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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 140617
Business Number: [...]
March 8, 2012
Dear [Client]:
Subject:
GST/HST RULING
Tax status of the supply of 'poultry quota' by way of lease
Thank you for your letter of December 6, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of poultry quota by way of lease.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the facts are as follows:
1. In [...][province X] [...] (the Marketing Board) is the governing body responsible for distributing new poultry quota and regulating the leasing of existing quota between producers (farmers). However, there has not been an issuance of new quota in over a decade and currently the only option for a producer to obtain additional quota is to lease quota through other producers in [province X].
2. Poultry quota that is leased by a [province X] producer to another [province X] producer must be for poultry production within [province X].
3. [...] (Producer A) is a poultry farmer in [...][City 1, province X] and is leasing poultry quota from [...] (Producer B) a registered corporation and other various farmers.
4. Producer A has been producing with leased quota from Producer B and was not charged GST at the time of the transaction. Producer A provided a copy of the lease between [...] [Producer A] and Producer B which outlines the amount of quota to be leased by period.
5. Neither Producer A nor Producer B is a public sector body for purposes of GST/HST.
Ruling Requested
You would like to know if the supply of quota by way of lease from Producer B to Producer A is subject to GST at the rate of 5%.
Ruling Given
Based on the facts set out above, we rule that the supply of a poultry quota by way of lease made in [province X], supplied by other than a public sector body, is subject to the GST at the rate of 5%.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
The following are exempt supplies for GST/HST purposes when made by a government or municipality or by a board, commission or other body established by a government or municipality pursuant to subsection 20(c) of Part VI of Schedule V:
"a supply other than of a right or service supplied in respect of the importation of alcoholic beverages) of... (i) a licence, permit, quota or similar right..."
The supply of quota by a marketing board or similar body is an exempt supply for GST/HST purposes. When quota is supplied by another party the above exempting provision may not apply. Producer B is not a government or municipality or a board, commission or other body established by a government or municipality pursuant to subsection 20(c). Therefore, the exempting provision does not apply in your case.
Pursuant to section 10 of Part IV of Schedule VI to the ETA, a supply of prescribed agricultural property is zero-rated (taxable at 0%). The prescribed property for the purposes of that section is listed under the Agriculture and Fishing Property (GST/HST) Regulations (the Regulations). Section 2 of the Regulations states that the property listed in the [Schedule] to the Regulations is zero-rated when supplied by way of sale.
Subsection 1(5) of the Schedule to the Regulations, lists the supply of "quota authorized by a government agency or marketing board in respect of an agricultural product that is zero-rated as a basic grocery under section 1 of Part III of Schedule VI or as a supply of farm livestock or product covered under sections 1, 2, 3, 4, or 7 of Part IV of Schedule VI". Therefore, the supply of quota for poultry is zero-rated only when supplied by way of sale. The Regulations are narrow in the nature of the relief that they provide. When supplied in any manner other than by way of sale, including when supplied by way of lease, the supply of the quota is subject to the GST/HST.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Angela Stachowski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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