3 October 2001 GST/HST Ruling 35854 - Fertilizer

Dear XXXXX:

Thank you for your letter of May 4, 2001 (with attachments) and telephone conversation of September 18, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by your client XXXXX[.]

Facts Given

You describe the product XXXXX sold by your client as follows:

•   The product is primarily the dung of horses mixed with the bedding (straw) thereto. It is obtained in bulk from the horse barns in the area and can contain cattle manure as well.

•   The product is sold in its natural state primarily to XXXXX.

•   The product is delivered by the truckload in quantities exceeding 500 KG.

•   The product is not labelled or formally marketed by XXXXX.

•   Invoices for the product designate it as XXXXX.

•   No laboratory analysis is done to verify the plant nutrient content of the product. However the product is monitored to ensure it does not contain any elements detrimental to health or the environment.

•   In the past, the client also sold a product named XXXXX.

•   This product contained some horse and cattle manure and other components (e.g. sedge peat).

•   Although similar to XXXXX is a separate and distinct product. The client had hoped to use labelling and formal marketing effort to differentiate the product and expand sales. This failed to occur and the making of supplies of XXXXX was abandoned.

•   A laboratory analysis was submitted to the CCRA XXXXX for a product called XXXXX

Ruling Requested

Clarify the tax status of XXXXX and XXXXX pursuant to section 5 of Part IV of Schedule VI to the Excise Tax Act (ETA).

Ruling Given

XXXXX sold in bulk is a zero-rated supply pursuant to section 5 of Part IV of Schedule VI to the ETA when supplied in quantities of at least 500 kg at that time.

XXXXX is not a zero-rated supply pursuant to section 5 of Part IV of Schedule VI to the ETA.

Explanation

Pursuant to subsection 3(1) of the Fertilizers Regulations made under the Fertilizers Act, animal and vegetable manures that are sold in their natural condition are exempt from that Act and Regulations, if they are:

•   not detrimental, harmful, or poisonous (including lesser plant nutrients),

•   are efficacious for every purpose for which it is represented or sold (including lesser plant nutrients),

•   if the product contains a pesticide, it is approved for use.

According to the Canadian Food Inspection Agency (CFIA), manure in its natural condition means that the product is not processed (other than handled and stored), packaged or bagged in any manner.

Animal and vegetable manures in their natural condition are commonly understood to be a fertilizer (i.e. efficacious) even though they are not subject to the requirements of the Fertilizers Act. Therefore, manure in its natural condition is zero-rated under section 5 of Part IV of Schedule VI to the ETA.

To be considered a fertilizer for purposes of section 5 of Part IV of Schedule VI to the ETA, XXXXX must meet specific compositional requirements set out in the attached P-235; Meaning of "Fertilizer" and pursuant to the Fertilizer Act and Regulations.

XXXXX is not the dried and ground excreta of animals or birds with or without litter, containing not less than 50% organic matter, designated as to kind and condition as required pursuant to Schedule II under the Fertilizer Act and Regulations.

Furthermore, based on the laboratory analysis for XXXXX, lesser plant nutrients are present below the minimum required level and major plant nutrients are present in insignificant levels. Therefore, supplies of XXXXX are subject to the GST at 7%.

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 our interpretative policy; and that you have fully described all necessary facts and transaction(s) 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) 952-9218.

Yours truly,

Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Canada Customs and Revenue Agency
Agence des douanes et du revenu du Canada T2001