ORST (PST) Conditional Exemptions

Tax Exemptions Overview

Conditional Exemptions

Unconditional Exemptions

Purchases from Ontario Suppliers

Purchases from Suppliers outside Ontario

Self-assessing Ontario Retail Sales Tax

Conditional exemptions are available in several categories:

Computer Software and Licences

All charges for application software including licence fees are taxable, except where a specific exemption exists.

Examples of Taxable Computer Programs and Services
(ORST Guide 650)

  • the program is off-the-shelf, pre-packaged or pre-written, including upgrades
    system programs or operating systems
  • application programs, such as word process, spreadsheets, database, Internet browsers and games
    computer programs produced from modules
  • add-on application utilities sold or leased to more than one person
  • programs designed for a number of different users in a particular industry
  • maintenance agreements or contracts
  • installation, re-installaing, repairing, restoring or providing corrective action to a program
  • support agreements/contracts that involve physical and/or remote program contract
  • modifications where the charge for the modification is not greater than the price of the original computer program

Examples of Non-Taxable Applications

The supply of application software is considered to be a non-taxable service under certain circumstances, for example:

  • the software is transferred to disk, tape or other medium supplied by the purchaser
  • the sale of custom software, specifically designed and developed for the exclusive use and special requirements of the customer
  • the sale of software under a specifically negotiated and signed licence agreement between the producer and the user. However, software sold under a standardized agreement signed by the retailer and the purchaser will be considered to be the sale of taxable goods.

To qualify as a custom computer program, the contract or agreement should be properly documented by the supplier to justify the non-collection of ORST(PST)by indicating that the charge is for the purchase of a custom computer program and that the program meets the specific needs, and is intended for the exclusive use, of McMaster University.

What is not a custom computer program?

  • A custom program is only tax exempt to the original purchaser. A subsequent sale of the same program is no longer considered custom.
  • A program designed for a specific industry and sold to more than one person
    minor modifications to a core program

Examples of Related Non-Taxable Services:

  • Consulting services (i.e. assistance or support either in person, over the phone, electronically, or via e-mail, but not hands-on)
  • Training services
  • Testing and diagnostic services, provided no further work is performed at the same time
  • Data management, including reorganizing and removing directories, creating and maintaining computer files, data back-up and storage
  • Disaster recovery fees or subscription fees
  • Manual data entry

Charges must be separated on the invoice.

Universities qualify for exemption when the software is used exclusively for research purposes. See Research Exemptions.

For more detailed information see Ontario Retail Sales Tax Guide 650.

Delivery Charges

Ontario Retail Sales Tax applies to the fair value of taxable goods and taxable services. If ORST(PST)is collectable on the sale or lease of taxable goods and taxable services, ORST(PST)is also collectable on any customs, mailing, handling, delivery or transportation charges made by the seller or lessor, even though the purchaser may not have title of the goods and services.

Discount Coupons

If a manufacturer’s coupon is redeemed, ORST(PST) applies to the full price (excluding the GST) before the reduction using the coupon.

When a retailer’s coupon is redeemed, ORST(PST)applies to the net value of the sale after deducting the value of the coupon.

Goods Brought Into Ontario

ORST(PST) applies to the total fair value of taxable goods and services for own use. The total fair value includes:

  • the purchase price (in Canadian funds) of goods or services bought outside Ontario
  • delivery, shipping or mailing charges billed by the vendor (in Canadian funds)
  • customs duties and federal excise taxes paid to bring goods and services into Canada. Brokerage charges and GST are not part of the total fair value.

Internet Services and Web Page Designs

The provision of internet services, such as:

  • Gateway, data, or world wide web access
  • Internet consulting
  • Arranging for live chat sessions or conferencing sessions directly on the Internet Broadcasting or hosting of web sites
  • Miscellaneous Internet data services

are all non-taxable services. The supplier is required to pay ORST(PST)on the purchase of taxable goods and services to provide these services.

Physical Disability Exemptions

Equipment and devices designed solely for the use of people who are chronic invalids, or have a physical disability. The exemption applies accessories specifically designed for such equipment and repair parts thereto. The exemption includes hypodermic needles and syringes for the injection of insulin and self-diagnostic equipment used by diabetics.

Exempt items may include:

  • Bath and shower equipment
  • Bedroom equipment and accessories, including beds and mattresses of a type normally used in hospitals
  • Communication aids
  • Diabetic items
  • Dressing aids
  • Eating and drinking utensils
  • Exercise equipment
  • Grooming aids
  • Kitchen equipment
  • Lifting devices
  • Protective equipment
  • Sitting devices
  • Toilet aids
  • Transportation equipment
  • Walking aids
  • Wheelchairs, parts and accessories
  • Specially trained dogs and harnesses for the dogs

Ontario Retail Sales Tax Guide 802 provides an extensive listing of exempt and taxable products. It is available on the Government of Ontario website at http://www.gov.on.ca
Use “Search” by typing in Retail Sales Tax Guide 802.

The following items are exempt from ORST(PST) and are not required to be designed solely for people who are chronic invalids or who are physically disabled:

  • Hearing aids and batteries
  • Contact lenses sold on prescription of a physician or optometrist
  • Prescription glasses sold on prescription of a physician or optometrist
  • Clip-on sunglasses when sold with prescription glasses as a package
  • Orthopaedic appliances
  • Prosthetic appliances or equipment

Publications – General Exemptions
ORST(PST) Guide 507

Books qualify for ORS(PST)T exemption if they are bound, printed, published solely for educational, technical, cultural or literary purposes and contain no advertising.

Qualifying publications may include:

  • Text books
  • Atlases
  • Colouring books
  • Dictionaries and encyclopedias
  • Printed music in book form
  • Binders sold with their contents in them when contents qualify for exemption and insert pages added later

Newsletters and bulletins qualify for exemption from ORST(PST) if they are printed, produced by or for a group, club, society, or organization for the interest of its members, contain information or literary matter of a non-promotional nature, and do not contain paid advertising.

Non-qualifying publications include:

  • Blank exercise books, drawing or workbooks
  • Books ruled for accounting or bookkeeping purposes
  • Calendars
  • Directories (historical or genealogical reference listings are tax-exempt directories)
  • Price lists
  • Programs
  • Financial reports
  • School calendars
  • Sheet music and blank books ruled for music
  • Timetables
  • Unbound publications such as maps, brochures, pamphlets, leaflets and folders
  • Microfilm and microfiche or equipment to show or play material
  • Any written material
  • Magazines purchased through retail

Publications – Conditional Exemptions

Publications, as defined by the Minister, purchased by a school, school board, community college or university, or a public library established under the Public Libraries Act, are exempt provided the contents are of an educational nature and will not be used for commercial exhibit or profit.

Qualifying publications may include:

  • Audio discs and tapes
  • Books and repairs thereto
  • Newspapers but not advertising inserts or supplements included in newspapers
  • Magazines by subscription or when included in a newspaper
  • CD-ROM format publications (not primarily computer programs) read only
  • DVD-ROM format publications (not primarily computer programs) read only 
  • Films and filmstrips
  • Phonographic records
  • Talking books
  • Video tapes and discs
  • 35mm slides  

Real Property and Fixtures
(ORST Guide 206)

When contractors supply and install items that become real property or items that are fixtures, they must not charge or show ORST(PST) on the selling price. The ORST(PST) 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 ORST(PST) separately from the real property.

Examples of real property include buildings, communication towers, driveways, fences, patios, roads, sidewalks, utility poles, etc.

Examples of items that are considered to be fixtures when attached to real property include:

  • Blinds (including Venetians and verticals)
  • Counters, cabinets and shelving
  • Theatre seats
  • Patios
  • Water heaters
  • Built in appliances
  • Signs

PBX equipment and computers are not considered to be fixtures although they may be affixed to real property. Window mounted air conditioners and free standing appliances also are not fixtures even if connected to wiring or plumbing.

Carpets and Flooring

When a contractor sells carpeting and other flooring materials and installs by affixing to the floor by gluing, tacking, stapling, etc., the contractor must pay the ORST(PST) to the suppliers on all items purchased. If the contractor then has one contract for the sale and installation of the flooring materials, it is considered to be the sale of real property and the customer must not be billed separately for the ORST.

Religious, Charitable, Benevolent Organizations
(ORST Guide 806)

Publications Exemptions

Religious, charitable and benevolent organizations that quality for ORST(PST) exemption may purchase the following tax-exempt:

  • Bibles, scriptures, sacred writings of all faiths, missals, prayer books, hymn books, pamphlets, booklets and similar printed matter published solely for the promotion of religion
  • Church calendars, hymn and mass cards, photographs, paintings, drawings, mottoes and similar artwork produced solely for the promotion of religion, including any negatives and printing plates made to produce printed materials
  • Films, filmstrips, videotapes and videodiscs if used to promote the objectives or the organization and not for commerical exhibition or profit
  • Printed instructional materials purchased for use and not for sale

Materials such as directories, price lists, stationery and forms are taxable.

Religious Items Exemptions

The following items are tax exempt if they are purchased for use by a religious institution exclusively in that part of its premises where religious worship or sabbath school is regularly conducted, by providing a properly completed Purchase Exemption Certificate to the supplier:

  • Altars and altar desks, cloths and linens
  • Baptismal bowls, fonts and shells, communion ware, mass linen
  • Collection plates
  • Furniture such as chairs, stools, tables, pews, choir stalls, kneelers, carpets and draperies
  • Lecterns and pulpits, lectern and pulpit cloths
  • Monuments, statues and memorials
  • Organs, pianos, chimes, bells
  • Audio visual equipment
  • Public address systems
  • Special lighting apparatus
  • Stained glass windows

Clothing and vestments are taxable.

Research Exemptions

Equipment purchased by the governing body of a university that is designed for use and is used exclusively (90% or more of the time) in research or investigation, and repair parts thereof are exempt from Ontario Retail Sales Tax.

Equipment is defined to include utensils and instruments, apparatus and equipment ancillary thereto and may be interpreted to include most items of a scientific nature sold by lab supply companies.

Qualifying goods may be purchased Ontario Retail Sales Tax exempt. To qualify, a certification of exemption must be provided by McMaster University to the supplier. Certification is provided on the University's Purchase Order form. Individuals wishing to make ORST(PST) exempt purchases must use the University's purchase order system.

Qualifying items may include:

  • Balances, baths, centrifuges, hot plates, microscopes, lab ovens, lab pumps, spectrophotometers, laboratory fume hoods
  • Disposable laboratory items capable of reuse: disposable glassware, Petri dishes, pipettes, paper weighing boats, filters
  • Animals (rats), skeletons
  • Computer and related peripheral equipment including terminals, printers, modems, switching gears, software, diskettes
  • Blank audio and visual tapes
  • Articles and materials used in the fabrication of research equipment

Non-qualifying, taxable items include:

  • Chemicals, bio-chemicals, culture media
  • Gases and cylinders
  • Laboratory and office furniture, office equipment and office supplies
  • Audio visual equipment
  • Equipment and supplies used for classroom or administrative purposes
  • Safety equipment and supplies
  • Detergents and cleaning agents
  • Lubricants
  • Lab marking pens and pencils
  • Lab clothing
  • Photocopy and fax machines
  • Domestic appliances such as freezers and refrigerators
  • Equipment used in the instruction of students

Transient Accommodation

Generally, ORST(PST) applies to the supply of transient accommodation at the rate of 5%. Transient accommodation includes the provision of lodging in a hotel, motel, hostel, apartment house, lodging house, boarding house or other similar accommodation , for a period of less than one month.

 

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