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 GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 191804
Dear [Client]:
Subject: EXCISE INTERPRETATION
Excise Tax on Air Conditioners on Electric Vehicles
We are sorry for the delay in responding to your letter of May 22, 2018, concerning the application of the Excise Tax Act to the excise tax on air conditioners in electric vehicles.
All legislative references are to the Excise Tax Act and the regulations therein, unless otherwise specified.
BACKGROUND
[…][You] imported […] electric vehicles, […] on […][mm/dd/yyyy] and paid the $100 excise tax on air conditioners […] [on each vehicle].
[You] read Excise Tax Memorandum X3.1 Goods Subject to Excise Tax dated July 2013 and noted that paragraph 17 stated the following: “the excise tax on air conditioners designed for automobiles, station wagons, vans and trucks applies only to those that are powered by the engines or power trains of the vehicles mentioned. Air conditioners that are powered by separate motors, propane or electricity are not subject to this tax.”
[You] interpreted the paragraph 17 of the Excise Tax Memorandum X3.1 Goods Subject to Excise Tax to mean that he should not have been charged the excise on the electric vehicles and if so, how can he claim a refund of the money paid.
INTERPRETATION REQUESTED
We understand that you would like to know if the $100 excise tax on air conditioners installed in electric vehicles should be imposed.
INTERPRETATION GIVEN
Section 7 of Schedule I to the Act states that an excise tax of $100 is imposed on air conditioners designed for use in automobiles, station wagons, vans or trucks whether
a. Separate, or
b. Included as equipment permanently installed in the vehicles at the time of the sale or importation by the manufacturer or importer, as appropriate.
According to section 8 of Schedule I the excise tax does not apply to air conditioners:
a. that are purchased or imported for permanent installation in an ambulance or hearse, or when they become permanently installed equipment in such vehicles;
b. where the sale qualifies as a zero-rated supply for the purposes of Part IX of the Act, or that is purchased by and for the personal use of a diplomat
c. that is permanently installed equipment in an automobile, station wagon, van or truck that is sold under conditions that would qualify as zero-rated supply for the purposes or Part IX of the Act, or that is purchased for the personal use of a diplomat;
d. that is permanently installed equipment in an automobile, station wagon, van or truck that is a qualifying vehicle, imported temporarily by a Canadian resident and not accounted for as a commercial good under section 32 of the Customs Act; was last supplied in the course of a vehicle rental business to the individual by way of lease, licence or similar arrangement under which continuous possession or use of the automobile, station wagon, van or truck is provided for a period less than 180 days, and is exported within 30 days after the importation.
Section 8 of Schedule I does not stipulate that the excise tax does not apply in the case of electric vehicles. Moreover it does not draw a distinction as to how the air conditioner is operated. To date the Act has not been amended to exempt the tax for air conditioners designed for use in electric vehicles.
Excise Tax Special Levies Memorandum 3.1 (ETSL 3.1) outlines the excise tax application imposed under Part III of the Act, on specific goods enumerated in Schedule I to the Act. Paragraph 17 of the memorandum was intended to explain that the $100 excise tax applies to what is essentially in-dash air conditioners, designed for use in cars, station wagons, vans or trucks. At the time the memorandum was originally published this would have encompassed air conditioners that were powered by the engine or power train of the vehicle(s) in question.
The exception cited in paragraph 17 explains that the $100 excise tax does not apply to certain air conditioners. These are normally operated by a separate motor, propane or electricity and are not specifically designed for use in the above-stated vehicle types. These would include conditioners noted in the following examples:
i) Air conditioners in the rear of a truck, where sleeping compartments are located; and
ii) Air conditioners installed in the living area of motorhomes (other than those specifically designed for automobiles, station wagons, vans or trucks)
ETSL 3.1 has not been updated to address electric vehicles when describing the application of the excise tax. That is, it does not identify electric vehicles that do not function via a traditional power train system and where the air conditioner is instead operated directly from the battery power source of the vehicle.
As noted in the memorandum’s disclaimer, the information provided therein is for reference purposes only. It does not replace the Act or its regulations. In case of any discrepancy between this information and the provisions of the Act or regulations, the legislative provisions apply.
Based on the information provided, the $100 excise tax is applicable on air conditioners installed in electric vehicles. The excise tax of $100 was correctly charged at the time the electric vehicles were imported into Canada.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) 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 interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call Sharon Kendall, at (613) 670-7206
Yours truly,
Dennis Dekleva
Manager
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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