Section 225

Prior to the October 30, 2007 announcement of the GST rate reduction from 6% to 5%, a builder agreed with numerous buyers to sell them (on a GST-included basis) condo units in a project that had not yet received site plan approval or a building permit. The transitional provision indicated that the reduced rate applied inter alia “to any supply … made on or after January 1, 2008.”

In concluding that there were supplies of real property under the agreements that occurred prior to 2008, so that the 6% rate applied, D’Arcy J. found:

• That there was a supply at the time each agreement was entered into on general principles given that such agreement gave the buyer a conditional right to acquire a specific (albeit, so far, non-existent) condo and: “This was the provision of something and thus constituted a supply.” (para. 45)
• In any event, ETA s. 133 (which, in approximate terms, deems supplies of property to occur when the agreement for their supply is entered into) deemed the agreements to be supplies of the condos, with D’Arcy J. noting in this regard that “[t]he application of section 133 is also not contingent on the existence of the Condo Units at the time the parties entered into the … Agreements … .” (para. 58)

D’Arcy J. also accepted the Crown’s alternative argument that the appellant had in fact collected GST at the 6% rate (and thus, would have been required to remit tax at the 6% rate under the s. 225(1) formula, which included "all other amounts collected by the person … on account of tax,” even if the 5% rate applied under the transitional rule) , noting that the 6% rate was referenced in the statements of adjustments at the closings, and that the buyers claimed the new housing rebates on the basis of a 6% rate.

CRA had incorrectly accepted the computation of GST in the statements of adjustment as being 6/106 of the agreed consideration for the purchase plus the new housing rebate amount that was assigned by the buyer to the appellant, rather than only 6/106 of the agreed consideration.

However, since the Appellant collected this additional GST, it was required to add the additional tax to its net tax for the relevant reporting period. (para. 93)

Prior to July 1, 2010, the date that Ontario adopted the HST, the appellant (“Enterprise”) had been charging, collecting, and remitting to the Ontario Minister of Finance retail sales tax (“RST”) at 8% on its sales of insurance products. Effective that date, Enterprise changed its accounting and invoicing practices to charge, collect, and remit HST to the CRA on such sales on the advice of its internal tax team. In May 2015, the Enterprise VP Taxation accepted a provincial RST auditor’s suggestion that Enterprise had been collecting RST from the insurers and remitting it to CRA in error. The Minister then assessed Enterprise for unremitted RST on the basis of this “admission.”

Both parties agreed that RST and not HST should have been collected during the post-June 2010 period audit period at issue. However, in allowing Enterprise’s appeal, the Court concluded (at para. 45):

The parties agree that the only basis for the Minister’s assessments in this case is under s. 18 of the RSTA, which permits assessments of the “tax collected”. The “tax collected” by Enterprise was not RST but HST. The Minister therefore had no basis to assess the “tax collected” by Enterprise.

Before so concluding, the Court stated (at para. 38):

Enterprise’s practices are consistent with CRA policy in its GST/HST Policy Statement P-131R that: “Generally, a person will be considered to have collected an amount as or on account of tax where the person issues an invoice for the supply to the customer indicating the amount of GST/HST payable and subsequently collects the amount.”

After the Tax Court had ruled that the cleaning staff utilized by the taxpayer in its cleaning business were independent contractors rather than employees, the taxpayer commenced paying GST/HST to them and did not obtain GST/HST registration numbers from them in the mistaken belief that it was sufficient to obtain their business numbers - but, in fact, most of them were small suppliers who were not registrants. Owen J noted (at para. 99) that such unregistered staff were required to remit the tax so paid to them, stating:

A person that is not a registrant but that receives an amount in a calendar month as or on account of tax under the GST Act is required to file a return under the GST Act within one month after the end of that calendar month, to report the amount in the return as net tax and to remit that amount to the Minister by that same deadline [citing ss. 225(1), 238(2), 245(1) and 228(2)(b)]. In addition, the Minister is entitled to assess the person for the net tax whether or not a return is filed [citing ss. 296(1)(a) and subsection 299(1)].

When the taxpayers, which were property-casualty insurers, received premiums from a customer before the policy took effect, they remitted the insurance premium tax (“IPT”) received by them on such collection on the basis of the month in which the policy came into effect rather than the earlier month of receipt. S. 523 of the Quebec Sales Tax Act (“QSTA”) required that a person receiving payment of a policy premium collect the tax thereon and relevantly required such tax to be remitted to the Minister. QSTA s. 527 relevantly required all tax collected by a registrant to be held and remitted as mandatary for the Minister. S. 24 of the Quebec Tax Administration Act provided:

Every person who deducts, withholds or collects an amount under a fiscal law is bound to pay to the Minister, at the date fixed by such law, or in accordance with the provision for such payment, an amount equal to that which the person must remit under the said Act.

The same obligation exists in respect of any amount that a person, whether in good faith or in bad faith, deducts, withholds or collects, believing or claiming that he is acting under a fiscal law.

In finding that the taxpayer had been properly assessed for failure to remit the IPT based on the month of receipt, the Court stated (at paras. 24, 26, TaxInterpretations translation):

Once the insurer received the premium from its client, it accepted the payment, even if it kept a separate record of the amount collected until the policy was in force. The client could consider that the premium, including the IPT, had been paid since the money came out of the client's account. …

Regarding the IPT, section 527 of the QSTA clearly provides that the insurer, in its capacity as agent, must account for the tax collected in the preceding calendar month at the end of the month. Whether or not the premium is due does not change the fact that the insurer has collected the IPT amount paid by the insured and must therefore remit it to the Minister.