Commercial Activity

Sommerfeldt J found that a dentist, who provided dentures, bridges, crowns and implants, was making a single supply of exempt health care services pursuant to Sched. V, Pt. II, s. 5 rather than zero-rated supplies of artificial teeth pursuant to Sched. VI, Pt. II, s. 11.

He then addressed, obiter, the analysis if the supply made by the dentist came within both provisions, and (at para. 62):

[I]f those supplies can be viewed as coming within both section V-II-5 and section VI-II-11 of the ETA, i.e., if the supplies have both exempt status and zero-rated status (to which view I do not subscribe), the exempt status of the supplies will preclude Dr. Axelrod’s dental practice (which is a business) from being a commercial activity, by reason of the exception at the end of paragraph (a) of the definition of the term “commercial activity” in subsection 123(1) of the ETA. [Fn. 93:] In essence, that exception provides that a business that involves the making of exempt supplies is not a commercial activity.

A lawyer who was disbarred in 2017 had been reporting net income from his law practice for most years between 2007 and 2015 of between $75,000 and $293,000 but very substantial losses from his operation of a racehorse farm (e.g., over $4 million over the most recent six years) notwithstanding substantial revenues also reported as generated. Before confirming the denial of input tax credit (ITC) claims by the taxpayer in 2017 based on the horse farm operation not having been carried on with a view to profit, Spiro J stated (at para. 17):

[T]he absence of any financial statements, or similar records, for any period of operation of the farm from the 1990s to the present causes the Court to draw two inferences that weigh heavily against the Appellant’s position that he had a reasonable expectation of profit from the farm:

(a) he was unable to objectively discern the root cause(s) of the farm’s lack of profitability; and

(b) he was unable to objectively assess the effect of any efforts he made to stem the rising tide of farm losses.

After having referred (at para. 6) to the statement in Moldowan that:

[W]hether a taxpayer has a reasonable expectation of profit is an objective determination to be made from all of the facts. The following criteria should be considered: the profit and loss experience in past years, the taxpayer’s training, the taxpayer’s intended course of action, the capability of the venture as capitalized to show a profit after charging capital cost allowance.

Spiro J stated (at para. 34):

Having applied the criteria … in Moldowan, I find that each factor (other than time spent), weighs heavily in favour of the conclusion that the Appellant did not carry on his farm business with a reasonable expectation of profit.

The appellant, who directly or through corporations, acquired equipment to refurbish and rent to junior oil companies, transferred to his corporation ("CHL") equipment which previously he had provided to CHL free of charge. His contention, that this transfer (made in consideration for a credit to his shareholder loan account) was not made in the course of commercial activity and was thus not a taxable supply, was directly contradicted by his testimony that his intention when acquiring the equipment was "to make money with it."

The appellant ("CCAN") was a not-for-profit organization which, in the second of the three years in question, was registered as a charity for the promotion of environmental responsibility. Part of this promotion entailed the production and distribution of tailgate magnetic stickers, posters, signs, etc., to discourage idle engine operation. CCAN printed its sponsors' logos on these materials. CCAN collected HST on the amounts received from the sponsors, which represented a mark-up over the related costs incurred by it. It claimed input tax credits for the HST on such expenses. C Miller J found that s. 135 deemed CCAN not to make a supply to each sponsor as "the sponsor's sole use was to publicize its business" (para. 10). However, CCAN was engaged in commercial activity as it made a margin in its sponsor dealings (para. 12), the publicity it provided to them was commercial in nature (para. 16) and "there is no reasonable expectation of profit test in the definition of commercial activity" (para. 15). The sponsor arrangements entailed both the promotion of the sponsor and the advancement of CCAN's mission, but with former characterized as merely a way to accommodate CCAN's mission (para. 18). C Miller J found the commercial portion of use of the promotional purchases was 30%. ITCs for HST incurred after CCAN became a registered charity was denied under s. 225.1(2).

The Appellant was a non-profit society which purchased and held title to all equipment used by the local fire department (a distinct entity consisting of volunteer firefighters). The Appellant claimed input tax credits ("ITCs") on its purchase of one such item of equipment (a boat) on the basis that some of the funding for the boat purchase came from the Nova Scotia government, and that such funding should be viewed as the consideration for a taxable supply of the boat to the government. The Minister denied the ITC claim on the basis that the boat instead was used in making exempt supplies for no consideration under Sched. V, Part VI, s. 10. In rejecting the Appellant's ITC claim, Campbell J found (at para. 37) that the Appellant had failed to adduce sufficient evidence to establish a "direct link" between the government funding and the purchase of the boat.

In order to settle a dispute between two insurance companies (Aviva and Underwriters) regarding the ownership of trademarks, the two companies agreed to a transfer of the trademarks to Aviva for $5 million. Underwriters first transferred the trademarks on s. 85 rollover basis to a related company, NN, to allow NN to utilize non-capital losses, before their on-sale by NM. Aviva paid GST to NN and applied to CRA for a rebate of tax paid in error. CRA refused. Woods J found that the sale by NN did not have "any of the characteristics of a trading transaction" (para. 24), noting that NN "did not negotiate the sale and likely acted as an accommodation party in order to minimize the income tax payable on the sale," so that the sale was not an adventure in the nature of trade. She also found that the sale was not a "business," noting that a business must be "carried on" to fall within para. (a) of the definition of "commercial activity" – nor was there any evidence that the sale was connected to any existing commercial activity of NM (including any connection which could engage ss. 141.1(1)(a) and (2)(a).) Accordingly, the sale was not a taxable supply and Aviva was entitled to the rebate.

The activity of the City of Regina in constructing highway connector routes was "an undertaking of any kind whatever" and, therefore, a commercial activity.