NWorks Management Corp. (Globotech Communications) v. Lincourt, 2018 QCCQ 1021

In various transactions between January 1, 2010 and June 30, 2014, the appellant (“NWorks”) issued invoices to the respondent that quoted its GST and QST registration numbers and charged GST, but failed to charge QST due (it alleged) to a mistaken understanding that none was applicable. On November 6, 2014, the ARQ assessed NWorks for such QST, and NWorks promptly sent a composite invoice in proper form to the respondent showing a balance owing for unpaid QST in respect of the period from January 1, 2010 onwards.

In finding that NWorks was entitled to recover the additional amounts from the respondent pursuant to the Quebec equivalent of ETA s. 224 on the basis that NWorks’s subsequent invoice had satisfied the requirements of the Quebec equivalent of ETA s. 223 (namely, of QSTA s. 425), Sirois JCQ stated (at paras. 61-62, 65-66, TaxInterpretations translation):

Occo establishes that it produces an unreasonable result to interpret the Act as precluding a supplier from recovering the tax that it did not “invoice” at the time of the supply of the service.

Occo provides that it requires clear wording in the Act to depart from its fundamental principles by holding the supplier-agent ultimately responsible for the tax in lieu of the recipient. …

[T]he object of ETA section 223 and QSTA section 425 is to permit the recipient from whom the taxes are collected to be apprised of the amounts owing for the supply and what are the payments due for each of the taxes so as permit it to receive credits to which it has a right upon being invoiced for those taxes.

That which the recipient must pay to the supplier-agent can be recovered as a credit or refund for inputs.

And at para. 116:

In the two decisions 130099 Canada Inc. v. Lamontagne [2009 QCCQ 7158 (CanLII)] and Romaniuk c. Broderies Pena S.E.N.C. [2011 QCCS 1941 (CanLII)] cited above, the courts added the non-existent words “at the time of invoicing” to the text of QSTA section 425.

A supplier (NWorks) charged GST, but failed to charge QST, on a number of supplies of services to the recipient thereof. When it was assessed by the ARQ for this failure, it promptly issued a revised invoice to the recipient for the previous transactions that showed the QST owing, which the recipient refused to pay.

Sirois JCQ preferred the jurisprudence (including Occo) that indicated that the documentary requirements of the Quebec equivalent of ETA s. 223 (i.e., QSTA s. 425) could be satisfied by issuing a revised invoice (in good form) for the tax well after the time of making the supply so that, under the Quebec equivalent of ETA s. 224, NWorks could recover the QST from the recipient. She also stated (at para. 116, TaxInterpretations translation) that two decisions to the contrary “added the non-existent words ‘at the time of invoicing’ to the text of QSTA section 425.”

Before concluding that QSTA s. 425 (equivalent to ETA . 223) could be satisfied by an invoice issued by the supplier to the recipient after the time of the supply, Sirois JCQ summarized the wording of QSTA s. 431(3) (equivalent to ETA s. 225(4)(c)), and then stated (at paras. 49-50, TaxInterpretations translation):

Thus, the recipient can, based on the written declaration of the supplier who has been assessed for the amounts, claim an input tax refund for the period in which it pays the tax.

This indicates that the legislator intended to accord to the supplier the ability to recover the tax which it is responsible for tardily remitting as agent of the tax authorities, and to permit the recipient to recover input tax refunds on certain conditions.