4 June 2004 GST/HST Ruling 48222 - Application of GST/HST to XXXXX

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Further to a request submitted by XXXXX of Domestic Rebates and Processing XXXXX with regard to built-in appliances qualifying for a new housing rebate under section 256 of the Excise Tax Act (ETA), we provide the following comments.

Pursuant to subsection 256(2), the "owner-built" rebate is available where, among other requirements, "a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex ..." That is, GST/HST must have been paid on the land and/or construction materials and contracting services. Policy Statement P-085, Amounts Eligible for Section 256 GST New Housing Rebate discusses what an eligible claimant may include in the rebate claim under section 256. Generally, an eligible amount is any tax paid with respect to the sale of the land that forms part of a single unit residential complex or an interest therein or in respect of any improvements thereto.

The primary issue for purposes of section 256, as it relates to built-in appliances, is to what extent should an appliance be "attached" or "affixed" to the owner-built home to be eligible for this rebate. In this regard, P-085 states that, "... a qualifying improvement in respect of a residential complex would comprise the property and services relating to the qualifying land, the residential building itself and any appurtenances to such building." These normally include building materials, construction services, and anything affixed to the inside or outside of the qualifying building or appurtenance, that are included in the adjusted cost base of the complex for income tax purposes. Generally, real property includes items that are attached to land, such as buildings, utility poles, fences, and chattels that have been attached to real property (i.e., fixtures). Examples of fixtures include doors, windows, water heaters, and built-in appliances.

It is our view that the degree of affixation to the residential complex must be such that it is considered an improvement, as this term is defined in subsection 123(1) of the ETA. As a result, the essential consideration is the nature of the physical connection and mode of attachment to the residential complex. Furthermore, once the appliance is attached or installed, it must become part of the residential complex such that it is intended to remain as a permanent part of the home that cannot be easily removed.

Consequently, the question of whether an appliance is a "fixture" and hence part of the residential complex, can only be answered by examining the facts of each case. Generally, the appliance must be plumbed in and/or hard wired to the residential complex. However, where plumbing can be easily attached, as in the case of a clothes washer, this would not be considered a "built-in" appliance for purposes of section 256. In addition, custom-built cabinetry around the appliance would not bring the particular appliance within the meaning of "built-in" for purposes of section 256 without the appliance being plumbed in and/or hard wired.

With regard to certain appliances referred to in our discussions, we note the following:

•   A refrigerator that is attached to a water supply, similar to a clothes washer, is not considered to be a built-in appliance. Even where cabinetry is custom built, this would not bring the appliance within the meaning of built-in.

•   A microwave with a range/hood type air system that requires electrical wiring is considered to be a built-in appliance. However, a microwave that is placed on a custom built shelf and is plugged in to the wall is not a built-in appliance, regardless of its cost.

•   A slide-in-range, that is essentially a freestanding appliance, is not considered to be a built-in appliance, regardless of any cabinetry that me be custom built to accommodate the appliance. However, stovetops or cook-tops that are installed in the kitchen counter and hard wired to the home are considered to be built-in.

•   A dishwasher, one that is hardwired and plumbed in to the home, is considered to be a built-in appliance.

•   A wine cooler that is simply plugged in, similar to a refrigerator, is considered to be a freestanding appliance.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8226.

2004/05/07 F — RITS 48549 — XXXXX Application de la partie IX de la LTA