Dockets: 2007-3789(GST)G
2007-3790(GST)G
BETWEEN:
JOSÉE OUELLETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal
heard on August 24, 2009, at Montréal, Quebec.
Before: The Honourable Justice François
Angers
Appearances:
|
Counsel for the appellant:
|
Jean-Pierre Gagné
|
|
Counsel for the respondent:
|
Gérald Danis
|
____________________________________________________________________
JUDGMENT
The appeal from
the assessment for the period from January 1, 2002, to
December 31, 2003, made under the Excise Tax Act, notice of
which is dated May 11, 2006, is dismissed with costs in accordance
with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 17th day of September
2009.
"François Angers"
on this 30th day
of October 2009
François Brunet,
Revisor
Citation: 2009 TCC 443
Date: 20090917
Dockets: 2007-3789(GST)G
2007-3790(GST)G
BETWEEN:
JOSÉE OUELLETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
This is an appeal
from an assessment dated May 11, 2006, made under the Excise Tax Act
(the Act) for the period from January 1, 2002, to
December 31, 2003. It should be specified that the appellant filed a separate
Notice of Appeal for each year in question. Since
a single Notice of Appeal was sufficient to institute her appeal, I grant the
respondent's request and dismiss the appeal bearing the following docket
number: 2007‑3790(GST)G. The Notice of
Appeal for docket 2007‑3789(GST)G covers the period in the notice of
assessment.
[2]
The
appellant was assessed following an audit by a representative of the respondent
for not having reported the taxable supplies she made as part of commercial
activity related to selling narcotics, for which she should have been
collecting and remitting the goods and services tax (GST) to the Receiver
General.
[3]
On November
5, 2003, over 300 police officers belonging to 12 police organizations
conducted 38 searches of the members of various groups related to the Outaouais
area Hells Angels. That extensive operation resulted in 31 arrests. That operation, known as "Ouragan" [Hurricane],
followed an investigation initiated in 2002 by the Outaouais Escouade régionale
mixte [joint regional taskforce] (ERM). On
December 15, 2004, the ERM police officers started the third phase of Operation
Ouragan aimed at arresting six people involved in drug trafficking in the RCM
of Antoine-Labelle, including the appellant.
[4]
The
evidence gathered by the ERM police officers was obtained from civil
informants. It was from one of them that the appellant purchased the
narcotics she resold. A table of the purchases
made by the appellant during the period in question was filed in evidence
(Exhibit I-1). The appellant purchased
narcotics from the informant from March 30, 2002, to September 23, 2003.
In 2002, she purchased $139,400 worth of narcotics,
and in 2003, $173,915 worth of narcotics.
[5]
According
to the evidence led by the respondent, the narcotics purchased by the appellant
were sold at resale prices usual for that sector of illegal activity, that is, with
a 20% profit margin. Thus, the appellant made $167,280 in sales during the year
ending on December 31, 2002, and $208,698 during the year ending on December
31, 2003. The unpaid net tax is $26,318.46.
[6]
The
appellant acknowledged that she had pleaded guilty to charges of conspiring to
commit a criminal offence, namely, cocaine trafficking, and of having
trafficked cocaine and cannabis during the period in question. She also
acknowledged that she had been sentenced to imprisonment.
[7]
The
respondent also imposed penalties on the appellant given the nature and source
of the failure, namely, not reporting or paying her taxes, as well as interest
given the amount of time that had elapsed since the obligation to pay arose.
[8]
At the
start of the trial, the appellant advised the Court that her objection to the
assessment was restricted to two points: that her obligation to collect tax as
an agent for the Minister of Revenue was invalid because she was acting under
threat, and alternatively, that she did not sell the quantities of cocaine that
the respondent claims.
[9]
The
appellant testified about her 17-year tumultuous relationship with her former
spouse. In 2000, she ended the relationship because her former
spouse was a compulsive gambler, used drugs and was sometimes violent. About two years later, she was approached by a certain
André Bernier, who was known as the drug supplier in Mont-Laurier and whose
true identity as an informant was not discovered by the appellant until after
she was arrested in December 2004.
[10]
According
to the appellant, André Bernier asked her to repay the $3,800 debt that her
former spouse owed him. When the appellant refused to repay the debt, he allegedly
said to the appellant while looking at her child [Translation] "It's not hard to lose an eye".
He also allegedly threatened the appellant verbally
and brandished a club and a firearm while explaining to her what happens when
you do not pay up.
[11]
Therefore,
she agreed to sell drugs in order to pay off her former spouse's debt. Throughout that
venture, which lasted almost two years, she was aided by her spouse, who also
pleaded guilty to similar charges.
[12]
According
to the appellant, Bernier did not want her to stop her activities. She stated that
she had given him $14,000 in 2003, because she made $100 or $200 payments once
a week, as well as the $5,000 or $5,500 she received from the SAAQ following a
car accident.
[13]
The
appellant admitted in cross-examination that she was in contact with her former
spouse because of the children.
However, she admitted that she did not know where he
was between 2000 and 2002.
[14]
During the
period in question, the appellant met with Bernier once a week. He had assigned
her a tavern where she went 4 to 5 times a week to sell drugs. She acknowledged that she had put in what she called [Translation] "a 3.5 cut" and
that she divided up the drug into 14-gram bags. Her
sales were profitable.
[15]
The
appellant's spouse confirmed that the appellant was a victim of threats from
Bernier because her former spouse had not paid his debts and Bernier had
demanded that the appellant pay him the money that he was owed.
[16]
Thus, it
must be determined whether the assessment dated May 11, 2006, is in
keeping with the provisions in Part IX of the ETA and whether, because of the
circumstances referred to by the appellant, she had indeed a duty to collect
the tax payable by the purchaser and to remit it as the Minister's agent.
[17]
This Court
has already ruled that income from growing marijuana is taxable income under
the Income Tax Act and that marijuana supplies are "taxable
supplies" for the purposes of the Act (see John Molenaar v. The Queen,
2003 TCC 468). It is therefore obvious that the same goes for selling all
other types of drugs and illegal substances. "Commercial
activity" is defined as follows in the Act:
"commercial activity" of a
person means
(a) a business carried on by the
person (other than a business carried on without a reasonable expectation of
profit by an individual, a personal trust or a partnership, all of the members
of which are individuals), except to the extent to which the business involves
the making of exempt supplies by the person,
(b) an adventure or
concern of the person in the nature of trade (other than an adventure or
concern engaged in without a reasonable expectation of profit by an individual,
a personal trust or a partnership, all of the members of which are
individuals), except to the extent to which the adventure or concern involves
the making of exempt supplies by the person, and
(c) the making of a supply
(other than an exempt supply) by the person of real property of the person,
including anything done by the person in the course of or in connection with
the making of the supply;
The
word "business" is defined as follows:
“business” includes a profession, calling, trade, manufacture or undertaking
of any kind whatever, whether the activity or undertaking is engaged in for
profit, and any activity engaged in on a regular or continuous basis that
involves the supply of property by way of lease, licence or similar
arrangement,. but does
not include an office or employment;
[18]
The word
“supply” is defined, subject to sections 133 and 134, as the provision of
property or a service in any manner, including sale, transfer, barter,
exchange, licence, rental, lease, gift or disposition, while "taxable
supply" means a supply that is made in the course of a commercial
activity. Subsection 221(1) of the Act provides that every
person who makes a taxable supply shall, as agent of Her Majesty in right of
Canada, collect the tax under Division II payable by the recipient in
respect of the supply and remit the positive amount of his or her net tax to
the Receiver General under subsection 228(2) of the Act. Every person who makes such a supply is required to be
registered (subsection 240(1) of the Act).
[19]
There is no
doubt that the activities the appellant engaged in were commercial in nature
and that she was making a taxable supply within the meaning of the Act. Thus, she had to
collect the tax payable and remit the positive amount of her net tax to the
Receiver General. The fact that a commercial
activity is illegal does not mean that a person can avoid the duty imposed on
her by tax legislation. Tax authorities do not
have to take into account the legality of an activity (see 65302 British
Columbia Limited v. Canada, [1999] 3 S.C.R. 804 S.C.C.).
[20]
Therefore,
during the period in question, the appellant was an agent of her Majesty in
Right of Canada and had a duty to collect and remit GST to the Receiver
General. I cannot agree with the argument of her counsel, who
maintains that, because of the constraints imposed by Bernier, there was no principal–agent
relationship, as required by the Act. It is difficult to believe that the
appellant acted under duress throughout the entire period in question. She “cut” and divided cocaine for profit, and she admitted
to using the profits of her sales to pay for gas and soft drinks as well as to
repay Bernier. Where was her former spouse
from 2000 to 2002, and why did she pay $14,000 to Bernier for a debt of $3,800?
The story is fraught with implausibilities that
undermine the appellant's credibility.
[21]
The same is
true concerning the evidence put forward by the appellant with regard to the
quantity of narcotics she had sold. The only evidence filed by the appellant is
that her sales of narcotics brought in only $8,500 ($14,000 - $5,500), that is,
part of the sum paid to Bernier. The appellant was unable to give more details
about her sales, while the respondent provided very well documented evidence of
all the purchases of narcotics made by the appellant for the purpose of
reselling.
[22]
Thus, the
appellant did not discharge her burden of proof. The appellant also provided
no evidence that could entitle her to input tax credits. The penalties and interest are amply warranted in this
case.
[23]
The appeal is therefore dismissed with costs.
Signed at Ottawa, Canada, this 17th day of September
2009.
"François Angers"
on this 30th day
of October 2009
François Brunet,
Revisor
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