Polyethylene Sheeting Used on Greenhouse Structures
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 Please be aware that any statute or policy referred to in this letter may have been superseded.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-0005, October 2000
Thank you for your facsimile message of October 23, 2000 inquiring about the application of Ontario retail sales tax (RST) on polyethylene sheeting used on greenhouse structures.
Understanding of Facts
It is our understanding that your company, Company A, is the manufacturer, installer and distributor of greenhouse structures and materials.
Company A would like to know if polyethylene sheeting, which is used on greenhouse structures, qualifies for the "point-of-sale" exemption for building materials incorporated into buildings used exclusively for farming.
Legislation and/or Administrative Policy
Under paragraph 7(1)13 of the Ontario Retail Sales Tax Act, persons engaged in the business of farming are entitled to an exemption from RST on the purchase of farm implements, farm machinery, farm equipment, agricultural products and repair parts. Regulation 1013 s1 defines a person engaged in the business of farming to be a person who farms with a reasonable expectation of profit. Farming includes the tillage of soil to grow seeds and seedlings, flowers, shrubs, bushes, and the propagation and cultivation of plants within a hothouse, greenhouse or other enclosed structure designed for the protection of plants.
Regulation 1012 s1 defines farm equipment, machinery and implements as those designed for farm use, but excludes items such as greenhouses.
However, paragraph 14 of subsection 7(1) of the 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;
The Act also provides a rebate for farm building materials under clause 48(3)(m) as follows:
providing for a rebate of the tax in whole or in part to a person engaged in the business of farming in respect of tangible personal property purchased on or after May 8, 1996 and incorporated into structures to be used exclusively for farm purposes and prescribing the terms and conditions under which such rebates may be made.
Greenhouse operators who operate a retail outlet on the same premises are not entitled to the above RST exemptions for farm building materials that will be incorporated into the retail outlet section.
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 completed purchase exemption certificate 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 purchase exemption certificate to their supplier.
It is the responsibility of the purchaser when they make declarations on the purchase exemption certificate to ensure that they meet the qualifications for the exemption. False statements and incorrect use of a purchase exemption certificate can be determined through audit of vendors and the purchaser may be held responsible for the RST and any penalties incurred by their actions.
Please Note: Any purchases made before October 1, 2000 will continue to be processed under the rebate system, i.e. only a commercial farmer can apply for the rebate of the RST paid for materials supplied and installed by a contractor. The amount of the rebate can be the actual amount of RST (i.e.8%) paid by the contractor on building materials supplied and installed under the terms of a written contract. Contractors will be allowed to provide farmers with either copies of their actual invoices, or a signed statement stating the amount of RST the contractor paid on the materials.
If the contractor cannot provide the farmer with actual invoices or a signed statement stating the amount of RST the contractor paid on the materials, a rebate of RST paid is still available to the farmer. The RST rebate should be calculated in one of the two following ways:
- If the federal goods and services tax (GST) is included in the contract price, the claimant calculates the amount eligible for rebate by multiplying the payments made (including GST) by 3%.
- If the GST is not included in the contract price, the claimant calculates the amount eligible for rebate by multiplying the payments by 3.4%.
The following charges, which may be included in the contract price, do not qualify for the RST rebate:
- building permit fees
- charges for development or project consulting services
- charges for the use of temporary facilities
- demolition charges
- equipment rental charges
- land or land improvement costs
- the value of performance bonds
- the cost of any item that may be eligible for exemption under any other section of the Retail Sales Tax Act.
Both renovation and repair work are regarded as modernizing for purposes of this rebate. However, if the item being acquired already qualifies for exemption as farm equipment, then the farmer should purchase the item exempt of tax rather than pay tax and apply for a refund.
The RST rebate applies only to materials purchased on or after May 8, 1996 and up to and including September 30, 2000. Farmers who apply for more than one sales tax rebate must ensure that each claim for a rebate is for a minimum of $100.00. To claim a rebate, the "General Application for Refund of Ontario Retail Sales Tax" form must be completed and copies of the receipts for goods purchased by the farmer or the contractor must accompany the application.
Conclusion
Effective October 1, 2000, Company A may issue their suppliers purchase exemption certificates for building materials i.e. polyethylene sheeting, that will be incorporated in buildings and structures used exclusively for farm use i.e. greenhouse operations. The exemption does not extend to building materials that are incorporated into retail outlets that a greenhouse operator may run.
Enclosed for you information is Sales Tax Guide #204 - Purchase Exemption Certificate and 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
