9 September 2004 GST/HST Ruling 53105 - Invoicing of $100 Automotive Air Conditioner Excise Tax

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letters XXXXX (with attachments), concerning the application of the Excise Tax to the transaction described below. We apologize for the delay in responding.

Statement of Facts

Our understanding of the facts, the transaction, and the purpose of the transaction is as follows:

1. Your client, XXXXX (the "dealership") is located in XXXXX and is not licensed for Excise Tax purposes.

2. The dealership purchases its new automobile inventory from XXXXX (the "manufacturer").

3. The manufacturer delivers an automobile that it manufactured in Canada to the dealership. Pursuant to subsection 23(1) of the Excise Tax Act (the "ETA") and section 7 of Schedule I to the ETA, an excise tax of $100 is payable in respect of the air conditioner that is included as permanently installed equipment in the automobile.

4. In accordance with subsection 23(2) of the ETA, the $100 excise tax is payable by the manufacturer at the time of delivery of the automobile to the dealership.

5. To recover its manufacturing costs, the manufacturer includes the $100 excise tax on the invoice issued by the manufacturer to the dealership for the sale of the automobile.

6. XXXXX does not pass on the $100 excise as a separate charge to its customers. Rather, XXXXX enters into sales agreements with its customers to sell vehicles for a negotiated price.

7. XXXXX would like to increase its margins by entering into sales agreements with customers to sell automobiles for a negotiated price plus a $100 surcharge. The purpose of the surcharge is to recover the dealership's out-of-pocket cost that relates to the excise tax payable by the manufacturer and that was passed on by the manufacturer to the dealership.

Ruling #1 Requested

If XXXXX separately charges a $100 "air conditioning Excise Tax" on its sales agreements with customers, is XXXXX legally responsible under the ETA to remit Excise Tax to the Canada Revenue Agency?

Ruling #1 Given

Based on the facts set out above, we rule that XXXXX would not be legally responsible to remit Excise Tax to the Canada Revenue Agency.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Ruling #2 Requested

If XXXXX separately charges a $100 "air conditioning levy" or "air conditioning surcharge" on its sales agreements with customers, is XXXXX legally responsible under the ETA to remit Excise Tax to the Canada Revenue Agency?

Ruling #2 Given

Based on the facts set out above, we rule that XXXXX would not be legally responsible to remit Excise Tax to the Canada Revenue Agency.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling

Additional Comment

While there is no legal liability for XXXXX to remit amounts collected as a cost-recovery of the Excise Tax paid, they should ensure that they are in compliance with relevant Federal and/or Provincial legislation dealing with consumer invoicing practices.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-6718.

Yours truly,

Darren Weiner
Excise Taxes Unit
Excise Duties and Taxes Division Division
Excise and GST/HST Rulings Directorate

2004/12/12 — RITS 53412 — [Application of the Excise Tax on the Transaction of a Contract of Insurance]