Exemption - Farm Building Materials
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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0004, October 2000
Thank you for your letter of October 17, 2000 inquiring about the application of Ontario retail sales tax (RST) on farm building materials.
Understanding of Facts
It is our understanding that your company, Company A, have received several requests for "point-of-sale" exemption for farm building materials.
You would like written confirmation as to what products are considered to be farm building materials.
Legislation and/or Administrative Policy
Paragraph 14 of subsection 7(1) of the Ontario Retail Sales Tax Act (Act) provides a conditional exemption for building materials purchased to build or modernize a structure or building used exclusively for farm purposes and states:
Tangible personal property incorporated into buildings or structures that are used exclusively in the business of farming by a person engaged in the business of farming. However, the exemption conferred by this paragraph does not apply to tangible personal property incorporated into residential premises, an office, a residential garage, a road, a sidewalk, a bridge or a building or structure prescribed by the Minister as not entitled to the exemption conferred by this paragraph;
Subsection 3(2) of Regulation 1013 of Act states:
"If a person purchases tangible personal property or a taxable service and does not submit a valid purchase exemption certificate to the vendor, the vendor shall collect tax from the person calculated on the price charged for the tangible personal property sold or the taxable service rendered."
Analysis
The May 2, 2000 Ontario Budget announced that the existing farmer's rebate program would be replaced with a point-of-sale exemption. The legislation has received proclamation making the point-of-sale exemption effective October 1, 2000. Eligible purchasers may claim the RST exemption at the time of sale by providing their supplier with a properly completed purchase exemption certificate (PEC) or a farmer's declaration statement when purchasing building supplies used to build or modernize structures used exclusively for farm purposes. Similarly, a contractor or other person purchasing building materials for farm structures would provide a PEC to their supplier in order to claim the exemption.
It is the responsibility of the purchaser when they make declarations on the PEC to ensure that they meet the qualifications for the exemption. False statements and incorrect use of a PEC can be determined through audit of vendors and the purchaser may be held responsible for the RST and any penalties incurred by their actions. The vendor is not required to verify whether the goods purchased will ultimately be incorporated into a farm building. A copy of the PEC is to be kept with the vendor's permanent records.
If a person (farmer or contractor) alleges that they are purchasing taxable goods for incorporation into a building used exclusively for farming, he or she must issue a properly completed PEC to the vendor/supplier of the taxable goods. If a properly completed PEC is not issued to the vendor/supplier of the taxable goods, the vendor/supplier is responsible for charging, collecting and remitting RST on their sales of the taxable goods.
Conclusion
In order for Company A to sell their merchandise to farmers or contractors without charging RST, the farmer or contractor must issue Company A a properly completed PEC. If the farmer or contractor does not issue a PEC, then Company A must charge, collect and remit RST on their sales.
The enclosed Retail Sales Tax Guide # 204 - "Purchase Exemption Certificates" provides further information. Also enclosed is, Information Notice - 2000 Ontario Budget Announcement - Rebate Program for Farm Building Materials to Point-of-Sale Exemption.
If you have any further questions, please contact our office.
ISBN 0-7794-2507-3
© Queen's Printer for Ontario, 2002
