29 January 1999 GST/HST Ruling HQR0001533 - Application of the GST/HST to the Supply and Installation of Greenhouses

Dear XXXXX:

I refer to your letters of October 23, 1998 and December 3, 1998 regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply and installation of greenhouses. We further discussed this matter during our telephone conversation on January 21, 1999.

Statement of Facts

Our understanding of the facts is as follows:

•   XXXXX is registered for purposes of the GST/HST.

•   XXXXX manufactures and installs greenhouses.

XXXXX was recently audited XXXXX with respect to the provisions of the Retail Sales Tax Act. As a result of the audit, XXXXX was advised that most of its supplies of greenhouses were deemed to be real property or a fixture and, consequently, the retail sales tax (RST) is payable only on the manufactured cost and is to be included in the selling price.

Ruling Requested

In the case of contracts for the supply and installation of greenhouses, is the GST calculated on the selling price including the RST or on the selling price excluding the RST?

Ruling Given

Based on the facts set out above, we rule that the GST is calculated on the selling price including the RST. During our telephone conversation on January 21, 1999, I advised you of this decision and you indicated that you disagreed with the decision. Please refer to the "explanation" portion of this ruling for further details.

Explanation

Section 154 of the Excise Tax Act (the "ETA") provides:

For the purposes of this Part, the consideration for a supply of property or a service includes any tax, duty or fee (other than a prescribed tax, duty or fee, or tax under this Part, payable by the recipient in respect of the supply) imposed under an Act of Parliament or the legislature of a province in respect of the supply, production, importation, consumption or use of the property or service that is payable by the recipient or is payable or collectible by the supplier.

Therefore, unless a tax, duty or fee is "prescribed", the amount is included in determining the value of the consideration.

Prescribed taxes, duties and fees are listed in the Taxes, Duties and Fees (GST) Regulations (the "Regulations"). Subsection 2(1) of the Regulations provides:

In these Regulations, "general retail sales tax rate" of a province means the rate of tax set out in

(a) XXXXX

Section 3 of the Regulations provides:

The following taxes, duties and fees are prescribed for purposes of section 154 of the Excise Tax Act:

....

(b) a tax imposed by the legislature of a province, under any provision of an Act

referred to in the definition "general retail sales tax rate" in section 2, in respect of an item of personal property or a service where ...

....

(ii) the tax is payable by the recipient of a supply of the property or service,

XXXXX, provides in part:

You are considered a manufacturing contractor if you manufacture and install items. which, after installation, become part of real property. RST must be paid by you on the manufactured cost of items installed.

XXXXX, provides in part:

Real property includes items supplied and installed, which after installation are permanently attached to real property, e.g. land or a building.

On real property contracts, the contractors are responsible for the payment of RST.

XXXXX provides in part:

When contractors sell real property or items that are fixtures, they must not charge retail sales tax (RST) on the selling price. The RST paid on items bought or manufactured for these contracts forms part of the cost used by contractors to determine the final contract price. For this reason, contractors should not quote or bill RST separately to their customers.

With respect to the manufacture and installation of greenhouses, the RST is not payable by the recipient of the supply of the property or service XXXXX, the RST is payable by XXXXX, the manufacturer. Therefore, the condition of subparagraph 3(b)(ii) of the Regulations has not been met. The RST that is included in the value of the consideration for the supply and installation of greenhouses is not a prescribed tax for purposes of section 154 of the ETA. The amount of the RST is included in determining the value for consideration and the GST/HST is calculated on the total amount inclusive of the RST.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%, (Example: Goods that are delivered or made available in a participating province are subject to the HST) the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8222.

Yours truly,

Tim A. Krawchuk
Rulings Officer
Financial Institutions Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate