Agence du revenu du Québec v. Distributions Maroline Inc., 2022 QCCA 1208

The taxpayer (“Maroline”) was assessed for failure to include rewards that it paid to salespersons employed by independent retailers in Ontario in the payroll total on which it reported Quebec health premiums (“contributions”) payable by it pursuant to the Act respecting the Régie de l'assurance maladie du Québec (the “LRAMQ”). Those employees never reported to any establishment of Maroline in Quebec.

S. 34 .0.1 of the LRAMQ relevantly provided that where a particular employer paid wages not otherwise subject to contributions to a person who was not required, in respect of those wages, to report for work at an establishment of such employer, such person was deemed to be an employee of such employer. S. 34 included, in the payroll subject to the contributions, the wages paid to an employee who was not required to report for work at an establishment of the employer.

In affirming the assessments and reversing the decision below, the Court stated (at paras. 40-42, TaxInterpretations translation):

The fact that the Ontario salespersons do not reside or work in the province does not alter the interpretation of the employer's obligations under s. 34 of the LRAMQ.

The trial judge rejected this interpretation of the LRAMQ as absurd. He emphasized that the respondent was not paying out rewards to avoid paying into the health fund, that the Ontario salespersons were not its employees and that they were not performing any services in Quebec. These statements do not stand up to analysis. The contributor's intent is irrelevant to the determination of its obligations under the LRAMQ. Ontario salespersons are deemed to be employees within the meaning of the LRAMQ, even though they do not perform services in Quebec. The liability arises from the fact that the wages are paid by the respondent from an establishment in Quebec.

Finally, the judge was of the view that the interpretation advocated by the appellant accords the LRAMQ extraterritorial application. This point must be qualified because, in reality, the legislator assesses employers on their entire payroll paid from their establishment in Quebec. The fact that Ontario salespersons are not eligible for the benefits of the province's health care plan is of little relevance to this analysis. The employer contribution is a method of funding the universal health care system and is not based on the services an employee will receive.

Assessments based on similar provisions of the Act respecting the Québec Pension Plan were also confirmed.

The taxpayer (“Maroline”) was assessed for failure to include rewards that it paid to salespersons employed by independent retailers in Ontario in the payroll total on which it reported Quebec health premiums (“contributions”) payable by it pursuant to the Act respecting the Régie de l'assurance maladie du Québec (the “LRAMQ”). Those employees never reported to any establishment of Maroline in Quebec.

The Court noted that the literal wording of the relevant provisions (which were similar in this regard to ITA Regs. 100(1) – “employee” and 100(4)) had the effect of deeming those salespersons to be employees of Maroline who reported for work at the Quebec Maroline office out of which the rewards were paid. In affirming the assessments and reversing the decision below, the Court stated (at paras. 40-42, TaxInterpretations translation):

Ontario salespersons are deemed to be employees within the meaning of the LRAMQ, even though they do not perform services in Quebec. The liability arises from the fact that the wages are paid by the respondent from an establishment in Quebec.

… [T]he judge was of the view that the interpretation advocated by the appellant accords the LRAMQ extraterritorial application. This point must be qualified because, in reality, the legislator assesses employers on their entire payroll paid from their establishment in Quebec. The fact that Ontario salespersons are not eligible for the benefits of the province's health care plan is of little relevance to this analysis.

Assessments based on similar provisions of the Quebec Pension Plan Act were also confirmed.