upon installation, it is the responsibility of the installer (i.e., concrete manufacturer, concrete supplier or real property contractor) to determine if the structure qualifies as exempt production machinery or equipment.
If the structure qualifies as exempt production machinery or equipment, the installer (i.e., concrete supplier or real property contractor) is not required to pay/remit RST on its cost of the reinforced concrete. Installers who purchase reinforced concrete for use in such contracts may claim an exemption from RST by issuing a properly completed PEC to the supplier/manufacturer of the reinforced concrete.
If the structure does not qualify as exempt production machinery or equipment, the installer must pay/remit RST on its cost of the reinforced concrete. An installer who manufactures or produces reinforced concrete is required to remit RST on the manufactured cost of the reinforced concrete (see RST Guide 401 - Manufacturing Contractors). An installer who does not manufacture or produce the reinforced concrete must pay RST directly to the supplier/manufacturer of the concrete on the purchase price, including any delivery charges. The RST paid on the items purchased or manufactured for these contracts forms part of the cost used by the installer to determine the final contract price. Installers should not quote or bill RST separately to their customers. Installation labour for real property contracts is not subject to RST.
If the concrete structure will remain TPP upon installation, the installer must charge RST on the reinforced concrete and installation, plus any delivery charges, unless the manufacturer provides a properly completed PEC.
For More Information
For more information or to obtain a refund form, please contact the nearest Ontario Ministry of Revenue Tax Office listed under Taxes - Provincial (Retail) Sales Tax in the blue pages of your telephone directory, or visit our website at ontario.ca/revenue.
© Queen's Printer for Ontario, 2003
ISBN 0-7794-5024-8
