File: 12000-3
Doc: 1266 XXXXX
August 1995
This letter refers to your facsimile transmission of May 2, 1995, on the above subject. We have also received:
(i) with the fax, a copy of a memorandum dated February 6, 1992, from this office entitled Occasional or Casual Taxi Drivers (this became Q&A 3.B.44);
(ii) notes on your subsequent telephone conversation on May 5, 1995, with a member of our staff, namely, Dwayne Moore; and
(iii) your memorandum to Dwayne Moore dated May 5, 1995, with an attached copy of a letter to XXXXX of your office from XXXXX of XXXXX seeking clarification of his registration status.
I can understand your concern with one of the conclusions in the memorandum dated February 6, 1992. I plan to issue a revised memorandum on registration of taxis as soon as possible. In the meantime, the fifth paragraph of the answer to the question in the policy ruling attached to the memorandum mentioned above should be disregarded. Some people have claimed, as stated in that policy and in former Q&A 3.B.44, that a casual taxi driver is neither an employee nor self-employed. (We have requested that Q&A 3.B.44 be removed from the Q&A database.)
Employee or Self-Employed
An individual will earn income from a business enterprise as either a self-employed person or as an officer or employee. An individual who has a commercial activity does so as a self-employed person. An office or employment is excluded from the meaning of a "business" under subsection 123(1) of the Excise Tax Act so an officer or employee cannot have commercial activity from the activity of his or her office or employment. The two categories of "self-employed" and "officer or employee" are mutually exclusive and exhaustive in scope for a particular transaction, set of transactions or business. There is no third category. Therefore, there is no room for a "casual driver" to be something other than an employee or self-employed.
In determining whether a relationship between two persons is a contract of service (i.e., employment) or a contract for services (i.e., independent contractor or self-employed) all of the elements in the relationship between the parties must be considered. Each situation must be evaluated on its own facts. There are several courts which have written useful judgements on this topic including:
• Wiebe Door Services Ltd. v. MNR, Federal Court of Appeal (Court No. A-531-85) [1986] 2 C.T.C. 200, [1986] E.T.C. 2132, 86 D.T.C. 5025, dated January 1, 1986; and,
• Castlegar Taxi (1988) Ltd. v. Director of Employment Standards, British Columbia Supreme Court, 84 D.L.R. (4th) 145, cross reference: 29 A.C.W.S (3d) 341, dated August 29, 1991.
Factors Used by Courts in Evaluating Employment Relationship
Some of the factors used in those cases in evaluating whether an employment relationship existed are listed below:
1. the degree or absence of control exercised by the alleged employer;
2. who has ownership of the tools (tools used in a broad enough sense that it could be used to mean the taxicab);
3. chance of profit and risks of loss;
4. integration of the alleged employee's work into the alleged employers business (also referred to as the "organization test");
5. the nature of the daily relationship between the parties;
6. whether the alleged employee works for one person (the alleged employer) or more than one person (customers); and
7. whether the alleged employee has the power to delegate tasks to those he employs.
Factors Relating to Taxis
As well as the general factors listed above there are some factors that have been used in cases dealing specifically with taxi drivers and taxi operators.
In the Castlegar case, a significant factor that was used to help determine that a person was not an employee was that the person leased a taxicab for a fixed fee which gave him proprietary rights to the "tools" needed to carry on a business.
Other factors mentioned in the Castlegar case included:
• drivers being subject to direction and disciplinary action;
• company determining when the drivers work;
• company holding taxicab licences;
• company dispatching business to drivers;
• company reserving right to terminate relationship either for cause or arbitrarily;
• company setting dress code for drivers;
• drivers not being permitted to allow free rides and drivers not being allowed to carry out own errands except in course of delivering passengers to destination;
• company policy governing the driver's use of the vehicle between passengers hiring of the cabs; and
• drivers being required to make daily filings of fares taken.
Deduction of CPP and UI Not a Determining Factor
It should be noted that whether or not a taxi business operator deducts Canada Pension Plan (CPP) contributions and Unemployment Insurance (UI) premiums is not a determining factor in deciding whether or not a taxi driver is self-employed or not.
At the taxi industry's request, special UI regulations were made so that taxi drivers who are not actually hired as regular employees have their earnings insured even though they are self-employed. This applies to taxi drivers who are not the registered or beneficial owner of the vehicle they drive and who do not own or operate the business of dispatching or managing taxi stands. The operator of those businesses is considered to be the employer of those taxi drivers for UI purposes but not for GST or income tax purposes.
Requirement to Register for GST
The requirements for registration make no mention of how often or frequently a taxi service must be made before the person making such a service is required to register. All that has to be established is that the person is carrying on a business of transporting passengers by taxi. A two week period as a driver, if the driver is self-employed, could easily be enough to qualify as carrying on a business.
The practical result is that any person who drives a taxi transporting passengers will be required to be registered, no matter how "casual" the driving is, unless they are an employee of a taxi business. I am assuming the fares the driver collects are regulated by the province or by a municipality authorized to regulate fares. That regulation is required because of the definition of "taxi business" in subsection 123(1) of the Excise Tax Act, but determination of that regulation is a question of fact that you may determine in your district.
If you have any comments or questions, please do not hesitate to contact Tom Alley, Tax Policy Officer at (613) 952-9218.
Enikö Vermes
Manager
Health Care, Goods and Services Unit
Special Sectors
GST Rulings and Interpretations
| c.c.: |
Enikö Vermes
Adam Belyea
Tom Alley XXXXX |
References: ETA subsection 123(1) & sections 165, 171.1, 240, 241.
Unemployment Insurance Regulations, Part II, subsection 12(e) and Employer's Guide to Payroll Deductions (Chapter 8, Special Situations).
Jurisprudence in addition to two cases mentioned in letter:
(a) Manitoba Court of Appeal: Imperial Taxi Brandon (1983) Ltd. v. Hutchison (1987), 46 D.L.R. (4th) 310, 50 Man. R. (2d) 81 apld
(b) Supreme Court of Canada: Re Yellow Cab Ltd. and Board of Industrial Relations (1980), 114 D.L.R. (3d) 427, [1980] 2 S.C.R. 761, 80 C.L.L.C. 14,066, 24 A.R. 275, 14 Alta. L. R. (2d) 39, 33 N.R. 585 distd
(c) Alberta Court of Appeal: Re Pannu et al. and Prestige Cab Ltd. [86 09 11] 31 D.L.R. (4th) 338
(d) British Columbia Supreme Court: Morrison v. Yellow Cab Co. Ltd. (1956), 1 D.L.R. (2d) 607
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