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SOCIAL SERVICE TAX CHANGESPeople in the logging industry will be particularly interested in some recent changes to the Social Service Tax laws. The logging industry is a machinery intensive industry, not only in the bush but also at the mill. Because the costs of acquiring equipment and machinery is so high, the logging industry is affected more than most by the 7% PST burden that was applied to all equipment purchases and leases. Effective July 31, 2001, that burden has been relieved somewhat. The Regulation is quite precise in terms of what machinery or equipment qualifies. That machinery or equipment must be purchased or leased by a person who, for commercial purposes, regularly engages in logging, and the machinery or equipment must be for use exclusively in logging. "Logging" means the felling and bucking of trees, skidding or otherwise moving trees to the landing or other first accumulation point, or the loading, unloading, sorting or storing of trees or logs at landings, log dumps, sort yards, dry-land sorts, or mill yards. "Logging" does not include silviculture or the construction and maintenance of landings, log roads, or other roads. Log trucks do not qualify for the exemption. The exemption goes on to apply to any service that a logger might receive to install, assemble, dismantle, repair, adjust, restore, recondition, refinish, or maintain the exempt logging equipment. This is not go so far as to apply to materials used and consumed in logging, however, such as lubricants and engine oils. To be exempt, the equipment must be used "exclusively in logging". That means more than 90%. So, be careful about using your equipment for non-logging purposes during slow periods or breakup. And remember, using the equipment for road construction or maintenance, or for silviculture, may jeopardize the exemption. You may be interested to know that similar exemptions apply to machinery and equipment for persons engaged in the exploration, discovery, or development of petroleum, natural gas, coal or mineral resources. You may also be interested to hear that items called "production machinery and equipment" are exempt from PST. This is referring to the type of machinery and equipment that is used to produce things. Examples would include planers, forklifts, drill bits, sawmill saw blades, excavator pins, bucket teeth, and sewing machine needles. Also, the parts and labour associated with installing, repairing, and maintaining that type of production machinery and equipment is exempt from PST. These provisions will not affect most logging contractors and subcontractors, but it will have an impact upon the mills that they work for. In order to claim an exemption it is necessary to provide each supplier with a completed Certificate of Exemption - Production Machinery and Equipment. I suspect that most suppliers will have these on hand. They can be obtained from the Internet or from the Consumer Taxation Branch in Victoria. For those of you who may already be making payments under equipment leases that pre-date the changes, it appears that all lease payments coming due after July 30, 2001 are P.S.T. exempt! So, contact your lease company, and make arrangements to provide them with the required form. As a side note, the Government also changed the "vehicle surtax threshold" on purchases and leases of passenger vehicles. That surtax now applies to vehicles being purchased for more than $47,000. (It used to be $32,000, which would apply to many four-wheel drive pickup trucks.) Trucks larger than three-quarter ton are not considered to be passenger vehicles, and so the surtax does not apply. Trucks three-quarter ton and below are subject to the surtax. The vehicle surtax is a graduated scale, and for passenger vehicles selling for $49,000 or more, the social service tax is 10% of the purchase price. John M. Drayton is a Kamloops lawyer practicing in the areas of motor transport and forestry law. Back to Articles Index
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