CRA finds that SLFI tax must be remitted irrespective of a failure of a SLFI supplier to charge the tax going into the SAM formula

A Canadian financial institution makes a taxable supply of services to an unrelated Canadian selected listed financial institution (SLFI) for cash consideration, but erroneously fails to invoice and collect any GST/HST thereon. Since the SLFI computes its SLFI tax under the “SAM” formula in s. 225.2(2) based on the tax payable by it, it nonetheless would be required to take the tax payable by it to the supplier into account in computing that SAM formula tax. The questioner suggested in light of s. 278(2), which provides that a person is not required to remit a tax amount where “the amount is required under section 221 to be collected by another person,” that the SLFI was not required to remit the related component of its s. 225.2(2) tax (based on the tax payable to the supplier) because of the obligation of its supplier to have collected and remitted that tax.

CRA considered this suggestion to be quite at odds with the scheme of the SAM formula rules, which required the SLFI to compute and remit an amount which was quite distinct from the tax paid to its suppliers. Essentially, the SAM formula computes a normative amount of provincial HST based on the residence of the SLFI's ultimate stakeholders, and compares this with the actual provincial HST paid to its suppliers – and then requires that the difference be reported and claimed as refunds or remitted as tax, in interim and final returns. Thus, the SAM tax is essentially by definition distinct from the tax that was remittable by the SLFI supplier.

Neal Armstrong. Summaries of 8 March 2018 CBA Commodity Tax Roundtable, Q.10 under s. 278(2) and s. 225.2(2).