Cooperatives
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 Please be aware that any statute or policy referred to in this letter may have been superseded.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 retail sales tax 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 AG-0001, April 2000
Thank you for your letter of February 25, 2000 regarding Ontario retail sales tax (RST) as it applies to co-operatives.
We acknowledge receipt of your client's written authorization to correspond directly with you, in this matter, on their behalf.
Understanding of Facts
It is our understanding that the Company C is a co-operative incorporated under the province of Ontario and follows the Co-operative Corporation Act. Farmers are the owners and members of the co-operative. You wish to clarify if the Company C qualifies as a farmer and has the entitlements to purchase exempt of RST, as such. You also wish to clarify if the Company C qualifies as a manufacturer when it cleans and drys the grain and mixes animal feeds for sale.
Legislation and/or Administrative Policy
A manufacturer is defined in section 1 of Regulation 1013 under the Ontario Retail Sales Tax Act (Act) as:
" ...a person who manufactures, fabricates, produces or assembles 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 for such tangible personal property manufactured for that person's own use exceeds $50,000 in the fiscal year..."
A "manufacturer" may purchase exempt from RST, production machinery, equipment and processing materials to be used directly in the manufacture or production of tangible personal property, or directly in and exclusively for the research or development of goods for manufacture/production or manufacturing/production processes, under paragraph 7(1)40 of the Act. The equipment must be prescribed in Regulation 1012 subsection 14(1) and must not be excluded by Regulation 1012 subsection 14(1.1).
The definition of person under the act is as follows:
"person", in addition to its meaning in the Interpretation Act, includes Her Majesty in right of Ontario, a partnership, a municipal corporation, including a district, metropolitan or regional municipal corporation, or a local board thereof as defined in the Municipal Affairs Act, and any board, commission or authority established under any Act of the Legislature;
For RST purposes "a person engaged in the business of farming" means a person who takes up farming with a reasonable expectation of profit.
Conclusion
Company C meets the definition of "a person" under the Act. However, Company C does not meet the definition of farmer under the Act. Although it is owned by persons engaged in the business of farming with a reasonable expectation of profit, Company C itself is in the business of storing and marketing grain and manufacturing feed. Therefore, it is our opinion that the Company C would not qualify for the exemptions afforded to farmers.
If Company C qualifies as a manufacturer by meeting the $5,000 threshold of goods produced annually it may be entitled to purchase production machinery and equipment exempt of RST by providing it's supplier with a properly completed purchase exemption certificate.
We have enclosed retail sales tax guides 400 "Manufacturers" and 204 "Purchase Exemption Certificates" for your information.
ISBN 0-7794-2507-3
© Queen's Printer for Ontario, 2002
