Citation: 2014 TCC
112
Date: 20040410
Docket: 2007-4601(GST)G
BETWEEN:
Douglas William
McDavid,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre J.
Assessments
and periods at issue
[1]
These are
appeals from two assessments under Part IX of the Excise Tax Act (ETA).
The first assessment, dated May 10, 2007, relates to adjustments made to
amounts claimed by the appellant in respect of input tax credits (ITCs)
for expenses (repairs and maintenance, lodging, phone, food, fuel) incurred for
his work as a transport truck driver during the periods from January 1, 2005 to
June 30, 2006 and from October 1, 2006 to December 31, 2006
(referred to as the “First Period under Appeal” in the Reply to the notice of
appeal (Reply)). The Minister of National Revenue (Minister)
disallowed $18,679.77 and allowed $8,960.21 out of the total amount of
$27,639.98 claimed for that first period (paragraphs 9 and 11 and Schedule A of
the Reply, and Exhibit A-1, Tab 3, page 17). The second assessment, also
dated May 10, 2007, relates to adjustments made to amounts claimed in
respect of ITCs for expenses pertaining to the purchase of a 2006 GMC Sierra
2500 diesel truck (Sierra), the leasing of a trailer, repairs and
maintenance, meals, lodging, and fuel incurred during the period from July 1, 2006
to September 30, 2006 (referred to as the “Second Period under Appeal”
in the Reply). The total amount of ITCs disallowed with respect to that second period
is $12,354.51 (paragraphs 12 and 14 of the Reply, and Exhibit A-1, Tab 3,
page 16).
Preliminary remarks
[2]
Since the
filing of his notice of appeal, the appellant has moved to Alberta for his work,
along with his spouse Carolyn Ryan. He did not ask for a change of venue. His
counsel of record is, and has been from the outset, located in Fredericton, New Brunswick where the hearing was held. The appellant did not travel to Fredericton for the hearing. Ms. Carolyn Ryan flew in to testify.
She explained that she was the one who did all the bookwork for the appellant,
who apparently is not very educated and not in a position to testify regarding
the figures and the documentation that were presented in court. Ms. Ryan
explained that she had all the first-hand knowledge required in order to
testify concerning the facts. She provided invoices and other records to
support the claims. Her credibility was not challenged, and taking into account
the particular circumstances existing here, I accept her testimony as
being sufficient to establish the facts of this case.
[3]
Ms. Ryan
filed a spreadsheet of revenue and expenses for 2005 and 2006 (Exhibit A-14).
She explained that she itemized all the expenses that are still at issue by
category (fuel, maintenance, meals, truck lease, cell phone, miscellaneous).
During the hearing, it was agreed that all amounts pertaining to the truck
lease appearing on that spreadsheet and not already accepted by the auditor
were to be allowed.
[4]
In
addition, it was pointed out that if the Court is of the view that the meal expenses
are to be allowed, the amounts so allowed should not exceed 50%, in accordance
with section 236 of the ETA.
[5]
Finally,
the appellant mistakenly added an extra amount of $1,000 in totalling the HST
on fuel for the period ending March 31, 2006, which amount shall be
subtracted from the total HST claimed for that period (Exhibit A‑14,
Expenses 2006, and Transcript volume 2, pages 34, 35 and 54).
Facts
[6]
It is not
in dispute that the appellant worked as a transport truck driver for Quality
Carriers Inc. (QCI), a registrant for the purposes of the ETA and having
its head office in Oakville, Ontario. As part of his duties with QCI the
appellant drove a transport truck in the United States and in various Canadian
provinces.
[7]
The
appellant owned and operated his own transport truck and worked as an
independent contractor. When performing his duties for QCI, the appellant used a
fuel card (T-Chek card) which was provided by QCI for the purchase of fuel,
parts and other items for his transport truck.
[8]
The
evidence also revealed that when he was not hauling for QCI, the appellant did
some work as an excavation/landscaping contractor and attempted providing a “hot
shot” delivery service. When the amount of work from QCI declined, he turned to
providing a mobile mechanic service.
Issues
[9]
There are
mainly two categories of ITC claims at issue here. The first set of claims comprises
those that the appellant submits were for expenses incurred in the course of
his business ventures and that the respondent contends were personal in nature.
[10]
The second
set of claims comprises the expenses that the appellant incurred while working
as a trucker. These expenses include claims for a radio phone, as well as fuel
and other items purchased by the appellant using a T-Chek card supplied by QCI.
With respect to these claims, the respondent’s sole argument in her Reply is that
they were properly disallowed because the appellant did not have sufficient
supporting documentation. It was argued that the invoices were deficient as not
meeting the requirements of subsection 169(4) of the ETA and section 3 of the Input
Tax Credit Information (GST/HST) Regulations (Regulations). The
relevant provisions are appended to these reasons.
First issue: Whether or not the
appellant’s expenses were incurred for business purposes
[11]
The
appellant claimed ITCs in relation to his work as a truck driver, an excavation/landscaping
contractor and a mechanic.
1) Truck driver for
QCI
[12]
Apart from
ITCs for fuel and related items and parts, which he purchased using a T‑Chek
card, the appellant also claimed ITCs for a radio phone which was paid for with
Carolyn Ryan’s credit card. He also claimed ITCs for food and lodging expenses
incurred by him while driving for QCI.
[13]
Further,
when his transport truck broke down on the road or required parts, he incurred
expenses for fuel for his pickup truck and for plane tickets, on which he also
claimed ITCs.
[14]
At the hearing,
the auditor conceded that a number of the QCI expenses that had been disallowed
were in fact incurred for business purposes (these expenses included rain gear
and other protective equipment as well as lodging). The auditor also stated
that wherever possible she allowed the fuel and other expenses that the
appellant incurred, and only denied those expenses that were paid with the T‑Chek
card because of a lack of sufficient supporting documentation (Transcript,
volume 2, page 19). Likewise, counsel for the respondent accepted the
fact that the radio phone was used for business purposes but said that the
problem was that it was not the appellant’s name appearing on the invoices
(Transcript, volume 2, page 104).
2) The excavation/landscaping work
and mobile mechanic service
[15]
The
appellant purchased a heavy duty GMC Sierra truck and leased a trailer in order
to execute an excavation/landscaping contract. He also bought equipment, fuel
and an alarm system that was used for business purposes. The alarm system was
installed in Ms. Ryan’s brother’s garage at the appellant’s cost because
he kept his Sierra truck, trailer and tools there. This was done because the
garage (which measured 30' x 60') was big enough to house all that equipment.
[16]
Ms. Ryan
explained that the GMC Sierra was acquired to enable the appellant to tow the
trailer in which he hauled his heavy tools and equipment. He kept his other pickup
for personal travel.
[17]
She
testified that she created the travel log for the GMC Sierra at the request of
the auditor. She said that none was kept previously because she was under the
impression that no log was necessary if the vehicle was used only for business
purposes. To create the log, she worked backwards from the appellant’s receipts
and invoices, filling in the distance for each location using MapQuest (Exhibit
A-1, Tab 1, pages 14‑15). The auditor had concerns regarding instances
in which the appellant appeared to have been in one place while the truck was
being driven in another. Ms. Ryan explained that this was due to the
appellant’s transport truck having broken down on one occasion. He had flown
home and loaded the trailer up with parts. He then flew back to the transport
truck and had his brother haul the parts out to him using the Sierra.
[18]
The auditor
was also under the impression that the appellant used the GMC Sierra to travel
to Toronto for personal purposes. Ms. Ryan testified that the Sierra was in
fact used to tow the trailer with the welder and tools to Toronto for his work in
that city.
[19]
The
appellant claimed ITCs for fuel, food, lodging and maintenance expenses related
to his work providing a mobile mechanic service. These claims were denied on
the basis that he did not use his own truck or provide his own tools for that
work. Ms. Ryan provided documentation showing, and she testified, that he
used his own truck, his trailer and his own tools. I have no reason not to
believe her.
3) Advertising
expenses
[20]
Finally,
the appellant claimed ITCs on the purchase of a motocross motorcycle. Ms. Ryan
explained that the appellant sponsored a motocross racer (Ms. Ryan’s son)
and that the motorcycle was an advertising expense. The motorcycle displayed
the appellant’s business name, and when his rider crossed the finish line, his
business was mentioned as a sponsor.
[21]
The auditor
disallowed this advertising expense because she saw no connection between the
expense and income earned by the appellant as a truck driver for QCI. To the
respondent, the motorcycle expenses seemed personal in nature and there was no
way of knowing that the advertising had actually resulted in work for the
appellant.
[22]
Ms. Ryan
described how sponsoring resulted in publicity for the appellant’s business and
she provided pictures of the bike with the business logo (Exhibit A‑11).
She said that her son was a very good racer who won races and was successful
enough to participate in national races, one of which was held in Ontario. She also stated that the advertising secured the appellant a large contract with
Maritimes & Northeast Pipeline.
[23]
The
appellant also claimed ITCs on the rental of a mobile home (Exhibit A‑13)
which was used for accommodation and advertising at the national TransCan motocross
event in Ontario. Ms. Ryan explained that the appellant stayed during the
entire event, that he put up boards advertising his business.
Conclusion on the first issue
[24]
In my view,
Ms. Ryan identified a business purpose with respect to all of the claims. The
respondent did little to contradict Ms. Ryan’s testimony or the documentary
evidence other than suggesting that her testimony was second-hand knowledge or
guesswork. I believe that the appellant made out a prima facie case sufficient
to demolish the minister’s assumptions (House v. the Queen, 2011 FCA 234,
2011 DTC 5142, at paragraph 61).
Second issue: Did the appellant have
sufficient supporting documentation to meet the requirements under subsection
169(4) of the ETA and section 3 of the Regulations?
[25]
It is my
understanding that the respondent is putting forward this argument only in
respect of two sets of expenses: the monthly bills for the radio phone and the
T-Chek purchases.
[26]
Subsection
169(4) requires that a registrant claiming ITCs have supporting documentation.
The Regulations set out what is required in this regard. The amount of
information to be provided is dependent on the amount of the underlying
purchase.
[27]
The
required information does not have to be in the form of an invoice nor does it
have to be contained in a single document. Indeed, the definition of supporting
documentation is an inclusive and broad one. It is found in section 2 of the
Regulations.
1) The radio phone invoices
[28]
The radio
phone ITCs were denied on the sole basis that the invoices were in the name of
Ms. Ryan and not the appellant. During the audit, Ms. Ryan produced credit card receipts and Telus invoices which stated
the amount of GST paid and provided the other required information. The phone
records also showed that the phone was used by the appellant in the different
areas in which he was travelling for his work as a truck driver (Transcript,
volume 1, page 175).
[29]
Ms. Ryan
testified that she bought the phone for the appellant. She clearly acted as the
appellant’s agent in this, as she did in a variety of other respects, namely:
keeping his books, issuing invoices to customers, paying his bills when
required and helping to conduct his business.
[30]
I am
therefore of the view that Ms. Ryan acted as the duly authorized agent or
representative of the appellant and that, this being so, her name appearing on
the invoices does not bar the appellant from claiming ITCs with regard to these
invoices (subparagraph 3(c)(ii) of the Regulations).
2) Fuel and supplies purchased
with the T-Chek card
[31]
The Crown
argued that the appellant did not provide valid documentation for the ITCs
claimed on the purchases made with the T-Chek card. According to the
respondent, the pay statements issued by QCI to the appellant are not valid
documentation because they do not show the registration number of the supplier,
nor do they state the amount of GST paid, but indicate only the quantity, price
and total cost (Transcript, volume 2, page 98).
[32]
Further,
although this was not argued in the Reply, the respondent also took the
position that there was a resupply of fuel by QCI to the appellant. The Crown
argued that when the appellant made purchases with the T-Chek card, the fuel or
other items were in fact acquired by QCI, and QCI then made a taxable resupply
of that fuel or those items to the appellant when it charged back the amount to
his pay or to his escrow account (Transcript, volume 2, pages 88-90). I will
discuss this second argument further on in these reasons.
Was there valid documentation
provided for the T-Chek purchases?
[33]
I will now deal
with the first argument of the respondent and the only one put forward in her
Reply. On this point, I do not agree with the respondent. In order to meet the
supporting documentation requirement, the appellant provided a sample of a
T-Chek receipt issued to him at a fuel station. The sample showed his truck
number (53072), the supplier’s name and GST registration number, the quantity
of fuel and the purchase amount on which GST was paid. Ms. Ryan testified
that every time the appellant used his T-Chek card in the machine at the fuel
station he received the same kind of receipt. The appellant also provided the
breakdown (the T-Chek fuel purchase table) of the T‑Chek fuel purchases
deducted from his pay statements. The T-Chek fuel purchase table showed the appellant’s
name and truck number, the supplier’s name, the date of purchase, the quantity of
fuel, as well as the total amount paid according to each receipt. Contrary to
the respondent’s contention, in the case of the receipt submitted as an example
it looks as if the price shown on the T-Chek fuel purchase table and deducted on
the appellant’s pay statement includes GST. Indeed, on the table, the breakdown
for that receipt shows a cost of 1.0690 per litre times 472 litres, which gives
a total cost of $504.57. The price shown on the receipt indicates 1.01472 per
litre times 472 litres, which works out to $478.95, plus $25.62 GST, for a
total of $504.57 (Exhibit A-1, Tab 1, pages 3, 5 and 7). A quick
calculation shows that it is possible to reconcile the T-Chek fuel purchase
table figures and the receipt and that GST was in fact paid by the appellant.
[34]
In addition,
the appellant provided a copy of his contract with QCI, which states that he is
responsible for the payment of all operating expenses, including fuel and taxes
(Exhibit A-7).
[35]
In Kramer
Ltd. v. Canada, 1994 CarswellNat 54, [1994] G.S.T.C. 47, this Court was
faced with a similar situation (allegedly insufficient supporting documentation)
to that in the present case. It was held that the taxpayer had satisfied the
statutory requirement in that the ITC could be easily calculated from the
information provided. The Court concluded that because it was possible to “reconcile
the calculation” the onus upon the appellant had been met (paragraph 12).
[36]
I therefore
conclude that the appellant provided the supporting documentation that was
required in order for him to be able to claim ITCs on the GST paid on purchases
made with the T-Chek card.
Did QCI resupply the T-Chek
purchases to the appellant?
[37]
With
respect to this particular issue, which is the second argument, raised for the
first time by the respondent at the hearing, it was argued that those purchases
resulted in a resupply by QCI to the appellant. This would mean that whenever
the appellant used the T-Chek card provided by QCI, QCI was in fact purchasing
the fuel on its own behalf and then reselling it to the appellant. If this was
the case, the appellant would have to prove that it paid GST to QCI in order to
be able to claim ITCs. This position was not pleaded in the Reply and the
respondent does not benefit from the rebuttable presumption whereby this
allegation is presumed to be true for the purposes of this appeal.
[38]
That being
said, the respondent is in effect asking that the Court look at the contract
(Exhibit A‑7) and infer that there was a resupply by QCI to the
appellant.
The Contractor Agreement
[39]
The
agreement provides that the contractor (appellant) is to be paid a percentage
of QCI’s adjusted gross revenue from the linehaul transportation of commodities
by the contractor on behalf of QCI, less any expenses incurred by QCI in the transportation
of those commodities (clause 3 of the Contractor Agreement). The contractor’s
compensation is further defined in Appendix A-1 to the agreement. Clause 3 of
Appendix A-1 states that some items, including fuel and fuel taxes, are to be
charged back and deducted from the contractor’s compensation or from the contractor’s
escrow funds in the event that the contractor’s compensation is insufficient to
cover those items. The contractor is required to hold a minimum of $3,000 in
escrow funds for the purpose of covering expenses incurred by QCI that are the
contractor’s responsibility under the agreement. The escrow funds belong to the
contractor and bear interest (Appendix C to the agreement).
[40]
The
contractor is required to provide at his sole cost all the equipment ready to
operate, including licences, permits and cab cards (which relate to such things
as road taxes and crossing state and provincial borders) and to furnish all
necessary fuel, tires and parts. He is to pay all expenses, including fuel
taxes, incident to the operation of the equipment. It is recognized that
certain of these expenses (including fuel taxes) will be initially assessed
against QCI even though they are the responsibility of the contractor. In such
a case, the contractor reimburses QCI for those expenses (clauses 7a) and c) of
Appendix A-1; see also Transcript, volume 1, page 124).
[41]
Clause 21 of
Appendix A-1 states that the contractor is free to purchase fuel solely at his
discretion and at the truck stops of his choice. Clauses 24 and 25 deal with
fuel purchases and payment therefor. I reproduce those sections below:
24. Fuel purchases.
For the purpose of computing and paying all state fuel
taxes owed for the Equipment, CARRIER [QCI] shall issue CONTRACTOR a fuel card
to be used for all fuel purchases. All fuel charges and state fuel taxes will
be charged back to CONTRACTOR as allowed under this Agreement. In the event
CONTRACTOR or its drivers fail to use Carrier’s fuel card, CONTRACTOR shall be
responsible for providing CARRIER with an accurate accounting of all fuel
purchases and miles traveled for the purposes of computing state fuel tax
liability, and CONTRACTOR shall provide CARRIER with all original fuel
receipts.
The CARRIER is not required to recalculate CONTRACTOR’s
fuel tax payments or credits if manual fuel receipts are not received within
the 30-day window provided by the CARRIER.
25. Charge back . . .
CARRIER shall charge back to CONTRACTOR at the time of
payment or settlement, any expenses CARRIER has initially paid that, under this
Agreement, the CONTRACTOR is obligated to bear. Such expenses shall be deduced [sic]
from the amount of CONTRACTOR’s compensation and shall include, but not be
limited to, fuel and mileage taxes, tank washes and product disposal, workman’s
compensation/occupational disability insurance, cargo claims, property damage,
license and permit fees, and any other expenses set forth in this Agreement.
CARRIER will furnish CONTRACTOR with a written explanation of how the charge
back is computed and, if requested by CONTRACTOR, will make the necessary
documents available to determine the validity of the charge back.
Analysis of the Contractor
Agreement in light of the Case Law
[42]
The Crown
argued that it is to be inferred from the provisions of the agreement that QCI
was contractually liable for all payments made with the T-Chek card, even
though the appellant was ultimately responsible for payment. In the respondent’s
view, QCI was the recipient of any supply purchased by the appellant with the
T-Chek card.
[43]
This
argument requires determining who is the recipient of the supply acquired with
the T-Chek card. The appellant is of the view that he acquired the fuel from the
fuel supplier, and therefore he is the recipient, not QCI. At most, QCI acted
merely as a conduit.
[44]
The parties
referred to a few cases showing some similarities with the present one, which I will now analyze.
[45]
Legally, the
recipient is the person who is liable to pay the consideration for the service
under the agreement for the service (subsection 123(1) ETA and PDM Royalties
Limited Partnership v. The Queen, 2013 TCC 270, 2013 CarswellNat 3090
paragraph 26). Furthermore, reimbursements and charge-backs must be
distinguished from monies paid by a principal to its agent in respect of
amounts expended by the agent on behalf of the principal (Roberge Transport
Inc. v. The Queen, 2010 TCC 155, 2010 CarswellNat 574, [2010] G.S.T.C. 43, paragraph
43).
[46]
In Roberge
Transport, the trucking company registered itself all the vehicles with the
provincial government and accordingly was responsible for the payment of the
interjurisdictional sales and fuel taxes. It then provided truck decals and
copies of the “Cap Cards” to the lease operators (drivers), who subsequently reimbursed
Roberge Transport for the aforementioned taxes. It was clear in that case that
Roberge Transport, and not the truckers, was liable to pay the taxes in
accordance with the provincial legislation and that it did not pay those taxes
as agents.
[47]
I agree
with the appellant that the situation is different here. The agreement
specifically provides that the contractor is to provide at its sole cost and
expense all the equipment ready to operate and fully roadworthy, including the necessary
licences, permits, plates and cab cards, and to furnish all necessary fuel,
tires and parts required for the operation of the equipment. The contractor is
also liable to pay all incidental expenses, including taxes. I take it that it was
the appellant who was liable under the agreement for the payment of all
purchases made with the T‑Chek card, in the same manner as he would have
been responsible for the payment of any fuel purchases made with any other
card.
[48]
I also find
that the present situation may be distinguished from that in Maritime-Ontario
Freight Lines Limited v. The Queen, 2009 TCC 474, [2009] G.S.T.C.
130, a case with some factual similarity to the present one. It was held there that
the determining factor was the intention of the parties with regard to the
treatment of the GST. Maritime-Ontario gave credit cards to its contractors for
fuel purchases. Maritime-Ontario deducted all fuel purchases by each trucker
from the amounts it paid the trucker for trucking services. However, the
similarities with the present case stop there. Indeed, Maritime-Ontario claimed
ITCs for the GST paid on the fuel purchases and did not deduct the GST from the
trucker’s pay. Here, there is no evidence that QCI claimed ITC’s for the GST
paid on purchases made with the T-Chek card, and the documentation tends to
show that QCI deducted the GST from the appellant’s pay. Further, the truckers
in Maritime-Ontario did not receive a standard credit card receipt
showing the cost of the fuel, the GST amount and the supplier’s GST
registration number. The receipt showed only the quantity of fuel purchased. In
the present case, the receipt issued to the appellant provided all that
information. In Maritime-Ontario, the Court concluded that the agreement
as a whole was consistent with the intent that the fuel paid for by Maritime‑Ontario
was acquired on its own behalf. The Court reached that conclusion, because,
among other things, the pay summaries provided to the contractors by
Maritime-Ontario clearly showed that the contractors were not paying GST
(paragraphs 44 and 50). In the present case, I have concluded that the
appellant has demonstrated that he was paying the GST.
[49]
In Vanex
Truck Service Ltd. v. The Queen, 2001 FCA 159, [2001] G.S.T.C. 70, the Federal
Court of Appeal also had to determine whether a trucking company was resupplying
fuel to drivers. Vanex arranged to have fuel company credit cards issued to it
since it could get better discounts due to the volume of fuel it purchased.
When Vanex paid the owner-operators, it deducted amounts for the fuel bought by
them on its credit cards. Vanex claimed the ITCs on the oil and fuel purchased,
and the Court concluded that by so doing Vanex acknowledged that it had purchased
those items not as an agent, but on its own behalf, and was resupplying them to
the owner‑operators whom it charged (paragraph 20).
[50]
In the
present case, there are charge-back clauses in the agreement that deal with
fuel taxes and other expenses that QCI might incur on the appellant’s behalf
(Exhibit A-7, Appendix A-1, clauses 3 and 7c)). Counsel for the respondent
pointed to those clauses of the contract as evidence that QCI was reselling the
fuel to the appellant.
[51]
First of
all, it is not at all clear that those clauses of the contract concern GST. They
may very well have to do with fuel taxes that are the subject of a tax-sharing
agreement between provinces and states which provides for the calculation of
fuel taxes for commercial trucking according to the number of miles driven in a
particular province or state (the interjurisdictional fuel tax, as discussed in
Transport Roberge, supra). This point was not brought up at
trial.
[52]
Second, in Vanex,
supra, the transport company had fuel supply agreements with Shell and
Petro-Canada. In the present case, it does not seem that QCI had a particular
agreement with any particular fuel supplier. The actual contract between QCI
and T-Chek was not provided. We simply do not know whether the T-Chek card
worked in a similar manner to the credit cards provided to the drivers in Vanex.
According to Ms. Ryan’s testimony, the T-Chek card was supposed to work
rather like a debit card, and this was accomplished through the escrow account (Transcript,
volume 1, page 27). Indeed, there is a clause in the agreement that states that
the appellant must maintain an escrow account to cover fuel purchases or other
expenses for which he is responsible (Exhibit A-7, Appendix C, clause 3).
[53]
Third, in Vanex,
the trucking company had claimed ITCs on fuel purchased by the drivers with the
credit cards provided by Vanex. There was double-claiming of ITCs for the same
fuel expenses.
[54]
Here, while
the appellant’s invoices and records were presented at trial, the corresponding
records of QCI were not. Evidence concerning how the T-Chek cards worked on
QCI’s side would have been helpful. There is no evidence that QCI either reported
GST or claimed ITCs on the fuel or other purchases made with the T‑Chek
card.
[55]
On the
contrary, there is a letter from QCI’s head office in Florida (on Quality
Carrier letterhead) stating that they did not claim GST rebates on fuel
purchases and that it would be up to the individual drivers to request such
rebates (Exhibit A-1, Tab 1, page 2). Counsel for the respondent pointed out
that the letter referred to Quality Distribution Inc. rather than to QCI.
However, the respondent did not bring any evidence to show that QCI itself
claimed GST rebates on fuel. Nor did the auditor testify that Ms. Bottorff, the
author of that letter, had said that QCI claimed those rebates. She said that
Ms. Bottorff had told her that QCI did “claim GST/HST” whenever it could
(Transcript, volume 2, page 16). On the other hand, Ms. Ryan had spoken to
QCI’s terminal managers in Montreal and Oakville, who both referred her to
Ms. Bottorff. All three told her that the appellant, as an independent
contractor, had to claim the ITC’s on fuel himself and that QCI would not claim
them (Transcript volume 1, pages 130 and 131). Presumably, the minister
would be aware of it if QCI was claiming ITCs on fuel, given the fact that he
had QCI’s registration number and had been in contact with QCI over the matter.
[56]
Fourth, the
contract itself as drafted, setting out the appellant’s obligation to cover out
of his escrow funds the cost of fuel or other items purchased with the T‑Chek
card, is a strong indication that the appellant bore the economic risk with
regard to fuel purchases. Indeed, as I have already said, if a customer
did not pay for a delivery, the cost of the fuel for that delivery would be
removed from the appellant’s escrow fund.
[57]
This is another
distinction that can be made with Vanex, as in that case no such escrow
fund seems to have been put in place. It is my understanding that, in cases
where the driver’s revenue did not cover the full amount, Vanex was responsible
for paying the amount owed for fuel purchases made with its credit cards.
[58]
In my view,
there is no prima facie evidence that QCI resupplied to the appellant fuel or
anything else purchased with the T-Chek card. I find that the evidence tends to
show that the situation here is different than those in Vanex, Maritime-Ontario
and Transport Roberge.
[59]
I therefore
conclude that the respondent’s argument does not stand up.
Decision
[60]
The appeals
are allowed and the assessments are referred back to the Minister for
reassessment on the basis that the appellant is entitled to the ITCs still at
issue as shown in Exhibit A-14, with the exception of the following: the
amounts already allowed by the auditor and still appearing on Exhibit A-14, the
HST on meals (with respect to which the claim may not exceed 50%), and a
reduction for the extra amount of $1,000 that was mistakenly added by
Ms. Ryan for the first period of 2006.
Costs
[61]
The
appellant has asked for solicitor and client costs from the date of the offer
of settlement that he presented to the respondent on July 14, 2011. In
that offer, the appellant proposed that the Canada Revenue Agency (CRA)
pay the appellant 50 % of the amount at issue at the time and release the funds
being withheld by the CRA ($24,859). This offer was not accepted by the respondent.
[62]
The
respondent opposed the request for solicitor and client costs mainly because
the majority of the amounts in dispute related to the ITC claims on the T‑Chek
card purchases. Counsel for the respondent relied on CIBC World Markets Inc.
v. The Queen, 2012 FCA 3, [2012] G.S.T.C. 4, paragraph 17, in arguing that
the issue regarding the treatment of ITC’s on fuel purchased with the T-Chek
card was a legal one that ought to be decided by the Court and that the offer
of settlement presented by the appellant was not an option that could be accepted
in light of the facts and the law in this particular case. The issue raised a
question of statutory interpretation whose resolution would result in the
Minister’s assessment with respect to the T-Chek receipts either being
confirmed in its entirety or rejected in its entirety.
[63]
I agree
that there are legal points to be resolved in this case. However, the main
legal argument advanced by the respondent was not put forward in her Reply.
[64]
I would
therefore award the appellant costs based on the Tariff in this Court’s Rules.
I would however add to the Tariff amount all disbursements incurred by
Ms. Carolyn Ryan to travel from Alberta to Fredericton for the discovery,
the settlement conferences and the hearing.
Signed
at Ottawa, Canada, this 10th day of April 2014.
“Lucie Lamarre”
Appendix A
Excise Tax Act
division i
interpretation
123. (1) Definitions — In section 121, this Part and
Schedules V to X,
. . .
“recipient” of a supply of property or a service
means
(a) where consideration for the
supply is payable under an agreement for the supply, the person who is liable
under the agreement to pay that consideration,
(b) where paragraph (a)
does not apply and consideration is payable for the supply, the person who is
liable to pay that consideration, and
. . .
and any reference to a person to whom a
supply is made shall be read as a reference to the recipient of the supply;
Subdivision b — Input Tax Credits
169. (1) General rule for
[input tax] credits — Subject to this Part, where a person acquires or imports
property or a service or brings it into a participating province and, during a
reporting period of the person during which the person is a registrant, tax in
respect of the supply, importation or bringing in becomes payable by the person
or is paid by the person without having become payable, the amount determined
by the following formula is an input tax credit of the person in respect of the
property or service for the period:
A × B
where
A is the tax in respect of the
supply, importation or bringing in, as the case may be, that becomes payable by
the person during the reporting period or that is paid by the person during the
period without having become payable; and
B is
. . .
(c) in any other case,
the extent (expressed as a percentage) to which the person acquired or imported
the property or service or brought it into the participating province, as the
case may be, for consumption, use or supply in the course of commercial activities
of the person.
169(4) Required documentation — A registrant may not claim an
input tax credit for a reporting period unless, before filing the return in
which the credit is claimed,
(a) the registrant has
obtained sufficient evidence in such form containing such information as will
enable the amount of the input tax credit to be determined, including any such
information as may be prescribed; and
(b) where the credit is in
respect of property or a service supplied to the registrant in circumstances in
which the registrant is required to report the tax payable in respect of the
supply in a return filed with the Minister under this Part, the registrant has
so reported the tax in a return filed under this Part.
input tax credit information
(gst/hst) regulations
interpretation
2. In these Regulations,
“Act” means the Excise Tax Act;
. . .
“supporting documentation” means the form in which information prescribed by section 3 is
contained, and includes
(a) an invoice,
(b) a receipt,
(c) a credit-card receipt,
(d) a debit note,
(e) a book or ledger of account,
(f) a written contract or agreement,
(g) any record contained in a computerized or electronic
retrieval or data storage system, and
(h) any other document
validly issued or signed by a registrant in respect of a supply made by the
registrant in respect of which there is tax paid or payable;
. . .
prescribed information
3. For the
purposes of paragraph 169(4)(a)
of the Act, the following information is prescribed information:
(a) where the total
amount paid or payable shown on the supporting documentation in respect of the
supply or, if the supporting documentation is in respect of more than one
supply, the supplies, is less than $30,
(i) the name of the
supplier or the intermediary in respect of the supply, or the name under which
the supplier or the intermediary does business,
(ii) where an invoice
is issued in respect of the supply or the supplies, the date of the invoice,
(iii) where an invoice
is not issued in respect of the supply or the supplies, the date on which there
is tax paid or payable in respect thereof, and
(iv) the total amount
paid or payable for all of the supplies;
(b) where the total
amount paid or payable shown on the supporting documentation in respect of the
supply or, if the supporting documentation is in respect of more than one
supply, the supplies, is $30 or more and less than $150,
(i) the name of the
supplier or the intermediary in respect of the supply, or the name under which
the supplier or the intermediary does business, and the registration number
assigned under subsection 241(1) of the Act to the supplier or the
intermediary, as the case may be,
(ii) the information
set out in subparagraphs (a)(ii)
to (iv),
(iii) where the amount
paid or payable for the supply or the supplies does not include the amount of
tax paid or payable in respect thereof,
(A) the amount of tax paid or payable in
respect of each supply or in respect of all of the supplies, or
(B) where provincial sales tax is payable
in respect of each taxable supply that is not a zero-rated supply and is not
payable in respect of any exempt supply or zero-rated supply,
(I) the total of the
tax paid or payable under Division II of Part IX of the Act and the provincial
sales tax paid or payable in respect of each taxable supply, and a statement to
the effect that the total in respect of each taxable supply includes the tax
paid or payable under that Division, or
(II) the total of the
tax paid or payable under Division II of Part IX of the Act and the provincial
sales tax paid or payable in respect of all taxable supplies, and a statement
to the effect that the total includes the tax paid or payable under that
Division,
(iv) where the amount
paid or payable for the supply or the supplies includes the amount of tax paid
or payable in respect thereof and one or more supplies are taxable supplies
that are not zero-rated supplies,
(A) a statement to the effect that tax is
included in the amount paid or payable for each taxable supply,
(B) the total (referred to in this
paragraph as the “total tax rate”) of the rates at which tax was paid or
payable in respect of each of the taxable supplies that is not a zero-rated
supply, and
(C) the amount paid or payable for each
such supply or the total amount paid or payable for all such supplies to which
the same total tax rate applies, and
(v) where the status of
two or more supplies is different, an indication of the status of each taxable
supply that is not a zero-rated supply; and
(c) where the total
amount paid or payable shown on the supporting documentation in respect of the
supply or, if the supporting documentation is in respect of more than one
supply, the supplies, is $150 or more,
(i) the information set
out in paragraphs (a)
and (b),
(ii) the recipient’s
name, the name under which the recipient does business or the name of the
recipient’s duly authorized agent or representative,
(iii) the terms of
payment, and
(iv) a description of
each supply sufficient to identify it.
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