Citation: 2010 TCC 365
Date: 20101028
Docket: 2009-3320(GST)I
BETWEEN:
VERA VURUNA,
STEVO VURUNA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bédard J.
[1]
The appellant disputes
the reassessment dated June 1, 2007 made by the Minister of National
Revenue (the "Minister") under the Excise Tax Act (the
"Act") with respect to the period from February 1, 2000 to
December 31, 2005.
[2]
The appellant was
internally registered by the Canada Revenue Agency ("CRA") for goods
and services tax ("GST") purposes on October 16, 2006, the
registration being effective from February 1, 2000. By letter dated October 20,
2006, the appellant was requested by the CRA to file GST returns for the
periods ending between February 1, 2000 and December 31, 2005.
[3]
The appellant initially
filed his GST returns as follows:
|
For the period ending
|
Date of filing
|
|
December 31, 2000
|
November 6, 2006
|
|
December 31, 2001
|
November 6, 2006
|
|
December 31, 2002
|
February 12, 2007
|
|
December 31, 2003
|
November 6, 2006
|
|
December 31, 2004
|
November 6, 2006
|
|
December 31, 2005
|
November 6, 2006
|
[4]
The appellant filed a
nil return for the period ending December 31, 2000.
[5]
By notices of
assessment dated May 22, 2007, the Minister assessed the appellant's net
tax on the basis of his returns as filed for the period ending
December 31, 2001 and the period from January 1, 2003 to
December 31, 2005. By notice of assessment dated May 23, 2007, the
Minister also assessed the appellant's net tax on the basis of his return as
filed for the period ending December 31, 2002.
[6]
During an audit of the
appellant, the Minister determined that he should only have been registered
effective January 1, 2003.
[7]
By notice of
reassessment dated June 1, 2007, the Minister increased the appellant's net
tax by $11,726.96 ($11,775.28 minus an administrative adjustment of $48.32 for
2001, reducing the balance for that period to nil) for the period from
January 1, 2001 to December 31, 2005. By the same notice of
reassessment, the Minister imposed late remittance penalties for the periods
ending December 31, 2003, 2004 and 2005 respectively, and imposed
instalment penalties for the periods ending December 31, 2004 and 2005
respectively.
Preliminary conclusions
[8]
I would point out
immediately that I am of the opinion that no valid appeal can be filed with
respect to the periods ending December 31, 2000 and December 31, 2001.
The reason for this is that no valid notice of objection was filed for those
periods as required by section 306 of the Act, since there was no assessment
of tax as required by section 301 of the Act and also since the reassessment
from which the appellant is appealing does not include the period ending
December 31, 2000.
[9]
In determining the
appellant's net tax liability for the period from January 1, 2002 to
December 31, 2005, the Minister made the following assumptions of fact:
a.
at all relevant times, Vera Vuruna and Stevo
Vuruna were spouses;
b.
at all relevant times, Stevo Vuruna drove a
transport truck for Whitelaw Trucking Inc.;
c.
Mrs. Vuruna reported a portion of the net
business income earned from the driving services;
d.
at all relevant times, Mr. and Mrs. Vuruna
formed a partnership with respect to the driving services (the
"Partnership");
e.
Whitelaw Trucking Inc. was located in Woodstock, ON;
f.
the Partnership did not operate a transport
truck of which it had ownership;
g.
the Partnership did not assume liability for the
supply of a freight transportation service;
h.
Whitelaw Trucking Inc. maintained the liability
for the supply of a freight transportation service and was therefore the
carrier;
i.
the Partnership provided driving services to
Whitelaw Trucking Inc.;
j.
the Partnership did not provide freight
transportation services;
k.
the Partnership became a GST registrant
effective January 1, 2003;
l.
the Partnership was an annual filer;
m.
the Partnership was a small supplier in the
period ending December 31, 2002;
n.
the Partnership did not report any GST in the
period when he was a small supplier;
o.
the Partnership earned $32,100 in gross income
for the period ending December 31, 2002;
p.
the Partnership was required to be a GST
registrant as of 2003;
q.
the Partnership's business operations provided
taxable supplies for the period from January 1, 2003 to December 31,
2005 only;
r.
the rate of GST applicable on the taxable
supplies was 7%;
s.
the Partnership made taxable supplies in the
mounts of $40,078, $61,854 and $64,201 in the periods ending December 31,
2003, 2004, and 2005, respectively;
t.
the Partnership did not collect or report any
GST on its taxable supplies for the periods ending December 31, 2003,
2004, and 2005, respectively;
u.
the Partnership was required to collect and
remit GST in the amounts of $2,805.46, $4,329.78 and $4,494.07 in the periods
ending December 31, 2003, 2004, and 2005, respectively;
v.
the Partnership claimed having paid GST on
expenses in the course of conducting commercial activities in the amount of
$97.65 for the period ending December 31, 2002;
w.
the Partnership is not entitled to input tax
credits for the periods in which it was a small supplier;
x.
the Partnership was to remit net tax owing by
April 30 of each year following the period year end for of [sic] the reporting
periods ending between January 1, 2003 and December 31, 2005; and
y.
the Partnership was to pay instalments within
one month after the end of each fiscal quarter for the reporting periods ending
between January 1, 2004 and December 31, 2005.
[10]
I would point out that
the appellant did not deny the assumptions of fact set out in paragraphs 16a)
to 16h) of the Reply to the Notice of Appeal.
[11]
Mr. Don Eltom, President
of Whitelaw Trucking Inc., Ms. Juanita Mary Florence Ferguson, signing
officer for Whitelaw Trucking Inc., and Mr. Nicolas Prsa, a GST and income
tax auditor with the CRA, were the only witnesses.
[12]
The evidence submitted
by the appellant (i.e. the testimony of the appellant's witnesses and Exhibit A-1)
clearly revealed that:
(i) at all relevant
times, Stevo Vuruna drove a transport truck as a subcontractor for Whitelaw
Trucking Inc., delivering auto parts from Ontario to Texas in the U.S.A; and
(ii) at all relevant times
Whitelaw Trucking Inc. owned the transport truck driven by Stevo Vuruna.
Issues to be decided
[13]
The issues to be
decided are whether the Minister:
a.
properly assessed GST
in the amount of $11,629.31 for the period from January 1, 2003 to
December 31, 2005;
b.
properly denied input
tax credits in the amount of $97.65 for the period ending December 31,
2002;
c.
was correct in
assessing late remitting penalties in the amount of $1,407.31 for the period
from January 1, 2003 to December 31, 2005; and
d.
was correct in
assessing instalment penalties in the amount of $229.24 for the period from
January 1, 2004 to December 31, 2005.
Appellant's submissions
[14]
Mr. Predrag Jurovicki
essentially submits that the appellant was providing outbound freight
transportation services, that his supplies were therefore zero‑rated
pursuant to Part VII of Schedule VI of the Act that, consequently, he
was not required to collect and remit GST in the amount of $11,629.31 for the
period from January 1, 2003 to December 31, 2005. Surprisingly, Mr.
Davorin Jurovicki (the other agent for the appellant) submits that at all
relevant times Stevo Vuruna was an employee of Whitelaw Trucking Inc. and for
that reason was not required to collect and remit GST in the amount of $11,629.31
for the period from January 1, 2003 to December 31, 2005.
Analysis and conclusion
[15]
Since the appellant did
not deny the assumptions of fact set out in paragraphs 16a) to 16h) of the
Reply to the Notice of Appeal and since the evidence submitted by the appellant
clearly revealed that at all relevant times, he was driving a transport truck
as a subcontractor for Whitelaw Trucking Inc., the appellant has to understand
that I cannot accept his agent's argument that at all relevant times he was an
employee of Whitelaw Trucking Inc. and was therefore not required to collect
and remit GST in the amount of $11,629.31 for the period from January 1,
2003 to December 31, 2005.
[16]
I point out that the
appellant also submitted that his supplies were zero-rated pursuant to section 6
of Part VII of Schedule VI of the Act. Therefore, the appellant had
to be in compliance with section 6. That section reads as follows:
A supply of a freight transportation service in respect of the
transportation of tangible personal property from a place in Canada to a place outside Canada where the value of the consideration
for the supply is $5 or more.
[17]
"Freight
transportation service" is defined in subsection 1(1) of Part VII
of Schedule VI as follows:
"freight transportation
service" means a particular service of transporting tangible personal
property and, for greater certainty, includes
(a) a service of delivering mail, and
(b) any other property or service supplied to
the recipient of the particular service by the person who supplies the
particular service, where the other property or service is part of or
incidental to the particular service, whether there is a separate charge for
the other property or service,
but does not include a service provided by the supplier of a
passenger transportation service of transporting an individual's baggage in
connection with the passenger transportation service.
[18]
"Carrier" is
defined in subsection 123(1) of the Act as follows:
"carrier" means a person who supplies a freight
transportation service within the meaning assigned by subsection 1(1) of Part
VII of Schedule VI.
[19]
It is accepted that, while
not determinative, administrative opinions do carry some weight and may be
considered by the Court. It is also accepted that technical notes although not
determinative either may likewise be given some consideration.
[20]
In the CRA publication Excise
and GST/HST News, No. 61, Summer 2006, it is stated:
Trucking – driver services
In the trucking industry,
the services of truckers usually fall into one of three categories. The trucker
is either an owner-operator, a self-employed driver or an employee of a
carrier. The following explains the application of the GST/HST to each of these
situations.
Owner-operators
Where
an owner-operator contracts with a carrier to supply
freight transportation services using its own truck, those freight
transportation services will be zero-rated (i.e., subject to tax at 0%) if the
owner-operator meets the definition of a carrier. A carrier is the person who
assumes liability to supply a freight transportation service.
Where
an owner-operator does not assume liability to supply a freight transportation
service, that owner-operator is not a carrier for purposes of the GST/HST.
Instead, the owner-operator is providing a driving service. The supply of
driving services is subject to GST/HST at 6% or 14% when supplied by a GST/HST
registrant. The driver’s services are a business input of the carrier.
Self-employed drivers
Where
a self-employed driver does not use its own truck and
does not assume liability for the supply of a freight transportation service,
the driver is not supplying a freight transportation service for GST/HST
purposes, it is providing a driving service. The supply of a driving service is
taxable at 6% or 14% when supplied by a GST/HST registrant. The driver’s
services are a business input of the carrier.
Employee drivers
Where a carrier uses its
employees to drive its trucks, the wages paid to these employees are not
subject to the GST/HST.
[21]
The Explanatory Notes
to Bill C-62 (the GST legislation) state with respect to the definition of
"carrier":
This term identifies a person who supplies a freight transportation
service. There is no limit on the number of carriers that may be engaged in any
given freight movement. Nor is there any requirement that a person physically
perform a freight transportation service in order to be a carrier: the person
need only assume liability as a supplier of a freight transportation service in
order to be a carrier. . . .
[22]
I also am of the
opinion that a truck driver who does not use his own truck and who does not
assume liability for the supply of a freight transportation service cannot be
said to supply a freight transportation service.
[23]
In the present case,
the appellant did not use his own truck and did not assume liability for the
supply of a freight transportation service. Consequently, he was not providing
a freight transportation service to Whitelaw Trucking Inc. He was simply
providing a driving service to Whitelaw Trucking Inc. and his services were a
business input of that company.
[24]
Since the appellant was
providing driving services and not freight transportation services, his
supplies were not zero‑rated pursuant to Part VII of
Schedule VI of the Act. He was therefore required to collect and remit GST
in the amount of $11,629.31 for the period from January 1, 2003 to
December 31, 2005. So the appellant was properly assessed the amount of
$11,629.31 for that period in accordance with subsection 165(1) of the
Act. Since the appellant did not remit GST for the reporting periods between
January 1, 2003 and December 31, 2005 as and when required pursuant
to subsection 228(2) of the Act, the Minister was correct in imposing late
remittance penalties under subsection 280(1) of the Act as it read at the
relevant time. Since the appellant did not pay all instalments payable for the reporting
periods ending December 31, 2004 and December 31, 2005 as and when
required pursuant to subsection 237(1) of the Act, the Minister was also
correct in imposing instalment penalties under section 280(2) of the Act
as it read at the relevant time.
[25]
For these reasons, the
appeal is dismissed.
Signed at Ottawa, Canada, this 28th
day of October 2010.
"Paul Bédard"
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