5 April 1994 GST/HST Interpretation 11785-5 - Definition of Automobile for Purposes of Subsection 340(3) of the Excise Tax Act

                                                                        Telephone: (613) 954-8585
Fax: (613) 990-3602
XXXXX                                                                                 File: 11785-5(on)
XXXXX                                                                                 ss. 340(3)
XXXXX

I refer to a letter of February 11, 1994 (copy attached), from XXXXX addressed to Mr. Robert Allwright of my staff. XXXXX advised that an audit assessment had been raised against a member of one of his clients, XXXXX. The assessment pertains to the application of the grandfathering provision in subsection 340(3) of the Excise Tax Act (the Act).

An auditor from your office raised an assessment against a XXXXX, XXXXX, in September 1993. The assessment was the result of a difference in interpretation given to the meaning of "automobile" as this term appears in ETA 340(3). XXXXX has grandfathered leases of vans and pick-up trucks as "automobiles" where the other conditions for grandfathering were met. The auditor disagreed with the grandfathering status given to such vehicles where the lessees were using the vehicles in a commercial activity.

Subsequent to a request for a review of the audit file by the District Chief of Audit, the file was referred to the District Informal Review Committee for consideration. The committee agreed with the findings of the auditor.

Prior to the implementation of the GST in 1991, XXXXX sought an interpretation from my office on the meaning of automobile as this term appears in subsection 340(3) of the Act. I provided XXXXX with an interpretation, dated October 3, 1990 (copy attached), which was communicated to all its' dealers. In my interpretation I stated that:

... the word "automobile" is meant to have a restrictive meaning. However, the Department is prepared to interpret the word more broadly to encompass certain other motor vehicles which are prevalently acquired for personal use. Such other motor vehicles include vans, pick-up trucks, station wagons.

This interpretation is reiterated in the Q & A database in query number 518 (copy attached).

XXXXX has commented that the relevant criteria to grandfather a lease is the type of vehicle. The status of the lessee is not relevant. I agree with XXXXX. Vehicles, such as vans, pick-up trucks and station wagons which are predominantly or very frequently, acquired for personal use, but which may be used for business purposes are included in the definition of automobile for the purposes of subsection 340(3). The status of the person acquiring the automobile or the use to which the vehicle is put are not relevant to the grandfathering of these automobile leases.

The wording in the October 3, 1990 interpretation to XXXXX and the above noted Q & A are not clear. They may be interpreted to suggest an end-use requirement. This was not our intent. XXXXX[.]

I trust that my comments have clarified our position on this matter and that the disputed assessments can be resolved in a satisfactory manner. Should you have any questions on this case, please contact Owen Newell at (613) 954-4280.

H.L. Jones
Director
General Tax Policy
Policy and Legislation

att.

GTP: XXXXX