Telephone No. (613) 954-8585
Fax No. (613) 990-1233
File 11667-4(sm)
Section 162
Dear XXXXX
Thank you for your memorandum dated June 7, 1995, requesting a GST interpretation with respect to the application of section 162 to six different scenarios which occur in the forestry industry.
We have the following comments in response to each scenario outlined in your memorandum.
1. Property owner cuts down trees on her property and sells logs to logging company. (Presumably the logs constitute inventory and the property owner may have to register and charge GST.)
You are correct in your assessment. The sale of logs is the supply of tangible personal property and is subject to the GST provided that the owner is not a small supplier and chooses not to register for the GST.
2. Property owner approaches cutting service company to cut down trees from property. Cutting service company bills property owner. Property owner approaches logging company to purchase logs. Logging company pays for logs and removes logs from property.
Again, the sale of the logs is the supply of tangible personal property and is subject to the GST. The services of the cutting company are also subject to the GST.
3. Property owner approaches logging company to take off trees from property. Logging company uses its own employees to cut trees and remove them from property.
The property owner is providing the logging company with the right to exploit the forestry resource. The right is deemed not to be a supply pursuant to subsection 162(1).
4. Property owner approaches logging company to take off trees from property. Logging company contracts out cutting service to separate legal entity. Separate legal entity charges logging company, not property owner. Logging company pays property owner (& many companies automatically include GST in their payment).
The property owner is providing the logging company with the right to exploit a forestry resource. The right is deemed not to be a supply pursuant to subsection 162(1) and is, therefore, not subject to the tax. The contractor that provides the cutting services is providing a taxable supply to the logging company which is subject to the GST.
5. Logging company approaches owner and indicates they will pay her for trees. They use own employees to cut down trees and pay property owner.
The property owner is providing the logging company with the right to exploit the forestry resource. The right is deemed not to be a supply pursuant to subsection 162(1).
6. Logging company approaches property owner and indicates that they will pay her for trees. They contract out the cutting service to separate legal entity who charges logging company. Logging company pays property owner for an amount including GST.
The owner is providing the logging company with the right to exploit the forestry resource. The right is deemed not to be a supply pursuant to subsection 162(1). It is immaterial that the logging company has contracted out the actual cutting down of the trees. It is still the logging company that has been given the right to exploit the forestry resource. The cutting service provided to the logging company is a taxable supply and is subject to the GST.
If any further information is required, please contact Sherry Moran at (613) 952-8807 or Sandy Marr at (613) 957-8253.
Sincerely,
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
GTP1308 (REG)
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