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, 5th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
ATTN : [Client]
Case Number: 9000307
May 28, 2024
Dear [Client]:
Subject: LUXURY TAX INTERPRETATION
Luxury Tax Exemption Certificates Application
Thank you for your letter dated [mm/dd/yyyy], concerning the application of luxury tax exemption certificate for subject vehicle. This letter is to confirm in writing what was previously discussed with [Client] in our phone call. We apologize for the delay in our response.
All legislative references are to the Select Luxury Items Tax Act (the Act).
Statement of Facts
Based on your letter, the following is our understanding of the facts provided:
1. [Company] is a vehicle manufacturer, and is registered as a vendor of subject vehicles under the Act.
2. [Company] sells subject vehicles to their dealership network.
3. You understand that the Act provides that the luxury tax will generally not apply to sales of subject vehicles between persons that are registered vendors of subject vehicles, provided the acquiring registered vendor (the dealer) provides the selling registered vendor [Company], with a properly completed Form L100-1, Luxury Tax Exemption Certificate for Subject Vehicles (Form L100-1).
Interpretation Requested
You would like the Canada Revenue Agency (CRA) to advise on the following questions:
1. Can [Company] accept exemption certificates provided after the end of the reporting period for sales of subject vehicles that occurred during the reporting period that has ended and apply for a refund for tax paid in error?
2. Has there been an update on how the exemption forms are to be administered? If yes, is it acceptable for [Company] to complete the exemption certificates for the dealers?
Interpretation Given
[Company] can not accept exemption certificates provided after the end of a reporting period for sales of subject vehicles that occurred during that reporting period, and apply for a refund for tax paid in error.
[Company] can fill out Parts A to C of Form L100-1 for their dealers. However, the dealer must certify and sign Part D and review the information provided by the manufacturer in Part A to C. Then, the dealer must return the completed and signed Form L100-1 to [Company] before the end of the reporting period for which it applies.
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.
Subsection 19(1) provides that the luxury tax will generally not apply to sales of subject vehicles priced above the price threshold between persons that are registered vendors of subject vehicles. Effectively, registered vendors of subject vehicles will be able to purchase and hold tax-free inventory of subject vehicles priced above the price threshold and defer the application of the luxury tax until the subject vehicles are sold to persons that are not registered, such as consumers.
As set out in subsection 19(1) of the Act, in order to purchase subject vehicles priced above the price threshold without the luxury tax applying at the time the sale is completed, the purchasing registered vendor must provide an exemption certificate to the selling registered vendor in accordance with section 36 of the Act. An exemption certificate is a document in which a purchaser attests to a vendor that the purchaser is eligible for a deferral of the luxury tax at that time. To be eligible for a deferral from the luxury tax on the purchase of subject vehicles priced above the price threshold, the purchaser must be a registered vendor of subject vehicles at the time the sale is completed.
Pursuant to paragraph 36(1)(c), the purchasing registered vendor must provide an exemption certificate to the selling registered vendor, in a manner satisfactory to the Minister. An exemption certificate does not need to be received prior to invoicing the dealer for the subject vehicle. An exemption certificate can be provided at any time during the reporting period, but it must be provided before the end of the reporting period for which it applies. This position is consistent with the information provided by the CRA during webinars prior to implementation of the luxury tax.
In addition, the requirement is that only one exemption certificate is required per reporting period between registered vendors covering all transactions between those registered vendors, although more than one may be provided if needed. Except for the first reporting period from September 1, 2022 to December 31, 2022, the reporting period is a calendar quarter.
The interpretations given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the Act, regulations, or the CRA’s interpretative policy could affect the interpretations or the additional information provided herein. For further information see the publication “Requesting an Excise and Specialty Tax Ruling or Interpretation”.
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
Manager
Luxury Tax Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
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