Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and Specialty Tax Directorate
Place de Ville, Tower A, 8th floor
320 Queen Street
Ottawa ON K1A 0L5
[third party addressee]
Date: June 7, 2022
Case Number: 204747
Dear [Representative]:
Subject: EXCISE INTERPRETATION
Fuel Charge Exemption – Section 87 of the Indian Act
Thank you for your correspondence of [mm/dd/yyyy] on behalf of your client, […] (the Client), and their associated business entities. Your client is seeking confirmation that the federal tax exemptions under section 87 of the Indian Act (the “Indian Act”) applies to the Greenhouse Gas Pollution Pricing Act (the “GGPPA”) and more specifically to Part 1 of the GGPPA. We apologize for the delay in providing our response.
You also provided the following documents:
* A third party authorization that authorizes […] (the Representative) to correspond on the Taxpayer’s behalf.
* Standard authorization for facsimile transmissions.
All legislative references are to the GGPPA and its regulations, unless otherwise specified.
We understand the following:
The First Nation is a limited partner of […] (the Company), whose activities are carried out on a reserve.
The First Nation, and their business entity, the Company, pays an embedded fuel charge on bulk purchases of a type of fuel from their distributor through their First Nations owned and operated fuel station, which is situated on-reserve.
The fuel charge is being applied to a type of fuel, being purchased by the Company and thereafter sold to members of the First Nation and other Status First Nation individuals, all of which occurs on reserve. Through the Company, the Client has purchased fuel from their bulk fuel supplier in order to supply its on-reserve, First Nation owned gas station. According to your client, typically, under Section 87 of the Indian Act, members of First Nation and other Status First Nation individuals who are the purchasers of the fuel would be subject to a rebate on the amount of fuel charge paid, or would otherwise be exempted from paying the charge. The Company has made these purchases since [mm/dd/yyyy] in Saskatchewan, and on those purchases, they have been subject to the federal fuel charge. Further, Status First Nations individuals purchase that fuel, as does the First Nation itself for its on-reserve activities.
Interpretation Requested
You would like to know if:
1) Section 87 of the Indian Act applies to the application of the fuel charge, as it relates to the purchase of fuel by the Company, the sale of fuel to members of the First Nation, and for the purposes of the First Nation's Band-related operations;
2) The purchase of fuel by members of the First Nation and other Status First Nation
individuals be exempt from the fuel charge in accordance with Section 87 of the Indian Act;
3) The First Nation and/or the Company would be eligible to a rebate on the amount of fuel purchased by the First Nation or the Company for the purposes of supplying fuel to members of the First Nation and for use in the First Nation's Band-related entities; and
4) The purchase and use of fuel by the First Nation itself be exempt from the application of the fuel charge in accordance with Section 87 of the Indian Act.
Interpretation Given
The Canada Revenue Agency (CRA) requires a third party authorization letter where a third party is acting for a person to whom a ruling or interpretation applies, and it should be specific to the request for the ruling or interpretation. As mentioned above, we are in receipt of third party authorizations for the purposes of this request.
The GGPPA received Royal Assent on June 21, 2018.
Under the GGPPA, subsection 17(1) applies a charge to a registered distributor that delivers a type of fuel to a person in a listed province, unless the other person is a farmer, a fisher or a registered person stipulated in subsection 17(2), or to a person eligible for relief in accordance with Regulations Amending Fuel Charge Regulations, and who has provided an exemption certificate in accordance with Section 36.
Your client is seeking confirmation that the federal tax exemption under Section 87 of the Indian Act applies to the GGPPA and more specifically to Part 1 of the GGPPA. Under Part 1 of the GGPPA, a charge normally applies to a type of fuel produced, used, delivered, imported or brought into a listed province, such as the province of Saskatchewan.
On March 25, 2021, the Supreme Court of Canada determined that the fuel charge applied by Part 1 of the GGPPA is a constitutionally valid regulatory charge and not a tax (Footnote 1).
Secondly, we want to address fuel charge relief granted under subsection 17(2) by virtue of the issuance of exemption certificates outlined under section 36 of the GGPPA. An exemption certificate is a document that certain persons that have fuel delivered to them must provide to the person delivering the fuel. The exemption certificate permits the delivery of a type of fuel in a listed province without having the fuel charge applied at the time. An exemption certificate applies to certain persons who make a declaration in the prescribed form contained prescribed information determined by the Minister. Status First Nations are not included in this list of persons. These include:
* a registered distributor, a registered specified air carrier, a registered specified marine carrier or a registered specified rail carrier, for that type of fuel;
* a registered emitter and that the fuel is for use at its covered facility;
* a registered user of fuel for that type of fuel and that the fuel is for use in a non-covered activity;
* a farmer and all of the following conditions are met:
o the fuel is delivered to a farm
o the fuel is for use exclusively in the operation of eligible farming machinery or of an auxiliary component of eligible farming machinery
o all or substantially all of the fuel is for use in the course of eligible farming activities;
* a fisher and all of the following conditions are met:
o the fuel is for use exclusively in the operation of an eligible fishing vessel
o all or substantially all of the fuel is for use in the course of eligible fishing activities;
* partial relief to a greenhouse operator and all of the following conditions are met:
o the fuel is for use exclusively in eligible greenhouse activities; and
* a remote power plant operator and all of the following conditions are met:
o the fuel is for use exclusively at the location of a remote power plant in the operation of the remote power plant.
In light of the Supreme Court decision referred to above, Section 87 of the Indian Act does not provide relief from the fuel charge as it is not a tax but a regulatory charge. Further, the GGPPA provides full or partial relief from the fuel charge to certain persons, such as those outlined above, but does not provide exemptions for Indians within the meaning of that term in the Indian Act.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the GGPPA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 289-544-6856.
Yours truly,
Shivam Bagga, CPA
Senior Rulings Officer
Legislative Policy and Regulatory Affairs Branch
FOOTNOTES
1 HYPERLINK "https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/18781/index.do" References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11 at para 219. The Supreme Court of Canada jointly heard case numbers 38663, 38781 and 39116: Attorney General of Saskatchewan vs Attorney General of Canada, Attorney General of Ontario vs Attorney General of Canada and Attorney General of British Columbia vs Attorney General of Alberta.
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