18 September 2015 Ruling 168521r

As also described in 144133, Ontario Tire Stewardship (“OTS”) was designated by Waste Diversion Ontario (“WDO”) as an industry funding organization (“IFO”) for used tires and, as such, was responsible for operating the waste diversion and recycling program in Ontario for used tires including collection, transporting and processing. ACo, which imports tires into Ontario as well as purchasing them from Ontario-based tire manufacturers (i.e., from “brand owners”) was designated by WDO as a “steward” in respect of the tires it imported into Ontario for sale in Ontario (but not in respect of the tires it purchased from the brand owners, who instead were the stewards respecting such tires). As a steward, ACo is required to pay fees (calculated by applying a per-tire charge to the tires imported by it) to OTS to help cover the costs of the waste diversion and recycling program operated by OTS. ACo charges its tire customers an amount for each tire and an amount separately identified on its invoices as an “OTS” charge (which ACo determines by referring to the tire stewardship fees posted on the OTS website). After ruling that ACo’s OTS charges were part of the value of the consideration for its taxable supplies of tires and, thus, subject to GST/HST, CRA stated:

The tire stewardship fees that [ACo] pays (as first importer), and the costs of the tire stewardship fees that other stewards (e.g. brand owners) pay and pass on to [ACo] are costs of doing business that [ACo] chooses to pass on to its tire customers in a separately identified “OTS” charge on its invoices. For ETA purposes, this cost, even when separately identified as an “OTS” charge on an invoice to a tire customer, forms part of the consideration for a taxable supply of tires and is subject to GST/HST… .

…[T]he tire stewardship fee is payable by [ACo] when [ACo] is the first importer of the tire …and the fee is payable by the brand owner (i.e. the manufacturer) in respect of tires that [ACo] purchases from the manufacturer. As a result, in both of these circumstances, the tire stewardship fee is not payable by the recipient of [ACo]’s supply of tires (i.e. [ACo]’s tire customer) and it is not excluded from the consideration for the tire charged to the tire customer by virtue of section 154… .

A company (“ACo”) which imports tires into Ontario is required to pay a per-tire “stewardship fee” to Ontario Tire Stewardship (“OTS”) to help cover the costs of the used tire recycling program carried on by OTS. ACo then adds a separately-identified “OTS charge” on its invoices for its tire sales in order to recoup those OTS fees.

In 144133, CRA had ruled that the “fees” charged by OTS were not subject to HST because OTS was not supplying anything to the companies required to pay them. Here, CRA has ruled that the charges made by ACo to its customers to recoup the OTS fees paid by it are part of the consideration for its sales to them, so that those charges are subject to HST. CRA stated:

…[T]he tire stewardship fee is payable by [ACo] when [ACo] is the first importer of the tire … . As a result…the tire stewardship fee is not payable by the recipient of [ACo]’s supply of tires (i.e. [ACo]’s tire customer) and it is not excluded from the consideration for the tire charged to the tire customer by virtue of section 154… .