1378055 Ontario – Tax Court of Canada allocates invoices between commercial and exempt activities based on general oral testimony

Individuals within the same extended family and a corporation controlled by family trusts sent vaguely worded invoices to a family company (the appellant, or “137ON”) for services rendered, without giving any allocation between the portion that related to 137ON’s exempt activity of earning exempt residential rentals, and its commercial activity of trying to get one of the residential sites developed as a commercial storage site. Sommerfeldt J concluded on the basis of relatively sparse oral testimony on this point that 75% of the invoices rendered (other than invoices rendered by a family member who was responsible for administering the residential rental activity and whose services were found to be only 25% commercial) related to the commercial development activity (which did not particularly progress in the years in question) rather than to the exempt residential rental activity, so that, subject to invoice-documentation issues, input tax credits were available as to the indicated percentages.

Respecting the form of the invoices, he found that it was not necessary to spell out payment terms (notwithstanding the requirement in s. 3(c)(iii) of the Input Tax Credit Information GST/HST) Regulations to this effect) given that there was an implied payment term:

[I]f a contractual document (which presumably includes an invoice) does not state express terms of payment, the fee or price that is the subject of the invoice is payable in cash currently or perhaps within a reasonable time.

However, the failure of some invoices to state the HST registration number of the supplier was fatal to the claiming ITCs for those invoices.

Implicitly, he found that the vague invoice descriptions of the services rendered (e.g., “administration, consultation and management services”) was sufficient to satisfy s. 3(c)(iv) of such Regs.

Neal Armstrong. Summaries of 1378055 Ontario Limited v. The Queen, 2019 TCC 149 under ETA s. 141.01(2), s. 169(1) – B(b), Input Tax Credit Information GST/HST) Regulations s. 3(c)(iii) and s. 3(b)(i).