Transfers of Residential, Commercial and Farm Properties and Equipment between Family Members
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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0003, July 2000
Thank you for your facsimile message of June 27, 2000 regarding the application of Ontario retail sales tax (RST) to transfers of residential, commercial and farm properties and farm equipment between family members.
Your letter pertains to an unnamed client's situation. As the facts of each case may differ and what may appear to be an unimportant difference could be a critical factor in determining the application of RST, it is Branch policy not to provide interpretations regarding unidentified clients. However, we are providing you with a general response based on the information provided. Our ruling does not pertain to any specific taxpayer.
Legislation and/or Administrative Policy
Paragraph 7(1)13 of the Ontario Retail Sales Tax Act (the Act) provides an exemption from RST to persons engaged in the business of farming on their purchases of farm implements, farm machinery, farm equipment, agricultural products and repair parts that are to be used exclusively in the conduct of farming. The definition of farm implements, farm machinery, farm equipment, agricultural products includes all implements, machinery and equipment designed for farm use but does not include barns, greenhouses, silos or similar structures.
Under section 1 of Regulation 1013, a "person engaged in the business of farming means a person who undertakes farming with a reasonable expectation of profit".
"Farming" is defined in section 1 of Regulation 1013 to include,
- tillage of the soil for the purpose of growing sod, trees, shrubs, bushes, seeds and seedlings, flowers, flowers for use as cut flowers, plants and bulbs from which plants or flowers may be grown,
Section 1 of the Act defines "tangible personal property" to mean:
"personal property that can be seen, weighed, measured, felt or touched or that is in any way perceptible to the senses, and includes computer programs, natural gas and manufactured gas."
For RST purposes, there are two types of property, tangible personal property (TPP) and real property. TPP refers to free standing items. Real property means land and any items permanently attached to land. Section 2(1) of the Act imposes a tax to the purchaser of TPP but not to the purchase of real property. Land and buildings are not considered TPP.
Paragraphs 8(1) and 8(2)of the Act provide an exemption for transfer of tangible personal property (TPP) between family members:
- Where a person acquires title to tangible personal property by bequest or from a member of his family or from his or her same-sex partner and no consideration is payable by the purchaser in respect of the acquisition, the tax imposed by subsection 2(1) does not apply.
- In subsection (1), "member of his or her family" means the father, mother, spouse, grandfather, grandmother, son, daughter, grandson, granddaughter, son-in-law, daughter-in-law, father-in-law or mother-in-law of the purchaser.
Analysis & Conclusion
Based on the above, RST does not apply to the transfer or sale of residential, commercial or farm properties as it is considered real property.
When consideration is paid on the transfer or sale of the farming equipment, an exemption may be available under Section 7(1)13 of the Act as explained above. A person engaged in the business of farming may purchase farm equipment and agricultural products designed for farm use (i.e., tractors, manure spreader etc.) tax exempt.
However, items that are not generally made for use exclusively in farming (i.e., chain saw, hand tools etc.) a Purchase Exemption Certificate (PEC) must be completed and given to suppliers.
Riding lawnmowers used to mow grass are taxable to farmers. Lawn and garden tractors with facilities for attachments, such as 3 point hitch, hydraulic outlets, etc., may be bought exempt by farmers if these tractors if used to till soil, maintain crops or to pull small trailers or other farm equipment.
We are enclosing Sales Tax Guides #206 - Real Property and Fixtures, and #807 - Farmers for your information.
If you have any further questions, please contact our office.
ISBN 0-7794-2507-3
© Queen's Printer for Ontario, 2002
