20 December 1999 GST/HST Interpretation 13586/HQC0004867 - Section 261 Rebates - Returned Vehicle or "Sale-back"

This memorandum is in response to your enquiry regarding section 261 of the Excise Tax Act (ETA). The issue at hand concerns whether a rebate under section 261 could be paid out to a claimant who purchased a used vehicle from a registrant in XXXXX. The claimant paid the harmonized sales tax (HST) on the purchase price of the vehicle. The claimant took the vehicle to have it inspected for registration purposes and found that it required more than XXXXX in repairs in order to have it pass inspection. The claimant then returned the vehicle to the vendor who "refunded" the purchase price of the vehicle less the HST.

To determine whether the claimant is entitled to a rebate we would need to know the actual facts of the scenario presented. As we were unable to obtain further information pertaining to the situation at hand, we will address the issue in general.

Dependent on whether the claimant actually returned the vehicle and was refunded the purchase amount or whether the vehicle was actually sold back to the vendor for an amount equal to the purchase amount would determine whether the claimant would be entitled to claim a rebate under section 261 of the ETA.

If the vehicle has been sold back to the original vendor and the original purchaser (the claimant) was not a registrant for GST/HST purposes then the supply would not have been subject to tax. It would have been up to the claimant to have incorporated an amount into the purchase price to essentially recover an amount equal to the tax he had paid on the original purchase.

If the vehicle was actually returned to the vendor rather than sold back, and the claimant was issued a refund of the purchase price less the tax paid, provided the claimant has sufficient documentary evidence to support his claim, he would be entitled to a refund of the tax that was paid. The claimant could either request a refund, or credit of the tax collected from the vendor pursuant to subsection 232(2) of the ETA, or if unable to obtain relief from the vendor who maybe unwilling to use that mechanism, the claimant could then file a rebate claim under section 261 of the ETA.

I hope this will be of some assistance to you. If you are able to obtain more information concerning this matter feel free to forward it to us for further review. Should you have any further questions, please contact me at (613) 952-0419.