Rice v. ARQ, 2016 QCCA 666

The appellants, all status Indians, were gasoline retailers on the Kahnawake Reserve who did not charge or collect taxes under the Excise Tax Act, Quebec Sales Tax Act or Quebec Fuel Tax Act on their gasoline sales notwithstanding that most of their customers were not Indian.

Hesler CJQ found that their obligations to collect and remit taxes on their fuel sales did not violate the ancestral right to trade freely and openly as protected by s. 35(1) of the Constitution Act, 1982, stating (at para 42):

There must… be a reasonable degree of continuity between the ancestral practice being invoked and the modern right being asserted… [T]he practice of trading objects to which the spiritual power symbolic of Orenda attached cannot be the basis of the modern right … to trade freely without hindrance.

The appellants, all status Indians, were gasoline retailers on the Kahnawake Reserve who did not charge or collect taxes under the Excise Tax Act, Quebec Sales Tax Act or Quebec Fuel Tax Act on their gasoline sales notwithstanding that most of their customers were not Indian.

After finding that s. 35 of the Constitution Act, 1982 did not accord an unfettered right to trade, Hesler CJQ found further found that the Royal Proclamation of 1763 did not provide an Aboriginal right to free and unfettered trade (protected from derogation by s. 25 of the Constitution Act, 1982), stating (at para 63):

Its objective was to protect them from the abuses of certain unscrupulous merchants, by obliging the latter to obtain a licence. Nothing in the text of the Royal Proclamation or its historical context gives rise to the conclusion that British Crown promised Aboriginals an unrestricted right to trade that was exempt from regulation of any kind.

The appellants, all status Indians, were gasoline retailers on the Kahnawake Reserve who did not charge or collect taxes under the Excise Tax Act, Quebec Sales Tax Act or Quebec Fuel Tax Act on their gasoline sales notwithstanding that most of their customers were not Indian.

After finding that s. 35 of the Constitution Act, 1982 did not accord an unfettered right to trade, and after noting (at para. 73) that having regard to the findings in the references on GST ([1992] 2 S.C.R. 445) and QST ([1994] 2 S.C.R. 717) that “in all instances, it is the purchaser who pays the tax, not the vendor,” Hesler CJQ stated (at para 78):

The fact that the appellants choose not to collect GST and QST (despite their obligation to do so) does not transform the tax assessments to which they have become subject into a tax on their personal property….[T]hey cannot claim the tax exemption contemplated in s. 87 of the Indian Act and thus, by ricochet, protect their customers who are not Indians from the application of the GST and the QST.

Under the Fuel Tax Act, the appellants were required to pay fuel tax on their purchases and could claim reimbursement of the portion of those amounts paid on fuel then sold to Indians (based certification procedures.) Alternatively, they could purchase (subject to “formalities”) fuel from a designated supplier on the basis of a percentage reduction corresponding to the expected sales to Indians. Hesler CJQ stated (at para. 90):

[T]he retailer is not personally responsible for any tax: either the retailer is reimbursed if the exemption program applies, or the retailer, as a mandatary, collects the tax from the customer and remits it to the tax authorities.

Status (Mohawk) Indians selling gasoline on the Kahnawake Reserve to non-Indian purchasers were not exempted by s. 87 of the Indian Act from the requirement to collect and remit GST, QST and Quebec fuel tax, given that these taxes were designed to be borne by the ultimate purchasers and the retailers’ obligations were merely those of statutory collection agents. (Various constitutional arguments also were rejected by Hesler CJQ.)

Status (Mohawk) Indians selling gasoline on the Kahnawake Reserve to non-Indian purchasers were not exempted by s. 87 of the Indian Act from the requirement to collect and remit GST, QST and Quebec fuel tax, given that these taxes were designed to be borne by the ultimate purchasers and the retailers’ obligations were merely those of statutory collection agents.

Hesler CJQ further dismissed the appellants claim that a Quebec regulation requiring retailers to verify, at the time of sale, the identity of a purchaser claiming to be an Indian, undercut the exclusive federal power over Indians, stating (at paras 100 & 112):

…Notwithstanding s. 91(24), provincial laws of general application apply proprio vigore to Indians and Indian lands…

…[T]he appellants’ failure to acknowledge or avail themselves of workable solutions does not render the budget measures unconstitutional… [T[heir refusal to participate more likely flows from a desire to preserve a competitive advantage than an inability to shoulder an excessive administrative burden.