Information Notice, April 2003

• This Notice explains how Retail Sales Tax (RST) applies to tangible personal property (TPP) repaired or replaced under a contract of insurance.

Background

When TPP is repaired or replaced under a contract of insurance, the owner (insured) is the purchaser and is required to pay RST on the cost of the repair. The facility providing the repair service (repairer) is the vendor and is required to collect and remit RST on the total amount billed.

In most instances, the insured and the insurance company (insurer) will agree upon a repairer who will repair or replace the damaged or stolen TPP. Upon completion of the work, the repairer will issue an invoice which includes RST calculated on the total charge of the taxable goods or services provided. It is the repairer's responsibility, as the vendor, to charge, collect and remit the RST to the Ministry of Revenue, regardless of whether the invoice is paid by the insured or the insurer.

Third Party Facilitators

In some cases, a third party facilitator (the facilitator), acting on behalf of an insurer, may arrange and direct the repair service. The facilitator will confirm coverage and entitlement, co-ordinate the repair or replacement of the insured goods and make financial settlement with the repairer. The facilitator will recover its disbursements and agency fees through billings to the insurer.

Facilitators are the providers of non-taxable financial and co-ordinating services when they are involved in claim processing and settlement activities. Accordingly, they are not considered vendors for RST purposes and should not charge RST. Facilitators are not permitted to purchase repair parts and labour for insured items exempt from RST, and therefore are not entitled to use Purchase Exemption Certificates.

Where a facilitator arranges the repair service, the repairer is still responsible for the collection and remittance of the RST.

For More Information

For more information, please contact the nearest Ontario Ministry of Revenue Tax Office listed under Taxes - Provincial (Retail) Sales Tax in the blue pages of your telephone directory, or visit our website at ontario.ca/revenue.

© Queen's Printer for Ontario, 2003

ISBN 0-7794-4748-4