10 December 2003 GST/HST Interpretation 45604 - Rebate in Respect of the Purchase of Qualifying Motor Vehicles

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5

XXXXX XXXXX XXXXX XXXXX

Case Number: 45604File: 11860-1

XXXXX XXXXX

December 10, 2003

Subject:

GST/HST INTERPRETATION Rebate in respect of the purchase of qualifying motor vehicles

Dear XXXXX:

Thank you for your letter XXXXX (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of your client who is a purchaser of vehicles that provide transportation to individuals using wheelchairs. Note that all legislative references are to the Excise Tax Act.

The attachment to your letter consists of a list of standard features included in buses provided by a bus manufacturer[.] XXXXX. The document is entitled XXXXX[.]

You state that your client has purchased buses described in the attachment and that these buses have special features that permit placing a wheelchair in the bus without having to collapse the wheelchair and that, in addition, these buses transport individuals who are using wheelchairs.

Your letter identifies a number of issues and concerns. You ask that we confirm that the buses that have been purchased by your client are eligible for rebate as "qualifying motor vehicles" under the provisions of section 258.1. You have listed and described certain characteristics that you consider support this position.

You also ask that we confirm that the 'special features' that you have listed are eligible for rebate for purposes of subsection 258.1(2). You then request confirmation of the liability of the supplier when the purchaser applies for the rebate under the provisions of subsection 258.1(2).

Interpretation Requested

While you have requested a ruling concerning the application of section 258.1, you have not provided documentation that relates to specific transactions. Although we are not in a position to issue a ruling, we are pleased to provide an interpretation of the provisions of section 258.1 to vehicles described in your submission. That is, we will not deal with the issue of a motor vehicle that is equipped with a device designed exclusively with an auxiliary driving control to facilitate the operation of the vehicle by an individual with a disability. We will also limit our comments to circumstances where the purchaser/recipient claims the rebate by filing an application for rebate.

In Appendix A of this document, we have reproduced those special features listed in your document which you believe are eligible for rebate for purposes of subsection 258.1(2). The determination of whether there are 'special features' or 'adaptations' as they relate to a particular vehicle is a question of fact that must be determined for each particular 'qualifying motor vehicle'. Notwithstanding, we have reviewed your submission and provided our comments in Appendix A of this document.

Interpretation Given

In order that there be eligibility for rebate, there must first be the supply of a qualifying motor vehicle.

Subsection 258.1(1) defines a "qualifying motor vehicle" as:

A motor vehicle that is equipped with a device designed exclusively to assist in placing a wheelchair in the vehicle without having to collapse the wheelchair and, that, for as long as the motor vehicle has been so equipped has never been used as capital property or been held otherwise than for supply in the ordinary course of business.

Whether a motor vehicle is 'equipped with a device designed exclusively to assist in placing a wheelchair in the vehicle without having to collapse the wheelchair' is a question of fact that must be determined by considering the characteristics of the motor vehicle in question. Generally however, we would consider that a motor vehicle equipped with a ramp that permits an individual using a wheelchair to safely access and exit the motor vehicle would be a "qualifying motor vehicle" (assuming the other conditions have been met).

Subsection 258.1(2) then sets out the circumstances that apply when a qualifying motor vehicle is purchased in Canada. These events include:

•   a registrant makes a taxable sale of a qualifying motor vehicle

•   the recipient has paid all tax payable in respect of the supply

•   the supplier identifies in writing to the recipient a portion of the consideration for the supply that can reasonably be attributed to special features that have been incorporated into, or adaptations made to, the vehicle for the purpose of its use by or in transporting an individual using a wheelchair. The legislation refers to this information as "certified amount of the purchase price."

The legislation provides for both 'special features incorporated into' and 'adaptations made to'. The common meaning of the term 'special features incorporated' would be that of an integrated or built in distinctive element. 'Adaptation' would have the common meaning of change, alter or make suitable. In addition, the special feature incorporated into or adaptation made to the vehicle must be for the purpose of its use by or in transporting an individual using a wheelchair.

In your letter, you describe basic design characteristics of the bus such as the low floor design and the suspension modifications required as a result of the low floor design. Based on the information provided and our understanding of the manufacturing process, the manufacturer designed a low floor bus that incorporates the above characteristics. While these characteristics may differ from those included in the design of other buses, these characteristics respond to the design needs of low floor buses that provide improved access to all persons. In our opinion, these characteristics are not 'special features incorporated into' or 'adaptations made to' a vehicle for the purpose of its use by or in transporting an individual using a wheelchair. Therefore, no part of the amount of consideration that relates to these design characteristics is eligible for the rebate under the provisions of section 258.1.

Special features or adaptations could include door access ramps and operating controls, removable/folding seats, systems to anchor the wheelchair, etc. In addition, the determination of special features into or adaptations to a vehicle for the purpose of its use by or in transporting an individual using a wheelchair must be decided for each qualifying motor vehicle.

Once the 'special features or 'adaptations' have been identified, the supplier is then in a position to determine that part of the consideration that can reasonably be attributed to the special features or adaptations. The word 'reasonably' would have the common meaning of logically or realistically.

Using the example of a floor that is made wider to accommodate a wheelchair, we are of the view that this 'widening' could represent either a special feature incorporated into or adaptation made to the vehicle. However, the consideration that should be included in the certified amount of the purchase price is the consideration that can reasonably be attributed to the special feature or the adaptation. In this case, the amount that can reasonably be attributed to the special feature or the adaptation is limited to the consideration for the increase in floor area.

However, in the case of other special features incorporated into or adaptations made to the vehicle that are for the purpose of its use by or in transporting an individual using a wheelchair, the consideration that can reasonably be attributed to the special features or adaptations may include the entire consideration that relates to the manufactured product as well as its installation. For example, we would consider the front door ramp as well as the system for deploying the ramp to fall within this category.

After the events described above have taken place, the recipient may then file an application for rebate. It is our position that the recipient is in a position to file an application for rebate only when all the requirements of subsection 258.1(1) and 258.1(2) have been met.

An additional condition is that the recipient must file an application for rebate within four years after the first day on which any tax in respect of the supply became payable. This provision is of special interest where supplies of qualifying motor vehicles are subject to payment arrangements where liability for tax occurs before the total tax is paid or the supply is made.

Subsection 258.1(2) provides, in part, that the Minister shall pay to the recipient a rebate equal to the tax calculated on that portion of the consideration for the supply that can reasonably be attributed to special features that have been incorporated into, or adaptations made to, the vehicle for the purpose of its use by or in transporting an individual using a wheelchair.

After the application for rebate has been filed as required, an auditor (Verification & Enforcement Division of the local Tax Services Office of CCRA) will verify the amount of the rebate as described in the legislation. This could be evidenced by a copy of the certified amount of the purchase price. In addition, the auditor may confirm with the supplier that the certified amount meets the requirements of the legislation; that is, that it is that portion of the consideration for the supply that can reasonably be attributed to special features that have been incorporated into, or adaptations made to, the vehicle for the purpose of its use by or in transporting an individual using a wheelchair.

As noted above, where the purchaser/recipient claims the rebate by filing an application for rebate, the responsibility of the supplier is to provide information as set out in the legislation.

As noted in your letter, in the circumstances where the supplier pays or credits the rebate to the purchaser/recipient, the provisions of subsection 258.1(5) may apply so that, in certain circumstances, the supplier and the recipient may be jointly and severally or solidarily liable for all or part of the rebate amount paid or credited.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you require clarification on the above matter, please contact me at (613) 954-4390.

Yours truly,

Suzanne Leclaire
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Appendix A

1. The entrance door ramp is a flip out device provided at the front door for deployment by the driver. The ramp deploys at curb height to allow passengers in a wheelchair to enter the bus without having to be lifted or having the wheelchair collapsed. The ramp is returned back to a recessed area in the bus.

Our comments: The ramp, as described, constitutes a special feature or adaptation. The amount that can reasonably be attributed to this special feature or adaptation includes the material and labour component of both the manufactured product(s) and its installation.

In reference to the recessed floor area, the amount that can reasonably be attributed to the special feature or the adaptation is limited to the incremental consideration that relates to the recessing and refabricating the entry floor to accommodate the wheelchair ramp.

2. The wide entrance door allows access for passengers in a wheelchair to enter the bus without having to collapse the wheelchair.

Our comments: The wider door may be considered to be a special feature or adaptation. However, the amount that can reasonably be attributed to the special feature or the adaptation is limited to the incremental consideration that relates to modifying/adapting the front entrance door to accommodate wheelchair access.

3. The kneeling device lowers the bus during the loading or unloading operations to a floor height of XXXXX[.]

Our comments: The kneeling device, as described, constitutes a special feature or adaptation. The amount that can reasonably be attributed to this special feature or adaptation includes the material and labour component of both the manufactured product(s) and its installation.

4. The audible and visual warning devices are operated together with the kneeling system to warn all passengers and the driver of the kneeling feature and ramp deployment to ensure the safety of all boarding passengers.

Our comments: The audible and visual warning devices that relate to the kneeling feature or ramp deployment are special features or adaptations. The amount that can reasonably be attributed to these special features or adaptations is limited to the incremental consideration that relates to providing the audible and visual warning devices that relate to the kneeling feature or the ramp deployment.

5. The driver controls operate the ramp and consist of an easy to operate XXXXX switch XXXXX. This allows the bus driver to deploy the ramp from a seated position.

Our comments: The driver controls, as described, constitute special features or adaptations. The amount that can reasonably be attributed to these special features or adaptations includes the material and labour component of both the manufactured product(s) and its installation.

6. Interlocks are connected to the maxi brake to ensure that when the kneeling feature is engaged, the brakes are engaged to prevent a roll-away situation.

Our comments: The interlocks, as described, constitute special features or adaptations. The amount that can reasonably be attributed to these special features or adaptations includes the material and labour component of both the manufactured product(s) and its installation.

7. The low-floor design

Our comments: Based on the information provided and our understanding of the manufacturing process, the manufacturer designed a low floor bus that incorporated certain characteristics to improve access to the vehicle for all persons. These characteristics are not 'special features incorporated into' or 'adaptations made to' a vehicle for the purpose of its use by or in transporting an individual using a wheelchair. Therefore, no part of the consideration that relates to these design characteristics is eligible for rebate under the provisions of section 258.1.

8. The flip-up seats accommodate the parking space for a wheelchair so that the wheelchair bound passengers may be transported without having to collapse the wheelchair.

Our comments: The folding mechanism of the seat is the special feature or adaptation However, the amount that can reasonably be attributed to the special feature or the adaptation is limited to the incremental consideration that relates to providing a folding seat as compared to providing a non-folding (fixed) seat.

9. The secure tie downs for wheelchairs ensure that passengers in a wheelchair may be transported without the risk of injury to themselves and other passengers.

Our comments: The secure tie downs (chair restraints) constitute a special feature or adaptation. The amount that can reasonably be attributed to this special feature or adaptation includes the material and labour component of both the manufactured product(s) and its installation.

10. Aisle width dimensions of not less than XXXXX facilitate travel of passengers in a wheelchair from the loading device through the bus to a designated parking area in the bus and an arc dimension no less than XXXXX in the parking area where 180 degree turns are expected in order to manoeuvre the wheelchair into and out of the parking position.

Our comments: Providing wider aisles (floor) may be considered a special feature or adaptation. However, the amount that can reasonably be attributed to the special feature or the adaptation is limited to the incremental consideration that relates to modifying/adapting the aisle (floor) to accommodate wheelchair access.

11. The suspension for the low-floor XXXXX buses has been modified to accommodate the low-floor design.

Our comments: Based on the information provided and our understanding of the manufacturing process, the manufacturer designed a low floor bus that incorporated certain characteristics to improve access to the vehicle for all persons. These characteristics are not 'special features incorporated into' or 'adaptations made to' a vehicle for the purpose of its use by or in transporting an individual using a wheelchair. Therefore, no part of the consideration for these design characteristics is eligible for rebate under the provisions of section 258.1.

12. A storage rack for the wheelchair restraints and safety belts.

Our comments: The storage rack, as described, is not a special feature incorporated into or adaptation made to a vehicle for the purpose of its use by or in transporting an individual using a wheelchair. Therefore, no part of the consideration for the storage rack is eligible for rebate under the provisions of section 258.1.