Escape Trailer – Federal Court of Canada suggests that imposing HST on goods earmarked for immediate export fails to apply s. 142 purposively
When a B.C.-based company (the “applicant”) sold an RV to a U.S. customer, it could have avoided the requirement to charge HST on the sale price by delivering the RV to the customer in the U.S. (so that under ETA s. 142 the place of supply would have been outside Canada) or by shipping the RV to the customer in the U.S. on a common carrier (thereby engaging zero-rating). Both options were cumbersome or inconvenient, and what it did instead was to deliver the RV to the customer in a parking lot just north of the border, with the customer then driving the RV across the border as the importer of record. When CRA assessed the applicant for failure to charge HST on the sales (on the basis that they were taxable under s. 142), the applicant paid the tax but then requested that CRA recommend a remission order under s. 23(2) of the Financial Administration Act. The requested grounds were three of the criteria set out in the CRA Remission Guide, namely, financial setback coupled with extenuating factors, incorrect CRA advice and “unintended results of the legislation.”
After finding that CRA had reasonably rejected the first two grounds, Manson J went on to find that CRA had not been unreasonable in choosing “to follow the express language of section 142 over the broader purpose of the ETA to tax the consumption of goods or services in Canada,” noting that this was “consistent with past jurisprudence of this Court which has preferred the strict language of the ETA over its broader purpose.” However, he went on to state, obiter:
[I]f I had [instead] applied the correctness standard to this issue, I may have come to the opposite conclusion.
…The Officer’s literal interpretation tends to frustrate both a purposive construction of section 142 and the intent of the ETA to tax consumption of goods in Canada … [and] appears to lead to a result which is at odds with the equitable underpinnings of subsection 23(2) of the FAA.
Neal Armstrong. Summaries of Escape Trailer Industries Ltd v. Canada (Attorney General), 2019 FC 31 under Financial Administration Act, s. 23(2), ETA s. 142(1)(a) and Statutory Interpretation – Ordinary meaning.