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]
Case Number: XXXXXX
November 24, 2023
Dear [Client]:
Subject: Luxury Tax on After-Sale Improvements
Thank you for your letter dated [mm/dd/yyyy], concerning the application of the Select Luxury Items Tax Act (the Act) as it pertains to after-sale improvements made to a subject vehicle.
STATEMENT OF FACTS
Based on your letter, the following is our understanding of the facts provided:
Scenario #1:
1. A customer purchases a subject vehicle from your dealership.
2. Luxury tax was payable at the time of purchase.
3. The customer returns to your dealership a few days later to have after-sales improvements made to the subject vehicle. The price of the improvements exceed $5,000.
Scenario #2:
1. A customer purchases a subject vehicle from your dealership.
2. Luxury tax was payable at the time of purchase.
3. The customer returns to your dealership 8 months later to have after-sales improvements made to the subject vehicle by the dealership’s service department.
Scenario #3:
1. A customer purchases a subject vehicle from your dealership.
2. Luxury tax was payable at the time of purchase.
3. The customer visits a third-party supplier to have after-sales improvements made to the subject vehicle without the knowledge of your dealership. The price of the improvements exceed $5,000.
INTERPRETATION REQUESTED
You would like the Canada Revenue Agency (CRA) to confirm who is responsible for reporting the luxury tax payable on after-sales improvements under the various scenarios provided.
DECISION
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. Under the Act, the vendor of the subject vehicle is generally the person who is liable for the luxury tax on the sale.
If a sale triggered the luxury tax on a subject vehicle, the total of any after-sales improvements made within the improvement period (generally 1 year from the date of purchase) exceeding $5,000 will attract additional luxury tax payable. The purchaser would be liable for any luxury tax payable on after-sales improvements made to that subject vehicle.
In the scenarios provided, any luxury tax liability incurred from after-sales improvements made to a subject vehicle would be with the purchaser, not the dealership. The purchaser would report the luxury tax payable on form B-501, Luxury Tax and Information Return for Non-Registrants.
I trust the above is satisfactory. If you have any questions or concerns, please contact me at 343-572-4194.
Yours truly,
Alfonso Capretta
Acting Manager
Luxury Tax Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
Legislative Policy and Regulatory Affairs Branch
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