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Reluxicorp Inc. v. The Queen, [2011] GSTC 138, 2011 TCC 336

75% was not substantially all

The registrant was a hotel company that paid franchise fees to a hotel franchise ("Marriott") in the United States. Marriott's fees were based on gross room revenues. Lamarre J. found that, because 30% of the registrant's revenue was from exempt stays (i.e. exceeding one month), 30% of the franchise fees were not incurred in respect of a "commercial activity" as defined in s. 123(1). Accordingly, she affirmed the Minister's assessment, which was made on the basis that the provision by Marriott of franchise rights was an "imported taxable supply" under s. 217, for which the registrant was liable to pay GST on the consideration paid on the basis that 30% of the franchise fees was not eligible for an input tax credit. One of the registrant's arguments was that the 30% franchise fees were not paid in respect of the long-term stays because 95% of its long-term bookings were not connected in any way with the franchise brand, and were booked through its internal management office. The court found that these numbers were closer to 75%, so it could not be said that the fees paid for the Marriott "banner" related exclusively to the short-term bookings. After noting that the meaning of "all or substantially all" must be left to the discretion of the trier of fact, Lamarre J. stated (at para. 29):

In my opinion, there is a limit to be observed. Parliament used the expression "all or substantially all," which means, in my view, that the figure must be closer to the totality than half-way between the majority and the totality.

Words and Phrases
substantially all

Scarlet Nelson/ Larry Nelson v. The Queen, 2011 TCC 223 (Informal Procedure)

The registrant acquired a passenger vehicle for $50,000, whose capital cost to the registrant for GST purposes was limited to $30,000, pursuant to s. 201. Woods J. disallowed ITCs on the vehicle, on the basis that the vehicle's commercial use was not "exclusive" as defined in s. 123(1). The registrant's business usage was only 54%, which was clearly not " all or substantially all" of the use of the vehicle. The registrant's argument, that the deemed cost was reduced to 60% of actual cost, and that 54% usage was 90% of this reduced amount, was irrelevant to the question of whether there was exclusive commercial use.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 201 99