Pay Audio – Federal Court considers that the denial of remission of tax overpaid due to an honest mistake was not unreasonable
An agent of a partnership (Pay Audio) incorrectly told an ARQ auditor that the place of supply for digital music services supplied by Pay Audio to Telus was in Ontario rather than Alberta, and the ARQ assessed Pay Audio accordingly for uncollected Ontario HST. Pay Audio did not realize that, in fact, the place of such supplies (based on the relevant Telus servers being in Alberta) was in Alberta until about a year later when it had unsuccessfully sought to recover such tax from Telus, at which point the time had expired for objecting from the assessments or applying for refunds under ETA s. 261.
In confirming that the decision of the Remission Committee to deny Pay Audio’s application for a remission of the tax was within the range of what was reasonable, Lafrenière J stated:
"Equity aids the vigilant, not those who sleep on their rights" and the lack of attention and undue delay by Pay Audio in rectifying the error undermines its arguments for equitable relief.
Since Pay Audio had no identified reason for doubting the accuracy of the relevant employee’s misinformation about the location of the Telus servers, the quoted lack of diligence might be referencing the slow response from Telus (although it is hard to find fault here too, given that Pay Audio fully expected Telus to pay).
Neal Armstrong. Summary of Pay Audio Services Limited Partnership v. The Queen, 2018 FC 494 under Financial Administration Act, s. 23(2).