More on Hay from EMG

 A follow up to breaking out the hay on the bill for board for horses.

I was asked if it would raise any red flags if all the horses in the barn were being charged the same amount each month for hay.  The answer is yes, most probably.  The transaction has to be credible.  I can think of limited circumstances in which a horse would eat 1650 lbs of hay in a month - please feel free to comment and correct me if you disagree.  Examples would include draft horses, horses on limited turnout, also perhaps broodmares, race horses etc.  In many cases, it would not be possible to bill the hay monthly, it would be necessary to invoice the hay every two or even three months in order to meet the quantity threshold.  I would suggest that barn owners who wish to adopt this approach be prepared to support the rationale behind the billing should CRA come to call.  In a barn where the horses are all of a uniform size and type, it would make sense if they were paying the same amount at the same frequency.  But if your clients board ponies to thoroughbreds to draft horses with you, it's not going to look right (and it isn't going to be right) and I would expect you to have problems.

This poster's other question was whether or not CRA could say that the barn owner was not really selling the hay, but trying to dodge the HST.  Well, diamonds are forever, but not tax legislation.  However, the way the memorandum reads currently ties the GST-about-to-be HST re: hay to the quantity sold.  I would argue that one: the barn owner is already selling the hay, and two: is selling the hay in zero-rated quantities over time. 

Here is the link to the relevant memorandum:  GST Memoranda 4.4 - Agriculture and Fishing.  See paragraphs 9 and 14.1.

I would be very interested in feedback on how folks are handling the HST in the horse business.  Are you tacking it on, will you roll it into a tax included price?  Are customers complaining?  Will it interfere with a price increase you wanted to put through?  Any other thoughts?  Please feel free to comment or email me. 

The information provided is intended to be general in nature. It is suggested that readers seek the advice of a CGA or other qualified professional for advice specific to their particular situation.

Breaking out the hay

Another EMG HST question:

Can a barn break out the hay on the board bill and not charge HST on it?  (Question paraphrased  for clarity)

The original inquiry mentioned that hay is zero-rated.  Well, to be precise, hay is zero-rated part of the time.  It depends on the quantity sold and this is where the catch is.  Hay is zero-rated when the quantity sold is greater than one large round bale or its equivalent.  A large round bale is defined by CRA as one that weighs at least 1650 lbs.  The bales, as defined by CRA, do not reflect any real hay bales that I have encountered. Notwithstanding this, it should be possible to invoice hay separately in zero-rated quantities, either on as a separate line item or on a separate invoice altogether.  The quantity is equivalent to 33 fifty-pound square bales so it may well be necessary to bill more than one month's hay at a time to make up the zero-rated quantity.

Here is a link to GST memoranda 4.4  dealing with zero-rated supplies.  Paragraphs 9 and 14.1 deal with hay and feed.


The information provided is intended to be general in nature. It is suggested that readers seek the advice of a CGA or other qualified professional for advice specific to their particular situation.

HST - follow up to EMG

Thank you to everybody who responded to my post on EMG offering to respond to GST inquiries.   There were several responses and I have responded to them below:

So far it seems like my board will be going up, but will my farrier and other misc. horse item prices increase as well?

If you are paying either GST or PST on goods or services now, you can expect to be paying HST as of July 1.    

I'm also paying off a vet bill, and because I can't pay it all at the moment, I have to do it over time, so there's a little bit of interest. Will my bill price be affected?

It shouldn't be, the HST is not retroactive. 

Requirement to register:

You have to register once you are no longer a "small supplier" according to CRA.  You are no longer a small supplier once your sales before GST/HST of boarding, training, riding lessons, horses etc.exceed $30k from all your businesses either in a single quarter or in four consecutive calendar quarters.  Note that this is not the same as a calendar year.  So if your sales for 2009 are $10k, all in December, and your sales in the first two months of 2010 are more than $20k, you must register for the GST/HST.  Also, the term "small supplier" refers to all your businesses, so a business cannot subdivide itself into smaller units, each operating under the 30k threshold in order to avoid registering for the GST/HST.


Here is a link to the Canada Revenue Agency Website covering who is required to register: Mandatory Registration

My sales are under 30K - should I register?

Generally businesses with sales under the 30k threshhold will be better off registering for the GST/HST as it will then be possible to recover the GST/HST on their expenses.  It is possible to register on a voluntary basis.  Here is a link to CRA's webpage dealing with voluntary registration:  CRA - Voluntary Registration.  If you are currently absorbing some or all of the tax, don't forget that you will now be paying 13% on all of your inputs, whereas previously services were GST only.  Either you register, or put through a price increase to cover the expense increase.  In both cases, the customer will be paying more, but in many areas of the horse business, most notably boarding, profit margins are already slim and the damage caused by absorbing additional expense may well be ruinous. 

What will happen to the PST exemption on farm supplies?

This will disappear as the PST & GST are replaced by  HST.   Those who register for the GST/HST will be able to recoup any HST they pay on inputs such as feed and other supplies, but must charge GST/HST on sales including boarding fees.  If you have any capital expenditure planned such as a new tractor or a even set of jumps, this can be substantial.

If you were absorbing the GST and paid little or no PST, it might be possible for you to put through a price increase to your customers that is less than 13%  and include the GST in the price.  Your gross after sales tax will be less than before, so you are now looking to the recouped sales tax to make up the difference.  The trick here is to estimate the additional outlay you are going to experience.




The information provided is intended to be general in nature.  It is suggested that readers seek the advice of a CGA or other qualified professional for advice specific to their particular situation.