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.
Excise and Specialty Tax Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 9000116
Dear [Client]:
Subject: Excise Interpretation
Operation of Woodlots and Fuel Charge Exemptions for Farmers
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Greenhouse Gas Pollution Pricing Act (GGPPA) to exemptions available to farmers and the operation of woodlots.
All legislative references are to the GGPPA and the regulations therein, unless otherwise specified.
We understand from your letter, and our subsequent telephone conversations that […][company A] harvests trees which are located on […][land] in […][a forest], which is managed by […][company B]. The duties performed by [company A] include building roads to access areas of the forest, cutting trees, skidding, processing, and hauling lumber to the mills. New trees are planted, however the planting activities are performed by […][X]. Decisions regarding what to plant, where to plant, and where to harvest are made by [company B], and [company A] is a subcontractor for local mills which are licensees of [company B].
INTERPRETATION REQUESTED
You would like to know if your business operations of harvesting trees on behalf of [company B] meet the definition of farming, and if you are entitled to use an exemption certificate to purchase qualifying farming fuels as a farmer.
INTERPRETATION GIVEN
The GGPPA defines a farmer as a person that carries on a farming business with a reasonable expectation of profit. Farming is also defined in the GGPPA and includes tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming.
Your letter references paragraph 1.11 of Income Tax Folio S4-F11-C1 regarding woodlots. The key point in that section is that the operation of a woodlot could be considered farming, logging, or another type of business, however each case must be considered individually based on the set of facts that apply in that situation. The paragraph further states that if a business’ main focus is the planting, nurturing, and harvesting of trees under a forest management or similar resource plan, it could be considered farming. This reinforces paragraph 1.1 of that Income Tax Folio, which states “Generally, farming is the raising and harvesting of animals or plants in a controlled environment. The courts have determined that taxpayers are farming if they make an appreciable contribution to the growth and maturity of the animals or crops.”(Footnote 1)
Based on this information, forestry may be considered farming and […] [a] farmer can contract out operations and functions and still meet the definition of a farmer as long as they are responsible for the overall farming operation. However the farmer designation does not extend to individuals or companies that are contracted to perform […][services on the farm]. Since the operations of [company A] do not meet the definition of farming, [company A] cannot be considered a farmer under section 3, and they cannot issue an exemption certificate under section 36 of the GGPPA to purchase fuel exempt of the fuel charge.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the GGPPA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 647-355-9305.
Yours truly,
Janet Pelletier, CPA, CGA
Rulings Officer
Fuel Charge Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
FOOTNOTES
1 Income Tax Folio S4-F11-C1, Meaning of Farming and Farming Business – Canada.ca, section 1.1
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