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.