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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 168521r
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Charge on tire sales
Thank you for your letter of March 9, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the amounts […][ACo] charges on sales of tires and which it separately identifies as an Ontario Tire Stewardship (“OTS”) charge on its sales invoices.
[…]
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the facts to be as follows:
[ACo]
1) [ACo] is an Ontario based tire retailer with locations in […][Township A] and […][Township B].
2) [ACo] was incorporated on [mm/dd/yyyy] and registered for GST/HST purposes on [mm/dd/yyyy].
Ontario’s Waste Diversion Act, 2002 (WDA)
3) The WDA provides legislative authority for the establishment of waste diversion programs in Ontario and the imposition of fees to recover the costs of the programs.
4) Section 1 of the WDA provides that its purpose “is to promote the reduction, reuse and recycling of waste and to provide for the development, implementation and operation of waste diversion programs.”
5) Section 3 of the WDA establishes Waste Diversion Ontario (WDO), a corporation without share capital.
6) Section 5 of the WDA sets out the (WDO)’s responsibilities, which include:
“(a) develop, implement and operate waste diversion programs for designated wastes in accordance with this Act and monitor the effectiveness and efficiency of those programs;
…
(d) determine the amount of money required by (WDO) and the industry funding organizations to carry out their responsibilities under this Act;
…”
7) Subsection 23(1) of the WDA states that, “The Minister may require (WDO) to develop a waste diversion program for a designated waste.” Subsection 23(2) of the WDA states that, “(WDO) shall develop the program in co-operation with an industry funding organization (IFO).”
8) Subsection 24(1) of the WDA states that, “If (WDO) is required under section 23 to develop a waste diversion program for a designated waste, (WDO) shall cause a corporation without share capital to be incorporated under Part III of the Corporations Act for the purpose of the program.”
9) Subsection 25(3) of the WDA states that, “A waste diversion program developed under this Act must include an agreement between (WDO) and the (IFO) that the program is developed in co-operation with, governing the role of the (IFO) in the implementation and operation of the program and governing the exercise of the (IFO’s) powers under this Act.”
10) Subsection 26(1) of the WDA states that, “After a waste diversion program has been developed under section 23, (WDO) shall submit the program to the Minister for his or her approval.”
11) Subsection 26(2) of the WDA states, in part, that:
“The information submitted to the Minister must include the following:
1. The name of the (IFO) that the program has been developed in co-operation with.
…”
12) Subsection 29(1) of the WDA states that, “… (WDO) and the (IFO) shall implement and operate the program in accordance with the agreement referred to in subsection 25(3).”
13) Subsection 30(1) of the WDA states, in part, that:
“If an (IFO) is designated by the regulations as the (IFO) for a waste diversion program, the (IFO) may make rules,
(a) designating persons or classes of persons as stewards in respect of the designated waste to which the waste diversion program applies;
(b) setting the amount of the fees to be paid by stewards under subsection 31(1) or prescribing methods for determining the amount of the fees;
…”
14) Subsection 31(1) of the WDA states that, “A person who is designated under the rules made by an (IFO) as a steward in respect of a designated waste shall pay to the (IFO) the fees determined in accordance with the rules at the times specified by the rules.”
15) Subsection 42(1) of the WDA states that:
“The Minister may make regulations,
…
(b) prescribing material as designated wastes for the purposes of this Act;
…
(e) continuing an (IFO) named under paragraph 1 of subsection 26(2) and designating the organization as the (IFO) for a waste diversion program that has been approved by the Minister under section 26;
…”
16) Ontario Regulation 84/03 Used Tires (the Regulation) was made pursuant to subsection 42(1) of the WDA.
17) Section 2 of the Regulation prescribes used tires as a designated waste for the purposes of the WDA.
18) Section 3 of the Regulation states that, “Ontario Tire Stewardship is continued under the name Ontario Tire Stewardship in English and Société de gestion des pneus usagés de l’Ontario in French and is designated as the (IFO) for the waste diversion program for used tires approved by the Minister under section 26 of the Act.”
19) Subsection 8(2) of the Regulation states that, “The amount of a fee required to be paid in respect of each calendar month during a base fee period by a steward designated under the Act in respect of used tires shall be determined by applying the method set out in this section.”
20) Subsection 8(3) of the Regulation states that:
“Ontario Tire Stewardship shall,
(a) determine the cost attributable to each tire class in respect of the base fee period by,
(i) determining the sum of the amounts described in paragraph 1 of subsection 30(3) of the Act that were incurred in relation to used tires during the cost reference period, and
(ii) determining, subject to subsection (4), the portion of that sum that is attributable to each tire class; and
(b) determine the cost attributable to a tire in each tire class in respect of the base fee period by,
(i) assigning each tire supplied by stewards during the cost reference period to a tire class if the tire meets the criteria of the tire class, and
(ii) dividing the cost attributable to a tire class, as determined under clause (a), by the number of tires assigned to that tire class under subclause (i).”
21) Subsection 8(5) of the Regulation states that, “Ontario Tire Stewardship shall provide written notice to each steward of the cost attributable to each tire class under clause (3)(a), the number of tires assigned to each tire class under subclause (3)(b)(i) and the cost attributable to a tire in each tire class under clause (3)(b)…”
22) Subsection 8(6) of the Regulation states that:
“A steward shall determine the amount of the fee required to be paid by a steward in respect of a calendar month by,
(a) assigning each tire supplied by the steward during the calendar month to a tire class in respect of the base fee period if the tire meets the criteria of the tire class;
(b) multiplying the cost attributable to a tire in each tire class, as determined under clause (3)(b), by the number of tires assigned to the tire class under clause (a); and
(c) determining the sum of all amounts determined under clause (b).”
23) Pursuant to subsection 30(1) of the WDA, Ontario Tire Stewardship made “Rules for Stewards with Respect to Payment of Tire Stewardship Fees (Steward Rules).”
24) Rule 1 of the Steward Rules includes the following definitions:
“Brand Owner means, with respect to Branded Tires, during any time in the Data Period:
(a) a Person Resident in Ontario who is the registered owner of the Brand, or
(b) a Person Resident in Ontario who is a licensee of the registered owner of the Brand, or
(c) a Person Resident in Ontario, who owns the intellectual property rights to the Brand, or
(d) a Person Resident in Ontario, who is a licensee, in respect of the intellectual property rights to the Brand;
…
First Importer means a Person Resident in Ontario who imports New Tires into Ontario but is not a Brand Owner of such New Tires, and includes a Person Resident in Ontario who is the first to take title to or delivery or possession of such Tires, upon or after arrival in Ontario from elsewhere during the Data Period. A Person who takes delivery/possession of New Tires only for the purpose of transporting them to another Person in Ontario is not the First Importer of the Tires;
…
OEM means a manufacturer or first importer of new vehicles for Supply in Ontario;
…
Steward means a Person designated as such under Rule 2; and “Stewards” means more than one Steward;”
25) OEMs, brand owners, and first importers are designated as stewards for new tires under Rule 2 of the Steward Rules.
26) Paragraph (1) of Rule 4 of the Steward Rules states that:
“Stewards shall pay Tire Stewardship Fees to (Ontario Tire Stewardship) on New Tires Supplied in the relevant Data Period in accordance with Appendix C. The amount of Tire Stewardship Fees shall be calculated in accordance with Appendix D by multiplying the number of units of each type of New Tires included in the Steward’s Report by the Fee Rate set out opposite such type.”
27) Ontario Tire Stewardship posts current tire stewardship fees that are payable by stewards on its website.
28) […], you confirmed that:
* [ACo]’s tire inventory consists of tires that [ACo] “imports” from […][Province X] into Ontario, and tires [ACo] purchases from Ontario-based tire manufacturers (i.e. brand owners).
* For purposes of the WDA and the Regulation, [ACo] is a steward in respect of the tires it “imports” from [Province X] for sale in Ontario. [ACo] is not a steward in respect of the tires it purchases from brand owners.
* [ACo] is a “first importer” as defined in Rule 1 of the Steward Rules, and designated as a steward under Rule 2 of the Steward Rules, in respect of the tires it “imports” from [Province X] for sale in Ontario.
* As first importer (i.e. a steward) of the tires it “imports” from [Province X], [ACo] pays tire stewardship fees to Ontario Tire Stewardship in respect of those tires.
* [ACo] charges its tire customers an amount for each tire and an amount separately identified on [ACo] sales invoices as an “OTS” charge for each tire purchased from [ACo].
* [ACo] refers to the tire stewardship fees posted on Ontario Tire Stewardship’s website to determine the amount it separately identifies as an “OTS” charge on its invoices on each tire purchased by a customer.
RULING REQUESTED
You would like to know whether the amount [ACo] charges on the sale of tires that is separately identified as an “OTS” charge is included in the value of the consideration for a taxable supply of tires and subject to GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that the amount [ACo] charges on the sale of tires that is separately identified as an “OTS” charge is part of the value of the consideration for a taxable supply of tires and is subject to GST/HST.
EXPLANATION
Under the authority of the WDA and the Regulation, only stewards (e.g. brand owners and first importers) are required to pay tire stewardship fees to Ontario Tire Stewardship. The tire stewardship fees that [ACo] pays (as first importer), and the costs of the tire stewardship fees that other stewards (e.g. brand owners) pay and pass on to [ACo] are costs of doing business that [ACo] chooses to pass on to its tire customers in a separately identified “OTS” charge on its invoices. For ETA purposes, this cost, even when separately identified as an “OTS” charge on an invoice to a tire customer, forms part of the consideration for a taxable supply of tires and is subject to GST/HST unless it is specifically excluded by the ETA.
In this regard, section 154 of the ETA and the Taxes, Duties and Fees (GST/HST) Regulations (the Regulations) specifically exclude certain provincial fees/levies, when they are payable by a recipient of a supply, from being included in the consideration for that supply for purposes of the ETA. As previously noted, under the WDA, the tire stewardship fee is imposed on the steward (generally, either the first importer or the brand owner of the tire). Therefore, based on the facts of this case, it is our understanding that the tire stewardship fee is payable by [ACo] when [ACo] is the first importer of the tire (i.e. when it purchases tires from [Province X]) and the fee is payable by the brand owner (i.e. the manufacturer) in respect of tires that [ACo] purchases from the manufacturer. As a result, in both of these circumstances, the tire stewardship fee is not payable by the recipient of [ACo]’s supply of tires (i.e. [ACo]’s tire customer) and it is not excluded from the consideration for the tire charged to the tire customer by virtue of section 154 of the ETA and the Regulations.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-8473. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Gentry Allen
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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