17 January 2006 GST/HST Interpretation 64912 - Timing of tax liability on holdback amounts

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 a vehicle brought into XXXXX a participating province by an individual who is an Indian.

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

Statement of Facts

We understand that:

•   A XXXXX resident of a participating province purchased a motor vehicle from a XXXXX non-participating province-based motor vehicle dealer;

•   The XXXXX resident is an Indian as defined in the Indian Act;

•   The vehicle was delivered to a reserve in XXXXX the non-participating province where the Indian took possession of it;

•   The dealer did not charge any sales tax on this transaction in accordance with section 87 of the Indian Act and B-039R2;

•   The Indian brought the vehicle to XXXXX a participating province and registered it;

•   The Indian does not live on a reserve and the motor vehicle was not delivered to a reserve in the participating province. XXXXX

Ruling Requested

You would like to know whether the participating province XXXXX is required to collect the 8% portion of the HST at the time of registering a vehicle that was brought into the participating province XXXXX by an Indian who acquired the vehicle tax relieved in a non-participating province.

Ruling Given

Based on the facts set out above, we rule that the participating province XXXXX is not required to collect the 8% portion of the HST from the Indian at the time of registering the vehicle because the Indian acquired the vehicle tax-relieved as the requirements of GST/HST Technical Information Bulletin, GST/HST Administrative Policy - Application of GST/HST to Indians (B-039R2) and section 87 of the Indian Act were met at the time of acquisition.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Section 87 of the Indian Act provides tax relief for "personal property of an Indian or band situated on a reserve". The administrative policy of the CRA concerning the application of GST/HST to Indians, bands and band-empowered entities is explained in B-039R2. The guidelines in B-039R2 are fully consistent with the relieving provisions in section 87 of the Indian Act affecting the personal property of an Indian situated on a reserve.

In order for tax relief to be available, the property must be that of an Indian and it must be situated on a reserve. Therefore, where property is acquired off a reserve and delivered to a reserve, the Indian must take possession of the property on the reserve in order to meet this condition.

There is no requirement that individuals reside on a reserve in order to qualify for tax relief. Where an Indian acquires a vehicle off a reserve, the Indian is still required to have the vehicle delivered to a reserve by the vendor or the vendor's agent in order for tax relief to apply. Normal GST/HST rules will apply where an Indian purchases a vehicle and takes possession of the property off a reserve and the Indian makes the arrangements to have the vehicle delivered to a reserve.

Where the Indian takes possession of a vehicle that is delivered to a reserve, the Indian is entitled to tax relief. There are no provisions under the Indian Act that require an Indian to pay tax when tax-relieved property is removed from a reserve. Consequently, the movement of the property does not initiate the imposition of tax where tax relief was available at time of first possession.

In the present scenario, the property is being brought into a participating province from a non-participating province. Normally the 8% portion of the HST would be payable upon registering the vehicle. However, the 8% portion of the HST will not apply on the registration of the vehicle in the participating province XXXXX where the vehicle was supplied to an Indian and the Indian has documentary evidence that the vehicle was initially delivered to a reserve and relief of the GST was appropriately given to the Indian at that time of acquisition.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7954.

Yours truly,

K. Chesterman
Aboriginal Affairs Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/01/18 — RITS 65096 — Application of GST/HST to XXXXX Nutritional Supplement Bars