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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Client]
[Client Address]
Attention: [Client]
[Title]
Case Number: 9000200
July 6, 2023
Dear [Client]:
Subject: LUXURY TAX RULING
Transitional rules relating to luxury tax payable on vehicles
Thank you for your letter dated [mm/dd/yyyy], concerning the application of the luxury tax on a vehicle being purchased by your client.
All legislative references are to the Select Luxury Items Tax Act (SLITA) unless otherwise specified.
Statement of Facts
From the documents that you have provided, we understand the following:
1. On [mm/dd/yyyy], your client placed an order for a new vehicle priced over $100,000 from a vendor, and paid a small deposit to secure the purchase of the vehicle.
2. The delivery of the vehicle to occur in [yyyy].
Ruling Requested
It is your understanding that your client has entered into an agreement in writing with the vendor before 2022 for the sale of a vehicle priced over $100,000. As such, you believe that the vendor should not be including the cost of the luxury tax in the price of the vehicle that your client is purchasing.
You would like to request a ruling from the Canada Revenue Agency (CRA) on your client’s eligibility for relief from the luxury tax on the vehicle being purchased.
Ruling Given
Based on the facts set out above, we rule that your client is not eligible for relief from the luxury tax on the vehicle being purchased.
Explanation
The luxury tax applies to vehicles that meet the definition of “subject vehicle” under the Act and that are priced above the $100,000 price threshold. Based on the information that you have provided, we understand that the vehicle that you are purchasing meets the definition of subject vehicle.
Under the Act, the vendor of the subject vehicle is generally the person who is liable for the luxury tax on the sale of a subject vehicle priced above the price threshold. Accordingly, any relief from the luxury tax is generally only available to the vendor who would have been liable for the luxury tax if the tax relief had not been available.
The Budget Implementation Act, 2022, No. 1, which implemented the new luxury tax, includes transitional rules to facilitate the transition to the new luxury tax regime. Under the transitional rules, luxury tax relief is available on the sale of a subject vehicle priced over $100,000 if a purchaser and a vendor enter into an agreement in writing before 2022, and the transfer of ownership as well as the delivery of the subject vehicle to the purchaser occurs on or after September 2022, in the course of the vendor’s business of selling subject vehicles.
It is incumbent on the vendor to determine what documents or documentation constitutes as an agreement in writing in respect of the sale of a subject vehicle in accordance with the transitional rules. For the tax relief to apply to the sale, the vendor will need to establish that there is an agreement in writing before 2022 for the sale of a subject vehicle priced over $100,000. Otherwise, luxury tax will be payable on the sale of the subject vehicle at the time the sale is completed pursuant to section 18 of the Act.
If luxury tax is payable by the vendor, the vendor may decide to pass the cost of the luxury tax to the purchaser by including the luxury tax in the purchase price of the subject vehicle. As a tax administrator, the CRA does not regulate industry pricing of goods for consumers. If your client has concerns relating to the purchase price of a subject vehicle, they may wish to discuss the matter with their vendor.
If you require clarification with respect to any of the issues discussed in this letter, please reach me directly at 343-572-4194.
Yours truly,
Alfonso Capretta
Acting Manager
Luxury Tax Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
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