Purchase Exemption Certificates for Retail Sales Tax

To Whom Does This Apply?

Summary

Purchase Exemption Certificates (PECs) are to be completed by persons entitled to claim an exemption from RST on the purchase of taxable goods and taxable services or entering into a contract of insurance or a benefits plan. A ‘valid purchase exemption certificate’ means a single or blanket PEC that a person is authorized to use and that contains all the required information, under the Retail Sales Tax Act (Act).

1. Use of Purchase Exemption Certificates

Examples of items that can be purchased by persons who qualify for exemption include the following:

• Equipment, as defined under the Retail Sales Tax Act (the Act), that is to be used by a religious institution exclusively in that part of its premises where religious worship or Sabbath school is regularly conducted;
  
• Farm equipment, farm tools, and farm machinery, as defined under the Act, that are to be
  used by a person engaged in the business of farming as well as building supplies and
  materials used to build, repair or modernize structures used exclusively for farm
  purposes. Instead of a PEC, farmers may use a Farmer Identification (ID) card, issued
  by a general farm organization (GFO), to claim an exemption from RST (See RST Guide
  807 - Farmers);
  
• Hospital equipment, as defined under the Act, used exclusively by The Ontario Cancer Treatment and Research Foundation, or by a hospital that is approved as a public hospital under the Public Hospitals Act, or by a hospital that is established under the Community Psychiatric Hospitals Act or a facility approved or established as a psychiatric facility under the Mental Health Act;
  
• Machinery and equipment, as defined under the Act, used by a qualifying manufacturer in the production of tangible personal property;
  
• Taxable goods and certain taxable services purchased by vendors or wholesalers for resale to others;
  
• Certain contracts of insurance or benefits plans.

Note: Vendors are not entitled to claim an exemption on items used for their business or for their own use unless an exemption is provided for under the Act.  Purchase Exemption Certificates cannot be used by customers to claim an exemption from RST on real property contracts or on fixtures.

The following are examples of when goods and services can be purchased exempt from RST without having to complete a Purchase Exemption Certificate:

• When goods, such as food products, are unconditionally exempt under the Act, i.e. all customers are exempt from the payment of RST;
  
• When suppliers ship the customer's goods directly out of the province and keep proof of the shipment on file to support a tax-exempt sale;
  
• When suppliers sell goods to vendors whose Vendor Permit number ends with a "G". Holders of "G" permits include the federal government and some large corporations.  The Vendor Permit number must be noted on purchase orders.

2. Purchase Exemption Certificate Forms

Supplies of PEC forms are not provided by the Ministry of Finance since it is not a prescribed form.  Vendors or taxpayers who need more forms may use photocopies or reproductions of the sample "Purchase Exemption Certificate" which may obtained from the nearest Tax Office.

Purchase Exemption Certificates can be used in the following ways:

• Single Purchase Certificates : When you need an exemption for only one order of goods, taxable services, or for contracts of insurance or benefits plans;
  
• Multiple Purchase Certificates (Blanket): For repeat orders of the same taxable goods or taxable services from the same supplier, or for contracts of insurance or benefits plan, write or insert the word “Blanket” on the form beside “Purchase Exemption Certificate” or check the “Blanket” box. A blanket certificate is valid until revoked by the issuer or cancelled by the Minister of Finance, whichever occurs first.
  
• Purchase Orders: If purchase orders are issued, a reference to the blanket
  certificate or Identity Card issued for above items must be typed, written, or stamped
  on the purchase order. A sample "Blanket Purchase Exemption Certificate Reference" may be obtained from the nearest Tax Office. 

3. Information Required on Purchase Exemption Certificates

A valid single purchase or multiple purchase (blanket) certificate must show:

• date
• name, address, and nature of the business
• business name
• name of authorized person
• business address
• Vendor Permit/International Registration Plan carrier account number (if applicable)
• reason exemption is being claimed

Note: A blanket certificate is valid until revoked by the person or until cancelled by the Minister of
Finance. A person who issues a blanket PEC can revoke it if any information was omitted or is not currently correct. The person may then issue a replacement PEC with the correct information. The Minister may cancel a PEC if the person who provided it is not entitled to use it.

4. Use of Valid Identity Cards instead of PECs

Valid identity cards may be used by authorized persons entitled to claim an exemption from
RST on the purchase of taxable goods and taxable services, or entering into a contract of
insurance or a benefits plan.

Farmer ID Card
Instead of a PEC, farmers may use a Farmer ID card, issued by a GFO, to claim an exemption
from RST on eligible farm-related goods, services and insurance. The Farmer ID card shows
the farmer’s name and Farm Business Registration number. Farmer ID cards are currently
issued by the Ontario Federation of Agriculture, Christian Farmers Federation of Ontario, and
the National Farmers Union. Farmers who do not hold a Farmer ID card, choose not to be
members of a GFO, or fail to provide the supplier with a Farmer ID card may issue a valid PEC
to the supplier.

For further information:
visit the Web site:
RST Guide 807 - Farmers
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_6709_1.html

Foreign States, Representatives and Officials
The Office of Protocol, Department of Foreign Affairs and International Trade (Canada) (DFAIT)
authorizes certain entities and persons to receive an exemption from RST on the purchase of
taxable goods or taxable services. DFAIT issues multi-coloured identity cards to recognize foreign
representatives and officials in Canada. Not all identity card holders are entitled to an RST
exemption.

For further information:
visit the Web site:
RST Guide 803 - Foreign States, Representatives and Officials
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_6723_1.html

Status Indians, Indian Bands and Band Councils
Status Indians hold “Certificate of Indian Status” identity cards issued by the federal government
under the Indian Act (Canada). These cards are numbered and contain the photograph, name,
and Indian band or registry number of the card holder. To claim an exemption, Status Indians
must show suppliers their federal ‘Certificate of Indian Status’ identity card. Indian bands and
band councils must provide the supplier with a valid PEC.

For further information:
visit the Web site:
RST Guide 808 - Status Indians, Indian Bands and Band Councils
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_6607_1.html

CNIB Membership Card
Persons who are legally blind can purchase audio books for their own use exempt from RST by
showing their Canadian National Institute for the Blind (CNIB) membership card to the supplier
at the time of purchase. Audio books in any form such as CDs or cassettes qualify, as long as
the audio book is a spoken reading of a book. Friends and family members can also purchase
audio books on behalf of a blind person by showing the blind person’s CNIB membership card
to the supplier. The exemption will be given to them provided they confirm they are buying the
audio book for the use of a legally blind person.

For further information:
visit the Web site:
Audio Books Purchased by Persons Who are Legally Blind
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_17885_1.html

5. Suppliers' Responsibilities

Suppliers are required to charge RST on taxable goods, taxable services, or taxable contracts of insurance or benefits plan whenever persons do not provide a PEC or do not provide a valid identity card. If a Vendor Permit number is provided by a person who is not a ‘G’-Permit holder or who does not already have a valid PEC on file with the supplier, RST must be charged.

A supplier who is a registered vendor may refund RST if the person buying the goods gives a valid PEC or a valid identity card to the supplier, after being charged the RST on goods purchased for resale.

Suppliers must maintain a record of all PECs provided by purchasers, and the name and number or other identifier on each identity card presented to support sales where no RST was charged. See the Ministry Tax Information Bulletin entitled, ‘Retention/Destruction of Books and Records’, or contact the nearest Ontario Ministry of Finance Tax Office to determine when these records can be destroyed.

For further information:
visit the Web site:
Retention/Destruction of Books and Records
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_20001_1.html

6. Penalty

If a person misuses a PEC or makes a false statement on a PEC, the person can, on conviction, be fined not less than $1,000 and an amount up to twice the RST owed, or imprisonment for up to two
years, or both.

• Important Notices

DISCLAIMER
Information contained in this section is of a general nature only and is not intended to constitute advice for any specific fact situation. For particular questions, the users are invited to contact their lawyer. For additional information, see contact(s) listed below.

Ontario Contact(s):
Hamilton Tax Office
Ministry of Finance - MOF
15th Floor
119 King Street West
Hamilton, Ontario  L8P 4Y7
Telephone: (905) 521-7504
Fax: (905) 521-7868
Toll-free (information): 1-800-263-9229