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: 161373
Dear [Client]:
Subject: EXCISE INTERPRETATION / RULING
Application of Federal Excise Tax on Air Conditioners to "Qualifying Vehicles"
Thank you for your letter of March 21, 2014 concerning the application of the Excise Tax Act to qualifying vehicles.
All legislative references are to the Excise Tax Act and the regulations therein, unless otherwise specified.
We understand that you are seeking an interpretation of the term “qualifying vehicle” as defined in section 1 of Schedule I to the Act. Further, we understand that you would like a ruling as to whether the $100 federal excise tax on air conditioners designed for use in motor vehicles would apply to seven classifications of vehicles as outlined in the List of Tariff Provisions set out in the schedule to the Customs Tariff. Their respective classifications are 8704.10, 8704.21, 8704.22, 8704.23, 8704.31, 8704.32, and 8704.90.
INTERPRETATION REQUESTED
You would like to know how the term “qualifying vehicle” is used in determining the application of the $100 federal excise tax on air conditioning units installed in motor vehicles.
RULING REQUESTED
You would also like to know whether the seven classes of motor vehicles you listed in your letter would be subject to the $100 federal excise tax if they were imported with air conditioners installed in them.
INTERPRETATION GIVEN
You are correct that the term “qualifying vehicle” is not the determining factor as to whether or not the excise tax applies. The term is used in paragraph 8(d) of Schedule I to the Act to identify specific vehicles that might qualify for an exemption from the excise tax imposed on air conditioners. Please note that the term is also used elsewhere in the Act (e.g paragraph 10(d) of Schedule I to the Act).
RULING GIVEN
Based on the information provided, some of the vehicles listed might constitute a “qualifying vehicle” and therefore be exempt from the federal excise tax on air conditioning units installed therein (provided they meet the other applicable conditions), while others would not.
For the seven classifications of vehicles you provided:
1. Two classes of vehicles, 8704.10 and 8704.23, are not mentioned in the definition of “qualifying vehicle” under the Act. They therefore would not qualify under any circumstances, and would be subject to the $100 federal excise tax on air conditioning units.
2. The other five classifications of vehicles (8704.21, 8704.22 and 8704.32 with a gross vehicle weight rating not exceeding 10 tonnes, 8704.31, and 8704.90), would meet the definition of “qualifying vehicle”. As a result, if they were to meet all of the conditions described in subparagraphs 8(d)(i) to 8(d)(iv), they would not be subject to the $100 federal excise tax on air conditioning units designed for use in automobiles.
Paragraph 8(d) enumerates the only circumstance relative to the federal excise tax on air conditioners designed for use in motor vehicles where a “qualifying vehicle” would not be subject to the tax. All of the conditions under paragraph 8(d) would have to be met in order to qualify for the exemption.
Applicable Legislation
Section 7 of Schedule I to the Act states that “Air conditioners designed for use in automobiles, station wagons, vans or trucks whether (a) separate, or (b) included as permanently installed equipment in an automobile, station wagon, van or truck at the time of sale or importation of the vehicle by the manufacturer or importer thereof, as the case may be, one hundred dollars…”.
Paragraph 8(d) of Schedule I goes on to state that “Section 7 does not apply in the case of any air conditioner described therein…that is included as permanently installed equipment in an automobile, station wagon, van or truck if the automobile, station wagon, van or truck
(i) is a qualifying vehicle,
(ii) is imported temporarily by an individual resident in Canada and not accounted for as a commercial good under section 32 of the Customs Act,
(iii) was last supplied in the course of a vehicle rental business to the individual by way of lease, licence or similar arrangement under which continuous possession or use of the automobile, station wagon, van or truck is provided for a period of less than 180 days, and
(iv) is exported within 30 days after the importation.
Section 1 of Schedule I to the Act defines “qualifying vehicle” as “a vehicle (other than a racing car described in heading 87.03 of the List of Tariff Provisions set out in the schedule to the Customs Tariff) registered under the laws of a foreign jurisdiction relating to the registration of motor vehicles that
(a) is described in any of heading…No. 8704.21, 8704.31, 8704.90…”
(b) is described in subheading 8704.22 or 8704.32 of that List and has a gross vehicle weight rating (as defined in subsection 2(1) of the Motor Vehicle Safety Regulations) not exceeding 10 tonnes…”.
The foregoing interpretation represents our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1-4 – Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the Excise Tax Act, regulations, or our interpretative policy could affect this interpretation.
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 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 Excise Tax Act, 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) 957-1140.
Yours truly,
Neil Varan
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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