Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower “A”, 20th floor
320 Queen Street
Ottawa, ON K1A 0L5
Case Number: 168093
[Addressee]
Dear [Client]:
Subject: EXCISE TAX INTERPRETATION
[Application of excise tax to Air Conditioners installed in Electric Vehicles]
Thank you for your […][correspondence], concerning the application of the non-GST/HST portion of the Excise Tax Act (the Act) to automotive air conditioners installed in electric vehicles. I apologize for the delay in responding.
All legislative references are to the Act and the regulations therein, unless otherwise specified.
INTERPRETATION REQUESTED
[…][The Company] produces fully electric vehicles, which operate solely by charging high voltage battery packs via private and public electricity input. [The Company] believes that the $100 excise tax on air conditioners should not apply to its fully-electric vehicles (i) manufactured and sold in Canada, or (ii) imported into Canada.
INTERPRETATION GIVEN
Based on the information provided, we issue the following interpretation:
An air conditioner installed in an electric vehicle, such as […][Vehicle A], is subject to the $100 (CDN) excise tax.
In 1977, the Act was amended to add this $100 excise tax on automotive air conditioners. Section 7 of Schedule I to the Act states that an excise tax of $100 is imposed on:
“Air conditioners designed for use in automobiles, station wagons, vans or trucks whether:
(a) separate, or
(b) included as equipment permanently installed in the vehicles at the time of the sale or importation by the manufacturer or importer, as appropriate.”
This section does not stipulate an exception for electric vehicles. Moreover, it does not draw a distinction as to how the air conditioner is operated. To date, the Act has not been amended to exempt this tax for air conditioners designed for use in electric vehicles.
In your letter, you refer to paragraph 17 of ETSL Memorandum 3.1, Goods Subject to Excise Tax (ETSL 3.1), which cites exceptions to the $100 excise tax imposed on air conditioners. It states, “The excise tax on air conditioners designed for automobiles, station wagons, vans or trucks applies only to those that are powered by the engines or power trains of the vehicles mentioned. Air conditioners that are powered by separate motors, propane or electricity are not subject to this tax.”
ETSL 3.1 outlines the excise tax application imposed under Part III of the Act, on specific goods enumerated in Schedule I to the Act. Paragraph 17 of the memorandum was intended to explain that the $100 excise tax applies to what are essentially in-dash air conditioners, designed for use in cars, station wagons, vans or trucks. At the time the memorandum was originally published this would have encompassed air conditioners that were powered by the engine or power train of the vehicle(s) in question.
The exception cited in paragraph 17 explains that the $100 excise tax does not apply to certain air conditioners. These are normally operated by a separate motor, propane or electricity and are not specifically designed for use in the above-stated vehicle types. These would include air conditioners noted in the following two examples:
(i) air conditioners in the rear cab of a truck, where sleeping compartments are located; and
(ii) air conditioners installed in the living area of motorhomes (other than those specifically designed for automobiles, station wagons, vans or trucks).
Since the original publication of ETSL 3.1, the automobile industry has changed significantly; one area has been the evolution of electric vehicles. ETSL 3.1 has not been updated to address electric vehicles when describing the application of this tax. That is, it does not identify electric vehicles that do not function via a traditional power train system and where the air conditioner is instead operated directly from the battery power source of the vehicle.
As noted in the memorandum’s disclaimer, the information provided therein is for reference purposes only. It does not replace the Act or its regulations. In case of any discrepancy between this information and the provisions in the Act or regulations, the legislative provisions apply.
Accordingly, the $100 excise tax is imposed on air conditioners installed in electric vehicles, such as [Vehicle A]. Changes to federal tax legislation, including excise tax rate determinations, are the responsibility of the Department of Finance Canada.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the Act, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me at (613) 957-9877 or Dennis Dekleva at (613) 954-4208.
Yours truly,
Michael Moskovic
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
Email this Content