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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 152752
September 12, 2013
Dear [Client]:
Subject: GST/HST INTERPRETATION
Application of the GST/HST to amounts received by car rental companies for parking/traffic violations and highway tolls
Thank you for your letter of April 12, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to amounts received by car rental companies for parking/traffic violations and highway tolls incurred by their customers.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand the facts to be as follows:
1. [The] [...] (Company) is a GST/HST registrant that rents automobiles to customers.
2. Under the terms and conditions of the Company's vehicle rental agreement, the customer agrees to rent the vehicle for consideration which may be calculated based as a specific charge, distance driven or a combination thereof.
3. The terms and conditions set out in the Company's vehicle rental agreement (not provided as part of the request) also provide for the following:
a. The customer is responsible for and agrees to reimburse the rental company for any traffic and parking violations and toll charges imposed in respect of the rental vehicle during the rental period.
b. In addition to the reimbursement of the traffic and parking violations and toll charges, the customer is also responsible for and agrees to pay an administrative fee to cover the costs of the Company administering the payment of the traffic and parking violations and toll charges to the issuing authority and the recovery of such amounts from the customer.
4. The administrative fee is a flat rate of $[...] that does not vary with the amount of the traffic or parking violation, or toll charge.
5. The Company states that it notifies the customer of the charge for the traffic/parking violation/toll charge and administrative fee by way of a letter known as a reimbursement letter (not provided as part of the request). The letter sets out the particulars regarding the toll charge, parking violation or traffic violation including the issuing agency, citation number, date and time of occurrence, license plate number and province of issuance, location of the occurrence, the amount owing pursuant to the citation (i.e., violation amount or toll charge), and the administrative fee.
Interpretation Requested
You would like to know the application of the GST/HST to amounts charged by the Company in respect of unpaid tolls, traffic and parking violations incurred by the customer while the vehicle was in the customer's possession, as well as the administration fee charged to recover these amounts.
Interpretation Given
Generally, every recipient of a taxable supply made in Canada shall pay GST/HST calculated at the rate of 5% on the value of the consideration for the supply (15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 14% in Prince Edward Island).
The reimbursement of a parking/traffic violation and a highway toll is compensatory and is not made in exchange for a supply of property or service made by the Company. The payment to the Company does not represent consideration for a supply. The reimbursement is not subject to GST/HST.
Where a service charge is imposed in addition to an amount for a parking/traffic violation and/or highway toll, the service charge is consideration in respect of a taxable supply of an administrative service and is subject to the GST/HST.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Angela Stachowski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Email this Content