Coop de travailleurs en serres Belle-de-Jour v. Agence du revenu du Québec, 2019 QCCQ 6609

The taxpayer used approximately 20% of the area within greenhouses to grow cucumbers or other vegetables, or flowers, from seed for sale as grocery items or as little plants that could be transplanted. The taxpayer also annually produced about 85,000 floral arrangements in pots, which it sold to retailers such as Costco. To this end, it purchased already-grown flowers from other growers, and maintained them in its greenhouses pending its use of them for incorporation into the floral arrangements. Between 2012 and 2014, it constructed a biomass system for heating the greenhouses.

S. 1029.8.36.166.40 of the Taxation Act potentially provided an investment tax credit for a Class 29 property, but Regulation 130R12(a) provided that for purposes of Class 29, “manufacturing or processing” did not include “farming.”

In finding that the taxpayer’s floral-arranging activity did not constitute “farming,” Gibbens JCQ noted the element of artistry in this activity, observed that although the flowers would still grow while being kept in the greenhouses, this was not the predominant element in a process that entailed the creation of something new, and stated (at para. 55, TaxInterpretations translation) that the activity:

also entailed an aspect of processing, as the purchased plants … were subject to a series of standard procedures: they were arranged with each other and with other materials and placed in pots in a particular manner according to a precise model. The plants and other material underwent a change in form and appearance to become the final product – the arrangements sold to the customers.

In further finding that the two activities were distinct, so that the flower-arranging activity was not assimilated to the taxpayer’s farming business, Gibbens JCQ stated (at para. 68):

Nothing otherwise suggests that the two activities were dependent one on the other. In particular, the floral arrangements were manufactured exclusively from already-grown plants that had been purchased by the Coop from third-party suppliers and not from flowers that the Coop had grown for sale as small plants to be transplanted.

Respecting the use of the biomass system, although 20% of the greenhouses were used in farming, the greenhouse-heating was not necessary to this business, with the exception of the warming of cucumber seeds in the spring so as to encourage germination, whereas heating was essential to the floral arrangement business, whose focus was on the cold season. Accordingly, the biomass system was used “primarily” in the manufacturing or processing of the floral arrangements.

The taxpayer used approximately 20% of the area within greenhouses to grow cucumbers or other vegetables, or flowers, from seed for sale as grocery items or as little plants that could be transplanted. The taxpayer also annually produced about 85,000 floral arrangements in pots, which it sold to retailers such as Costco. To this end, it purchased already-grown flowers from other growers, and maintained them in its greenhouses pending its use of them for incorporation into the floral arrangements. Between 2012 and 2014, it constructed a biomass system for heating the greenhouses.

Gibbens JCQ found that this system qualified as a Class 29 property that entitled the taxpayer to investment tax credits, i.e., it was used primarily for the manufacturing or processing of goods for sale. After finding that the floral arranging activity was manufacturing or processing, she went on to find that the floral-arranging activity was a separate business rather than being part of the taxpayer’s (greenhouse) farming business, stating (at para. 68, TaxInterpretations translation):

Nothing otherwise suggests that the two activities were dependent one on the other. In particular, the floral arrangements were manufactured exclusively from already-grown plants that had been purchased by the Coop from third-party suppliers and not from flowers that the Coop had grown for sale as small plants to be transplanted.

The taxpayer used approximately 20% of the area within greenhouses to grow cucumbers or other vegetables, or flowers, from seed for sale as grocery items or as little plants that could be transplanted. The taxpayer also annually produced about 85,000 floral arrangements in pots, which it sold to retailers such as Costco. To this end, it purchased already-grown flowers from other growers, and maintained them in its greenhouses pending its use of them for incorporation into the floral arrangements. In finding that that the floral-arranging activity was a separate business rather than being part of the taxpayer’s (greenhouse) farming business, Gibbens JCQ stated (at para. 68, TaxInterpretations translation):

Nothing otherwise suggests that the two activities were dependent one on the other. In particular, the floral arrangements were manufactured exclusively from already-grown plants that had been purchased by the Coop from third-party suppliers and not from flowers that the Coop had grown for sale as small plants to be transplanted.