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]
Date: December 5, 2023
Case Number: 9000225
Dear[Client]:
Subject: FUEL CHARGE INTERPRETATION
Eligibility to provide an exemption certificate as a farmer for custom fertilizer application
Thank you for your letter of August 30, 2023, concerning the application of the Greenhouse Gas Pollution Pricing Act (GGPPA)
All legislative references are to the GGPPA and the regulations therein, unless otherwise specified.
We understand from your letter, and our subsequent telephone conversation, […][Company A]is planning on offering a service of custom fertilizer application to farmers. The current operations of [Company A]involve selling the following: fuel at the retail level, agricultural products, food, pharmaceuticals and home and building supplies. When [Company A]uses a type of fuel for it’s own use it pays the fuel charge on the volume in question.
[Company A]is a registered distributor for a type of qualifying farm fuel as it delivers this fuel in a listed province to eligible farmers. You have stated that the intention of [Company A] is to purchase/lease farming equipment required to perform the fertilizer application. To power the farming equipment, [Company A]will use fuel from their own inventory.
INTERPRETATION REQUESTED
You would like to know whether [Company A]is required to pay the fuel charge on fuel used in farming equipment for the purposes of supplying a custom fertilizer application service, or is [Company A]eligible to complete a L402 Fuel Charge Exemption Certificate for Farmers so that the fuel used in the farming equipment is exempt of the fuel charge.
INTERPRETATION GIVEN
Section 3 of 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.
Subsection 18(1) states that a registered distributor that uses a type of fuel in a listed province at a particular time must pay a charge in respect of the fuel and the listed province. The charge is payable at the particular time.
An exemption certificate may apply to the delivery of fuel by a person to another person subject to conditions outlined in subsection 36(1). The exemption certificate must be in prescribed form containing prescribed information, it must include a declaration by the person, it must be provided in a manner satisfactory to the Minister, and it must be retained by the person to whom it is provided with an indication that the delivery is subject to the exemption certificate. Subparagraph 36(1)(b)(vii) details additional conditions for farmers to be eligible to use L402 Fuel Charge Exemption Certificate for Farmers. The location that the fuel is being delivered to must be a farm or a cardlock, the fuel is for use exclusively in the operation of eligible farming machinery or of an auxiliary component of eligible farming machinery and, that all or substantially all of the fuel is for use in the course of eligible farming activities,
The performance of custom fertilizer application provided to a farmer would not constitute farming for [Company A]providing the service. Instead, a farmer engages the services of [Company A]to undertake a portion of their farming activity for a fee. The definition of farmer does not extend to individuals or companies that are contracted to perform services on a farm.
[Company A]is performing the customer fertilizer application as a component of its business activities which do not meet the definition of farming. Accordingly, [Company A]cannot be considered a farmer under section 3, and they cannot issue an exemption certificate under subparagraph 36(1)(b)(vii) to receive a delivery of a type of fuel in a listed province exempt of the fuel charge. The fuel used in the farming equipment as part of rendering the service is considered fuel used for its own business activities and the fuel charge must be paid on the volumes in question under the registered distributor account pursuant to subsection 18(1).
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 Act, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein. For further information see the publication “Requesting an Excise and Specialty Tax Ruling or Interpretation”.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-719-5752.
Yours truly,
Melanie Pearce
Senior Rulings Officer, Fuel Charge Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
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