26 August 2005 GST/HST Interpretation 56085 - Protein Supplement Powder Mixes

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your purchase of a truck.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

We understand that you purchased a new truck in XXXXX and paid GST. In addition, our records indicate that you are registered for GST/HST purposes as a sole proprietor XXXXX. You file your GST/HST returns on a quarterly basis.

In our telephone conversation XXXXX, you stated that the truck had only one seat (the driver's seat), that you used it in excess of 90% in your commercial activities and that your accountant claimed capital cost allowance on the truck for income tax purposes. You traded this truck in when you purchased the other truck in XXXXX.

Interpretation Requested

You would like to know if you are eligible to claim an input tax credit (ITC) for the GST you paid on the truck purchased in XXXXX.

Interpretation Given

Section 169 provides that, in order for a person to be eligible to claim an input tax credit for the tax payable in respect of property or a service, the following conditions must be met:

1. the property or service must be supplied to or imported by the person;

2. the person must be a GST/HST registrant during the reporting period in which the supply or importation is made;

3. tax must be payable by the person in respect of the supply or importation, or be paid by the person prior to its becoming payable;

4. the property or service must be acquired or imported by the person for the purpose of consumption, use or supply in the course of commercial activities of the person; and

5. the person must have obtained sufficient documentary evidence, including any prescribed information as set out in the Input Tax Credit Information (GST/HST) Regulations, to establish the eligibility for the input tax credit before the claim is made.

Where the above conditions under subsection 169(1) have been met, your eligibility to claim an ITC for the GST paid on the truck also depends on whether the truck is considered to be a motor vehicle or a passenger vehicle, the extent to which you use the truck in your commercial activities and the time limitations in section 225 for claiming an ITC.

Subsection 123(1) of the ETA provides that a passenger vehicle has the meaning assigned by subsection 248(1) of the Income Tax Act (ITA). Subsection 248(1) of the ITA states that a passenger vehicle means an automobile acquired after June 17, 1987 (other than an automobile acquired after that date pursuant to an obligation in writing entered into before June 18, 1987) and an automobile leased under a lease entered into, extended or renewed after June 17, 1987.

An "automobile" is defined in subsection 248(1) of the ITA to mean:

(a) a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers,

but does not include

(b) an ambulance,

(b.1) a clearly marked emergency-response vehicle that is used in connection with or in the course of an individual's office or employment with a fire department or the police;

(c) a motor vehicle acquired primarily for use as a taxi, a bus used in a business of transporting passengers or a hearse used in the course of a business of arranging or managing funerals,

(d) except for the purposes of section 6, a motor vehicle acquired to be sold, rented or leased in the course of carrying on a business of selling, renting or leasing motor vehicles or a motor vehicle used for the purpose of transporting passengers in the course of carrying on a business of arranging or managing funerals, and

(e) a motor vehicle

(i) of a type commonly called a van or pick-up truck, or a similar vehicle, that has a seating capacity for not more than the driver and two passengers and that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods or equipment in the course of gaining or producing income,

(ii) of a type commonly called a van or pick-up truck, or a similar vehicle, the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income, or

(iii) of a type commonly called a pick-up truck that is used in the taxation year in which it is acquired or leased primarily for the transportation of goods, equipment or passengers in the course of earning or producing income at one or more locations in Canada that are

(A) described, in respect of any of the occupants of the vehicle, in subparagraph 6(6)(a)(i) or (ii), and

(B) at least 30 kilometres outside the nearest point on the boundary of the nearest urban area, as defined by the last census dictionary published by Statistics Canada before the year, that has a population of at least 40,000 individuals as determined in the last census published by Statistics Canada before the year.

Lastly, a "motor vehicle" under the ITA means "an automotive vehicle designed or adapted to be used on highways and streets but does not include:

(a) a trolley bus; or

(b) a vehicle designed or adapted to be operated exclusively on rails.

If you determine from the above ITA definitions that your truck is considered to be a motor vehicle, then the capital property rules in the ETA will apply. If you determine that the truck is a passenger vehicle, then the rules for passenger vehicles will apply for GST purposes.

Capital property rules

Under subsections 199(1) and 199(2) of the ETA, a registrant individual may claim an ITC for tax paid or payable on the acquisition of a motor vehicle if it is to be used as capital personal property primarily (more than 50%) in commercial activities of the individual registrant. When the motor vehicle is for use primarily in commercial activities, the registrant is considered to use the property exclusively in such activities and may claim a full ITC subject to the conditions in section 169 and the time limitations for claiming an ITC in section 225.

Paragraph 225(4)(b) of the ETA provides that an ITC of a person (who is not a specified person) for a particular reporting period shall not be claimed by the person unless it is claimed on or before the day the return is required to be filed for the last reporting period that ends within four years after the end of the particular reporting period.

For example, if you purchased the truck in the quarterly reporting period ending on June 30, 1998, the ITC must be claimed no later than in the return for the reporting period ending June 30, 2002 which is required to be filed by July 31, 2002.

Passenger vehicle rules

Where a passenger vehicle (or aircraft) is acquired or imported by a registered individual (or partnership) all or substantially all (90% or more) in the course of the registrant's commercial activities, the property will be deemed under subsection 202(2) to be used exclusively in the individual's commercial activities. Accordingly, the registrant is eligible to claim a full ITC for the GST paid on the acquisition of the passenger vehicle provided the conditions in section 169 have been met and the ITC has been claimed within the four-year limitation period.

Regardless of whether a truck is considered to be a motor vehicle or a passenger vehicle, a registrant would not be eligible to claim an ITC for tax paid on the purchase of a truck in 1998 as the four-year limitation period in paragraph 225(4)(b) of the ETA has expired.

The foregoing comments represent 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, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-7931.

Yours truly,

Anne Kratz
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/08/12 — RITS 56852 — XXXXX Eligibility for Relief of GST