13 January 1999 GST/HST Interpretation HQR0001493 - Collection of the Harmonized Sales Tax (HST) on Specified Motor Vehicles

I refer to your facsimile message of December 3, 1998, addressed to Mr. Marcel Boivin, concerning the collection of the HST of 15% or the provincial component of the HST of 8% by participating provinces XXXXX on specified motor vehicles.

The following scenario, question and suggested solutions XXXXX were outlined in your message:

A purchaser of a specified motor vehicle registers a vehicle at the local provincial motor vehicle office. If the purchaser bought the vehicle from a GST/HST registrant (XXXXX XXXXX, the officer at the motor vehicle office examines the purchase invoice to see if tax was charged. If tax was not charged (i.e., shown as a separate charge) on the invoice, what is the responsibility of the province?

The Province of XXXXX is requesting that in the above scenario, the Province collect either

a) the 8% provincial component of the HST, or

b) collect the 15% HST and deposit the funds into the HST funds that are forwarded to Revenue Canada.

I agree with your analysis concerning a) above. The application of Division IV.1 tax on tangible personal property is covered by sections 220.05, 220.06 and 220.07 of the Excise Tax Act (Act). These sections outline the circumstances in which a person is required to pay the 8% provincial component of the HST. However, the scenario outlined in your message is not covered by any of these provisions. Therefore, there is no requirement for the recipient to pay the 8% provincial component of the HST and there is no authority for the provincial motor vehicles office to collect the provincial component of the tax.

Subsection 221(1) of the Act requires the person making a taxable supply (of a motor vehicle) to collect the GST/HST payable thereon from the recipient of the supply as an agent for Her Majesty in right of Canada. However, the Province of XXXXX did not make a taxable supply of a motor vehicle. Therefore, there is no authority for the provincial motor vehicles office to collect the 15% HST.

Although not part of your request, I would also like to discuss the possible application of the 15% provincial motor vehicle tax (PMVT).

The XXXXX Part IIA, section 31B states that: "Every purchaser shall pay to Her Majesty in right of the Province a tax at the rate of fifteen per cent of the purchase price of motor vehicles and other designated tangible personal property where the purchase is not a taxable supply made by a registrant pursuant to Part IX of the Excise Tax Act (Canada)."

Referring to the aforementioned scenario, the only time this provision could come into play whereby the Province of XXXXX would collect the 15% PMVT would be if the supply was deemed not to be a taxable supply, such as by virtue of subsections 200(3) or 203(3) of the Act. In any other case, which would probably represent the majority of the cases, if the motor vehicle was purchased from a registrant and the supply is a taxable supply, the provincial motor vehicles office does not have the authority, under the Sales Tax Act, to collect the 15% PMVT. Generally, in situations where the supplier is a non-registrant (e.g., private sales), the provincial levy of 15% would apply.

The above opinions would also apply to scenarios involving a motor vehicle purchased from a registrant in the Province of XXXXX, except that reference should be made to the Harmonized Sales Tax Act of XXXXX[.]

To summarize, the provincial motor vehicle offices in XXXXX do not have the authority under the Act to collect the 8% provincial component of the HST or the 15% HST. In addition, in the majority of instances they do not have the authority, under their respective sales tax acts, to collect the 15% PMVT.

Although not part of your query, I would like to mention that the Province of XXXXX XXXXX established a transitional tax which applies to automobiles and heavy equipment leased or purchased after March 1997. The transitional tax rates are 2% for the period April 1, 1997, to March 31, 1998, and 1% from April 1, 1998, to March 31, 1999. The tax does not apply after March 31, 1999.

Section 223 of the Act sets out the general tax disclosure requirements with which all registrants must comply when making taxable supplies. Specifically, registrants making taxable supplies of goods and services are required to disclose to purchasers, in one of three ways, that the HST has been charged on the supply, as follows:

•   by indicating on receipts, invoices or in a written agreement the consideration paid or payable and the actual amount of tax payable on the supply in a manner that clearly indicates the amount of tax;

•   by indicating on receipts, invoices or in a written agreement that the amount paid or payable includes the tax payable on the supply; or

•   in a manner prescribed by regulation, such as by giving clearly visible notice to the recipient of the taxable supply at the place where the supply is made that the price includes the tax or that the price includes the tax where applicable (e.g., signs).

Where staff of a provincial motor vehicle office run into situations where the HST is not shown as a separate charge on the invoice or agreement, and there is no indication on the documentation that the total cost to the purchaser includes the tax, they could provide the information to Audit for follow-up. If it is determined that the supplier does, in fact, have signs posted indicating that the price includes the HST, the requirements of subsection 223(1) will have been satisfied. If not, then it would be appropriate for Audit to inform the supplier that the supplier is not complying with the requirements of the Act.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6743.

Garry L. Ryhorchuk
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate