Accountant for Leamington and Kingsville greenhouses

Greenhouse growing is farming, for tax

A greenhouse looks like a factory from the road, heated, lit and running every day of the year, but the Income Tax Act treats growing crops under glass as farming. That matters because farming income can be reported on the cash method: revenue when it is received and expenses when they are paid, rather than when they are earned or incurred. For a grower with large crop receivables at year-end or a big seed and substrate order in December, that choice moves real income between years. It comes with its own adjustments for inventory and with limits on how far losses can be created by prepaying. We look at which method suits the operation, whether it is incorporated or farmed personally, and keep it consistent. Cash versus accrual accounting sets out the difference.

Zero-rated produce and HST refunds

Fresh vegetables are basic groceries, and basic groceries are zero-rated for HST. A grower selling tomatoes, cucumbers or peppers charges no HST on them, yet still claims input tax credits for the 13% HST paid on natural gas, electricity, fertiliser, packaging, repairs and new equipment. The result is often a refund return, period after period, and filing more often can bring that money back sooner. The catch is the product mix. Ornamental plants and cut flowers are generally taxable, so an operation that grows both has to charge HST on those lines and code every sale correctly. Registration and the right filing frequency are worth settling at the start. Zero-rated versus exempt supplies explains why the category matters for your credits.

Energy: the cost that sets the margin

Heating a greenhouse through an Essex County winter and lighting it for year-round production makes energy one of the largest costs a grower carries. The books should show it clearly: natural gas for heat, electricity for lights and pumps, carbon dioxide for crop enrichment, and any cogeneration or electricity sold back, each in its own account. Split by greenhouse range or by crop where the metering allows, it tells the grower which crops actually pay for their heat. Energy contracts and hedges need their own treatment at year-end. A grower who can see energy cost per square metre each month can make planting and lighting decisions with the numbers in front of them, rather than after the season.

Seasonal crews and foreign agricultural workers

Most Leamington and Kingsville operations run a core year-round staff and add seasonal workers for planting and harvest, many of them foreign agricultural workers who come for the season and return home afterwards. They are employees. Income tax is withheld, and CPP and EI generally apply to their pay the same way they apply to local staff. Employer-provided housing, transport and meals each have to be looked at for taxable-benefit and deduction treatment. Ontario Employer Health Tax applies once annual payroll passes the exemption, and a large seasonal crew can carry a grower over it. T4 slips have to reach workers who may be back home by February. Payroll services in Windsor covers the full cycle.

Structures, boilers and equipment

Greenhouse structures, boilers, heating pipes, irrigation and fertigation systems, grow lights, packing lines and forklifts are capital assets, deducted over time through capital cost allowance at the rates for their classes. An expansion is usually the largest capital decision a grower makes, and the CCA available in the first year depends on when each part is available for use, not when it was ordered. Replacing lighting or boilers raises the question of what was disposed of and whether any recapture arises. We keep the capital schedule by asset and plan expansions with you before the year closes. CCA classes lists the common ones.

Selling across the border

Much of what Essex County greenhouses grow is trucked to buyers in the United States, often through marketers and often priced in US dollars. Each sale is recorded at a consistent exchange rate, the payment at the rate on the day it clears, and the difference is a foreign exchange gain or loss. Marketing agreements that deduct packing, freight and commission before paying the grower have to be recorded gross or net consistently, so the margin can be compared year to year. Exported produce is zero-rated in any case, so the HST position does not change, but the records that show where it went should be kept. Foreign exchange gains and losses covers the rules.

Passing the greenhouse to the next generation

Many Essex County greenhouses are family businesses on their second or third generation. Qualified farm property can qualify for the lifetime capital gains exemption when it is sold, and farm property can be transferred to a child through an intergenerational rollover that defers the gain. Both depend on how the property has been used and held for years before the transfer, and on whether the greenhouse is owned personally, in a partnership or in a corporation. Planning early keeps both options open. Farm succession and rollovers and the lifetime capital gains exemption go into the detail.

Remote accounting for growers from Abbotsford

EverStone is a one-CPA firm in Abbotsford, British Columbia, serving Essex County growers remotely. There is no Windsor or Leamington office and no local staff. Records come in through a secure upload link, meetings run by video or phone around the growing schedule, and the fee is fixed before work starts; see what it costs.