REASONS
FOR JUDGMENT
D’Auray J.
[1]
The facts are straight forward and were admitted
by both parties. During the period under litigation, the appellant operated a
transportation service business known as “Dewan Limousine” and was a GST/HST registrant.
[2]
In 2011, due to its financial situation, the appellant
started to liquidate its assets, notably three limousines (the “limousines”) that
had been used in the course of its commercial activities. These limousines were
sold for an amount of $105,700.00. The appellant did not collect and remit
GST/HST on the sales of the limousines, which amounted to $13,741.00.
[3]
In this appeal, the provision applicable is
section 141.1 of the Excise Tax Act (“Act”). The relevant
portion states:
141.1 (1) For the purposes of
this Part,
(a) where a person makes a supply (other than an exempt
supply) of personal property that
(i) was last acquired or imported by the person,
or was brought into a participating province by the person after it was last
acquired or imported by the person, for consumption or use in the
course of commercial activities of the person or was consumed or used by
the person in the course of a commercial activity of the person after it was
last acquired or imported by the person, or
the person shall be deemed to have made the supply in the course
of the commercial activity;
[4]
In this appeal, the appellant is deemed by subparagraph
141.1(1)(a) of the Act, to have made a supply in the course of its commercial activity, since the limousines sold by the appellant
were used by it, in its commercial activity.
[5]
Pursuant to section 221 of the Act, when
a person makes a supply that is taxable, that person has to collect the
GST/HST. Accordingly, the appellant should have collected an amount of $13,741.00
of GST/HST on the sale of the limousines.
[6]
The provisions of the Act are clear. I
have no choice but to dismiss the appeal.
[7]
While this is sufficient to dispose of the
appeal, I thought it was important to explain the relationship between the
federal GST/HST regime and the Ontario provincial Retail Sales Tax (the Ontario
“Motor Vehicle Tax”). It was not clear to the appellant why it had to remit the
GST/HST since the person who acquired the limousines paid a tax of 13% upon the
registration of the limousines at the Ministry of Transportation of Ontario.
[8]
Confusion often arises from the misunderstanding
that persons have regarding the separate tax systems of the GST/HST and the
Motor Vehicle Tax. The two taxes have an identical rate of 13%, it is therefore
easy to conflate the two taxes. However, the regimes in place for the two taxes
are distinct systems and operate separately. These two taxes cannot be viewed
as being one general sales tax.
[9]
In this appeal, the purchaser of the limousines
paid the Motor Vehicle Tax, but not the GST/HST. The appellant was under the
impression that the GST/HST had been paid directly by the purchaser to the
Ministry of Transportation. However, since there are two different systems, the
fact that the purchaser paid the Motor Vehicle Tax to the Ministry of
Transportation does not relieve the appellant, as a registrant vendor, from its
obligation to collect and remit the GST/HST to the federal government as
required under the Act.
[10]
However, when a vendor that is a registrant
collects the GST/HST when selling a vehicle used in the course of its
commercial activity, there is an exemption from the Ontario Provincial Retail
Sales Tax Act,
which relieves the purchaser from having to pay the Motor Vehicle Tax.
[11]
In practice, issues arise when the documentation
provided to evidence the sale does not indicate that the vehicle is sold by a
person that is a registrant. For example, the invoice does not indicate a
registration number for GST/HST and it is clear from the invoice that no
GST/HST has been charged on the sold vehicle. In these cases, the Ministry of
Transportation correctly assumes that the transactions are private sales
between non-registrants. In such cases, the Motor Vehicle Tax must be paid by
the purchaser of the vehicle upon registration.
[12]
This was exactly the case in this appeal. The
invoice provided was unfortunately inadequate. Therefore, the 13% Motor Vehicle
Tax was charged upon the registration of the limousines by the Ministry of
Transportation.
[13]
This situation places both the vendor and the
purchaser in a disadvantageous position since the former is still liable to
remit the GST/HST to the federal government, which should have been collected
from the purchaser, and the latter is not eligible to claim input tax credits
because he/she did not pay GST/HST on this specific transaction.
[14]
To avoid this type of issue, clear documentation
should be provided to the Ministry of Transportation, upon the registration of
the vehicle.
[15]
That said, if the Motor Vehicle Tax is
erroneously paid by a purchaser upon registration of the vehicle, a purchaser
may ask the Ministry of Transportation for a refund. Some conditions must be
met for the Motor Vehicle Tax to be refunded. Only the purchaser will be
allowed to request a refund and there is a statutory time limit after which it
is not possible to claim a refund. The form is entitled “Application for Refund
of Ontario Retail Sales Tax for Motor Vehicles Purchased Privately” and can be
found on the Ontario Ministry of Finance’s website. However, I do not know if
the appellant meets the conditions for a refund in this appeal, the appellant
could get in touch with the Ontario Ministry of Transportation to inquire.
[16]
Although the appellant mistakenly believed that
the GST/HST had been paid to the Ministry of Transportation, by the person who
purchased its limousines, this was not the case.
[17]
This is a very unfortunate situation but as I
have already stated, I do not have any other choice than to dismiss the
appeal.
Signed at Ottawa,
Canada, this 19th day of July 2017.
“Johanne D’Auray”
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