Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 212366
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Supply of hay for horses
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of hay for horses used for trail rides, racing, and dressage. We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. […] (the Company) is a business located in [City, Province].
2. The Company sells stacks of hay.
3. Customers purchase the hay to feed a variety of animals, including horses used in trail rides, racing, and dressage.
4. The Company charges GST/HST if the customer purchases less than 1,650 lbs of hay but does not charge any tax if the customer purchases 1,650 lbs or more of hay.
RULING REQUESTED
You would like to know if hay sold to feed horses that are used for trail rides, racing, and dressage is zero rated when supplied in quantities of at least 750 kg or 1,650 lbs.
RULING GIVEN
Based on the facts set out above, we rule that the supply of hay that is ordinarily used to feed farm livestock, such as horses, is zero-rated under section 2 of Part IV of Schedule VI when supplied in a quantity of at least 750 kg or 1650 lbs.
EXPLANATION
Hay is a plant that has been cut, dried, and stored for animal feed. Hay is used to feed livestock, such as cattle, horses, goats, and sheep, or smaller domesticated animals such as rabbits and guinea pigs.
Section 2 of Part IV of Schedule VI to the Excise Tax Act zero-rates:
A supply of
(a) grains or seeds (other than viable seeds that are cannabis as defined in subsection 2(1) of the Cannabis Act) in their natural state or treated for seeding purposes or irradiated for storage purposes
(b) hay or silage, or
(c) other fodder crops,
that are ordinarily used as or to produce, food for human consumption or feed for farm livestock or poultry, when supplied in a quantity that is larger than the quantity that is ordinarily sold or offered for sale to consumers, but not including grains or seeds or mixtures thereof that are packaged, prepared or sold for use as feed for wild birds or as pet food.
A number of conditions must be met in order for a feed to be zero-rated under section 2 of Part IV of Schedule VI to the ETA. The first condition is that the hay is ordinarily used either as or to produce food for human consumption or feed for farm livestock or poultry.
The term “livestock” is not defined in the ETA, however it is defined in section 2 of the Feeds Act as follows:
Livestock means horses, cattle, sheep, goats, swine, foxes, fish, mink, rabbits and poultry and includes such other creatures as may be designated by regulation as livestock for the purposes of this Act.
GST/HST Memorandum 4-4, Agriculture and Fishing (Memo 4-4) paragraph 5 provides examples of animals, poultry and bees that the CRA considers to be farm livestock or poultry that are ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool. Similarly, examples that the CRA considers not be ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool can be found in paragraph 7 of Memo 4-4. Horses are listed under paragraph 7 of Memo 4-4.
Horses are considered to be farm livestock so the first condition of section 2 of Part IV of Schedule VI to the ETA is satisfied. However, horses are not considered to be farm livestock that are raised or kept to produce, or to be used as, food for human consumption or to produce wool, which is a condition in other zero-rating provisions such as the supply of farm livestock (section 1 of Part IV of Schedule VI) and other types of feed (subsection 1(2) of the schedule of the Agriculture and Fishing Property (GST/HST) Regulations).
The second condition is that the feed must be supplied in a quantity that is larger than the quantity that is ordinarily sold or offered for sale to consumers. Hay is ordinarily sold or offered for sale in bales which can have varying sizes and shapes. To be a zero-rated supply, hay must be sold in a quantity larger than one large round bale or an equivalent to this amount. A single large round bale is one which weighs at least 750 kg or 1650 lbs. An equivalent to this would be 16 square bales, each weighing 50 kg or 110 lbs. That is to say, although the supply of hay may be sold in different proportions than the round bale, provided the total supply is the equivalent, it will be a zero-rated supply pursuant to section 2 of Part IV of Schedule VI to the ETA.
The third condition is the exclusion from zero-rating of grains or seeds or mixtures thereof that are packaged, prepared or sold for use as feed for wild birds or as pet food. A supply of hay that is ordinarily used as feed for farm livestock will satisfy this condition.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-3972.Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287 or by fax to 1-418-566-0319.
Sincerely,
David Phoenix, CPA, CGA
Senior Rulings Officer
Services and Intangibles
General Operations and Border Issues Division
GST/HST Rulings Directorate
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