Labour Charges

RST Guide 601, March 2001

The information in this Guide explains how Retail Sales Tax (RST) applies to labour charges. Please note that this Guide replaces the previous version dated May 1997.

Taxable Labour

If you provide labour to install, assemble, dismantle, adjust, repair, or maintain items, you are providing a taxable service and must collect RST from your customers on the total charge for labour. The following are examples of taxable labour charges:

Business Equipment

business equipment, including typewriters, calculators, cash registers, photocopiers, and computers, that are installed, assembled, dismantled, adjusted, repaired or maintained.

Clothing and Shoes

alterations and restyling, including fur garments
mending
shoe repairs and dyeing
skate sharpening

Furniture and Appliance Services

furniture repair, reupholstery, refinishing, and restyling
repairs to free-standing appliances such as stoves, refrigerators, washers, dryers, and televisions

Motor Vehicles

battery charging
conversion of vehicles to operate on alternative fuels
diagnosis, when other work is done at the same time
engine tune-up, oil change, and chassis lubrication
installation or removal of all items such as fenders, mufflers, rocker panels, and bumpers
radiator recoring
repair and repainting of auto bodies
rust-proofing and finish protection
tire installation, balancing, and repair
wheel alignment

For further information, see RST Guide 600 - Motor Vehicle Repairs.

Miscellaneous

knife sharpening
piano tuning and guitar and violin restringing
potted plant maintenance, if the planters are moveable
refinishing, restoring, and retouching of works of art, including paintings, sculptures, and artifacts
repair and rewinding of motors, generators, and transformers
stain protection of items, such as furniture and upholstery in motor vehicles
watch and jewellery repairs and maintenance

Service Charges

service and local travel charges associated with any of the above charges. Local service charges are expenses during a normal working day for items such as mileage and meals, but do not include other expenses, such as hotel and airfare cost.

Non-Taxable Labour

The following examples of labour charges are not taxable:

Motor Vehicle Services

car washing, including waxing and engine shampooing
diagnosis, safety inspection, "Drive Clean" emissions tests and estimates when no other work is done at the same time
lock-out services
towing and emergency battery boosting

Personal Services

alterations to infants' and children's clothing
barbering, hairdressing, beauty treatments and ear piercing
dry cleaning, and carpet, drapery and upholstery cleaning, including charges for stain protection and waterproofing when done in conjunction with the cleaning
medical and health services
taxidermy
veterinary care and animal grooming

Installation of Items That Become Real Property

built-in cupboards and appliances
built-in fireplaces
lighting fixtures and bulbs
replacement windows
water heaters and furnaces

Repair and Maintenance of Real Property

building renovation
lawn maintenance and tree surgery
painting, wallpapering, plastering, and tilework
plumbing and electrical work
roofing
work on central air conditioning and heating systems

For futher information, see RST Guide 206 - Real Property and Fixtures.

A contractor who repairs or maintains real property is the end user of all materials used to carry out the repair.

If a contractor removes an item, repairs it and then reinstalls it, the labour is not taxed. If an item is removed and then repaired by a person other than the contractor, the item is no longer real property and is taxable on the total amount charged by the repair person. However, if the item repaired is non-taxable (eg., production machinery) the charge for parts and labour is also nontaxable provided the customer provides a properly completed Purchase Exemption Certificate (PEC).

Repair and Maintenance of Items When Replacement Parts are Tax-exempt

The labour charges to repair and/or maintain the following items are not taxable when the
replacement parts are tax-exempt:

commercial aircraft *
equipment used in religious worship *
farm machinery and equipment *
hospital equipment used in patient care *
orthopaedic and prosthetic devices and equipment designed for people with physical disabilities
production machinery and equipment

* In these cases, the purchaser is required to provide a properly completed PEC to obtain the labour exempt.

Repairing Your Own Goods

Individuals do not need to pay RST on their own labour when they install, repair or maintain their own goods. However, RST must be paid on the materials used, unless the materials are tax-exempt.

Out-of - Province

RST does not apply to item(s) repaired in Ontario when the repair person ships the repaired item(s) to a customer located outside Ontario.

In some instances, the repair person sends the item out of Ontario for repair. If the customer is located in Ontario, the Ontario repair person must charge RST on the total repair charges, including parts and labour, even though the item was repaired outside of Ontario.

Warranty Contracts

Tax Rates

The May 2, 2000 Ontario Budget announced that RST paid on parts and labour used to carry out repairs or replacements under warranty contracts, extended warranty contracts, service or maintenance contracts, or guarantees will be completely phased-out by April 1, 2004. During the phase-out period, the rates of RST will be:

8% for repairs up to and including May 2, 2000
6% for repairs from May 3, 2000 to March 31, 2001
4% for repairs from April 1, 2001 to March 31, 2002
2% for repairs from April 1, 2002 to March 31, 2003
1% for repairs from April 1, 2003 to March 31, 2004.

The new rate applies to the purchase of repair parts after May 2, 2000. Repair parts held in inventory on May 2, 2000 will not be eligible for a refund based on the lower rate in effect on May 3, 2000.

Warranty, Extended Warranty, Service or Maintenance Contracts

As a general rule, whoever pays for the cost of repairs done under warranty must pay RST. If the repairer pays for the cost of warranty repairs and does not bill anyone, then the repairer must pay the applicable rate of RST on the cost of parts only.

If a customer pays a deductible as part of the warranty repair, the rate of RST that the customer pays on the deductible amount remains at 8%. (RST paid on deductibles did not change with the Budget announcement.) Similarly, customers will continue to pay RST at the rate of 8% on their purchase of warranty contracts, extended warranty contracts, service or maintenance contracts, or guarantees.

If vendors allow customers to return unsatisfactory items soon after the sale, for a full refund or exchange, the Ministry will allow the vendor to record this as a cancelled sale rather than a taxable warranty repair. Returned goods may be recorded as cancelled sales only if a full refund or exchange is given to the customer. The return or exchange period must not be more than 90 days. If the original goods are repaired and returned to the customer, the transaction is a taxable warranty repair and the person bearing the cost of the repairs must pay the applicable rate of RST.

For More Information

The information contained in this publication is only a guideline. For more information, please contact the Ontario Ministry of Revenue at 1 866 ONT-TAXS (1 866 668-8297) or visit our website at ontario.ca/revenue.

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