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
[Client]
[Client Address]
Attention:
Case Number: XXXXXX
November 24, 2023
Dear [Client]:
Subject: LUXURY TAX INTERPRETATION
Application of the Luxury tax on the sale of a subject vehicle
Thank you for your letter dated [mm/dd/yyyy], concerning the application of the Select Luxury Items Tax Act (the Act) as it pertains to the sale of a subject vehicle under an agreement made in writing before 2022.
STATEMENT OF FACTS
Based on your letter, the following is our understanding of the facts provided:
1. On [mm/dd/yyyy], [the customer] agreed to purchase a [subject vehicle] from [the dealership]. The dealership submitted the order, completed on a [subject vehicle] Customer Form, to the manufacturer.
2. After receiving confirmation from the manufacturer that the order would be fulfilled, the dealership and customer entered into a “Partial Payment Agreement”. As per the terms of the agreement, the customer made a $[…] non-refundable partial payment towards the purchase of the subject vehicle. The agreement was signed by both parties on [mm/dd/yyyy] and was considered binding.
3. The customer revised their order on [mm/dd/yyyy].
4. Before the subject vehicle could be delivered to the customer, the dealership terminated its franchise agreement with [manufacturer]. To ensure fulfillment of the order, the dealership transferred the order to another [dealership], in [mm/yyyy].
5. The vehicle is a [subject vehicle] with a list price of $[…] plus tax.
6. Delivery of the order was delayed due to delays at the manufacturer caused by the Covid pandemic.
7. The subject vehicle was eventually delivered to [dealership] during the 2nd week of [mm/yyyy].
INTERPRETATION REQUESTED
You would like the Canada Revenue Agency (CRA) to confirm whether the luxury tax applies to the sale of the subject vehicle.
DECISION
The luxury tax applies to the sale of subject vehicles priced above the $100,000 price threshold and is payable at the time the sale is completed. In most cases, the vendor of the subject vehicle is liable for the luxury tax on the sale.
The luxury tax does not apply to the sale of a subject vehicle where a purchaser and a vendor have entered into a written agreement for the sale of the subject vehicle before January 1, 2022, and delivery occurs on or after September 1, 2022.
Based on the facts provided, the vehicle meets the definition of a subject vehicle. The customer placed the order for the subject vehicle on [mm/dd/yyyy], to be delivered once it has been manufactured. The purchase agreement was made in writing.
Although the dealership that entered into the original purchase agreement terminated its franchise agreement, the purchase agreement is still being honoured through an intermediary. Since the purchase agreement was made in writing before [mm/dd/yyyy], luxury tax does not apply on the sale of the subject vehicle.
I trust the above is satisfactory. If you have any questions or concerns, please contact me at 343-572-4194.
Yours truly,
Alfonso Capretta
Acting Manager
Luxury Tax Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
Legislative Policy and Regulatory Affairs Branch
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