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 Specialty Tax Directorate
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5
[Client]
[Address]
ATTN : [Client]
Case Number: 9000310
June 6, 2024
Dear [Client]:
Subject: LUXURY TAX RULING
Refund of the Double Incidence of Luxury Tax
Thank you for your letter dated [mm/dd/yyyy], concerning the refund of the double incidence of luxury tax on the purchase and sale of subject vehicles. We apologize for the delay in our response.
All legislative references are to the Select Luxury Items Tax Act (the Act) unless otherwise specified.
Statement of Facts
From the documents that you have provided, we understand the following:
1. [Client] is a vehicle dealership, and is registered under the Act.
2. [Client] sells subject vehicles to end consumers.
3. [Client] purchases subject vehicles from the [Manufacturer].
4. [Manufacturer] charged [Client] an amount equal to the luxury tax on the purchase of a subject vehicle.
5. [Client] remitted the luxury tax on the sale of the subject vehicle made to their customer, resulting in the double incidence of the luxury tax.
Interpretation Requested
You would like the Canada Revenue Agency (CRA) to advise if [Client] is entitled to a refund of the amount, equal to the luxury tax, paid to the [Manufacturer], on the purchase of a subject vehicle.
Interpretation Given
There is no rebate available under the Act to remedy the double incidence of the luxury tax, therefore, [Client] is not eligible for a refund.
Explanation
The luxury tax applies to vehicles that meet the definition of “subject vehicle” under the Select Luxury Items Tax Act (the Act) and that are priced above the $100,000 price threshold. In most cases, the vendor of the subject vehicle is liable for the luxury tax on the sale.
Subsection 19(1) of the Act, provides that the luxury tax will generally not apply to sales of subject vehicles priced above the price threshold between persons that are registered vendors of subject vehicles.
Effectively, registered vendors of subject vehicles will be able to purchase and hold tax-free inventory of subject vehicles priced above the price threshold and defer the application of the luxury tax until the subject vehicles are sold to persons that are not registered, such as consumers.
As set out in subsection 19(1) of the Act, in order to purchase subject vehicles priced above the price threshold without the luxury tax applying at the time the sale is completed, the purchasing registered vendor must provide an exemption certificate to the selling registered vendor in accordance with section 36 of the Act.
Prior to the coming into force date (September 1, 2022) of the Act, in response to industry feedback, the CRA adopted an administrative policy to help ease compliance obligations surrounding exemption certificates.
Pursuant to paragraph 36(1)(c), the purchasing registered vendor must provide an exemption certificate to the selling registered vendor, in a manner satisfactory to the Minister. An exemption certificate does not need to be received prior to invoicing the dealer for the subject vehicle. An exemption certificate can be provided at any time during the reporting period, but it must be provided before the end of the reporting period for which it applies.
In absence of exemption certificates, the luxury tax would apply on the sale of a subject vehicles between the selling registered vendor and the purchasing registered vendor. The purchasing registered vendor will also have to pay the luxury tax when they are selling or leasing the subject vehicles to consumers. Without an exemption certificate, there are no remedies available under the Act that would allow CRA to waive or avoid the double incidence of tax.
The interpretation 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 or the additional information provided herein. For further information see the publication “Requesting an Excise and Specialty Tax Ruling or Interpretation”.
If you require clarification with respect to any of the issues discussed in this letter, please reach me directly at 343-572-4194.
Yours truly,
Alfonso Capretta
Manager
Luxury Tax Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
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