REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal, governed by the
informal procedure, from an assessment made by the Agence du Revenu du Québec (the
ARQ) as agent for the Minister of National Revenue (the
Minister), under the Excise Tax Act, R.S.C. 1985, c. E‑15, as
amended (the ETA), notice of which is dated June 6, 2014, for the period from
January 1, 2009, to December 31, 2012 (the period in question).
[2]
As indicated in
the notice of assessment sent to the appellant, the amounts assessed on June 6,
2014, are as follows:
|
Adjustment made to net tax calculation
|
$5,670.30
|
|
Interest
|
$820.29
|
|
Penalty for failure to report
|
$222.97
|
|
Total assessment
|
$3,713.56
|
[3]
In particular,
the specific adjustment to the net tax calculation is the following:
|
|
GST
|
ITC
|
Net Tax
|
|
2009-12-31
|
$1,945.95
|
($648.99)
|
$1,296.96
|
|
2010-12-31
|
$1,848.65
|
($495.95)
|
$1,352.70
|
|
2011-12-31
|
$2,159.65
|
($658.48)
|
$1,501.17
|
|
2012-12-31
|
$2,393.40
|
($873.93)
|
$1,519.47
|
[4]
In assessing the
appellant, the Minister relied, inter alia, on the following findings
and assumptions of fact:
(a) The facts admitted
below;
(b) For the period in
question the appellant is a registrant for the purposes of the ETA;
(c) The appellant has a
groundskeeping business and also does snow removal in the winter [his business];
(d) For the period in
question, the appellant reported the following gross income in his statement of
income regarding his business:
|
Year
|
2009
|
2010
|
2011
|
2012
|
|
Gross income
|
$38,919
|
$36,973
|
$43,193
|
$47,468
|
(e) All the supplies
the appellant made in the operation of his business were taxable supplies for
which GST was payable by the recipients to the appellant, who was to collect
and remit it to the Minister;
(f) The total of the
amount representing the consideration for taxable supplies made by the
appellant is greater than $30,000 for each of the periods ending on 2009-12-31,
2010-12-31, 2011-12-31 and 2012-12-31;
(g) For the period in
question, the appellant was required to be a registrant for the purposes of the
ETA and to collect GST on taxable supplies he made and remit it to the
Minister;
(h) The Minister
established the amounts of tax the appellant was to collect and remit to the
Minister based on the gross income the appellant reported in his income
statement for the period in question and considering the rate of the GST in
force during the period in question, which was 5%;
(i) The input tax
credits to which the appellant was entitled were established based on the valid
supporting documents the appellant provided to the Minister when required to do
so and also based on their eligibility;
(j) The Minister
refused to allow the input tax credits for the appellant's driver's licence,
parts for his motorcycle and insurance;
(k) On April 15, 2014,
the Minister retroactively registered the appellant in the tax records for the
period in question.
[5]
The issue in this
case is to determine whether the appellant rebutted the presumption of validity
of the assessment in question under which the Minister assessed the appellant,
making adjustments to the calculation of the net tax with interest and
penalties.
[6]
The appellant
testified at the hearing and admitted the Minister's findings and assumptions
of fact except paragraph (b) as written, because the Minister registered him
for taxes retroactively for the period in question and paragraph (j) because he
did not claim the input tax credits as described.
[7]
During his testimony, the appellant stated that
he was unaware that the services he provided were taxable supplies for the
purposes of the ETA and that he had to collect the goods and services tax (GST)
from his clients and remit it to the Receiver General of Canada after each
reporting period. As a result, he was not registered for tax purposes even
though the value of the services provided during each of the 2009, 2010, 2011
and 2012 taxation years exceeded $30,000 per year. Moreover, he did not collect
the GST from his clients for the services he provided nor did he remit it to
the Receiver General of Canada.
[8]
The appellant indicated that in 22 years as a
self-employed worker, nobody had informed him that taxes should be applied on
the value of the services provided—not his clients or his accountant, who was
mandated to prepare his tax returns.
[9]
Aline Garceau, the appellant's common-law wife,
also testified at the hearing. She was not involved in her spouse's business
but acted as the appellant's authorized representative in a tax audit conducted
by the Canada Revenue Agency (the CRA) at the end of 2012. No reassessment was
issued after his audit for the 2009, 2010 and 2011 taxation years, but Ms.
Garceau does not understand why the CRA auditor did not inform her of the
application of the ETA with regard to the services the appellant provided.
[10]
The CRA auditor testified at the hearing to
essentially confirm that the appellant's gross income exceeded $30,000 per year
during the period in question and during the previous year, in 2008. There was
no reassessment for 2008 because it was considered the year during which the
appellant exceeded the $30,000 mark for gross income. The auditor explained
that the uncollected GST was added to the appellant's gross income.
[11]
For the purposes of calculating the input tax
credits, only personal expenses were disallowed. Following the assessment under
the ETA, the appellant's taxes were recalculated and a loan loss provision for
the uncollected GST was granted. As a result, the appellant received a tax
refund of $6,000.
Analysis
[12]
Pursuant to the ETA, every person who makes a
taxable supply in the course of a commercial activity is required to be a
registrant for the purposes of Part IX of the ETA, unless excluded under the
exceptions set out at subsection 240(1), which includes an exception for small
suppliers.
[13]
The expression "taxable supply" is
defined at subsection 123(1) as a supply that is made in the course of a
commercial activity. For the purposes of the ETA, operating a business
constitutes a commercial activity carried out by a person. The term
"registrant" is defined at subsection 123(1) as follows:
"registrant"
means a person who is registered, or who is required to be registered under
Subdivision d of Division V…
[14]
The provisions of Part IX of the ETA that apply
to a registrant also apply to any person who is required to be registered even
if that person is not registered. The obligations to collect GST on taxable
supplies and remit it to the Receiver General of Canada under sections 221 and
225 also apply to any person who is required to be registered.
[15]
There is no doubt in this case that the
appellant provided services in the course of a commercial activity during the
period in question and he should have been registered unless he fell under the
exceptions provided in subsection 240(1), which states the following:
Every person who makes a taxable supply in
Canada in the course of a commercial activity engaged in by the person in
Canada is required to be a registrant for the purposes of the Part, except
where
(a) the person is a small supplier;
(b) the only commercial activity of the person is the making of supplies
of real property by way of sale otherwise than in the course of a business; or
(c) the person is a non-resident person who does not carry on any
business in Canada.
[16]
According to the documents submitted to evidence,
the appellant was a small supplier until the third quarter of 2008. In theory,
he should have collected and remitted the GST on the taxable supplies made
during the fourth quarter of 2008 but the Minister did not assess him for this
period. Under the circumstances, the Minister was justified in beginning the
appellant's registration retroactively to January 1, 2009.
[17]
As a result, the appellant owes the Minister the
amount of the adjustments made to the calculation of his net tax for the period
in question, in addition to the interest and penalties for failing to file GST
returns.
[18]
I find it difficult to believe the appellant was
able to operate his business for 22 years without being exposed in one way or
another to the application of the GST on his services. During the period in
question, the appellant's business had around thirty clients including many
businesses. The appellant's spouse worked in a jewellery store and paid the
store's invoices. She was therefore familiar with the application of the GST on
goods and services acquired by the jewellery store. Lastly, the appellant used
the services of an accountant to prepare his tax returns. I find it absurd that
this accountant did not inform the appellant that GST was applicable to
services he provided considering the income from his business exceeded $30,000
per year, for many years.
[19]
For these reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 8th day
of December 2015.
"Réal Favreau"
Translation certified true
on this 20th day
of January 2016.
Elizabeth Tan,
Translator
Email this Content