Indian Act

Although various Crown officials had recommended to other Crown officials that the Ross River lands be set aside as a reserve and the Department of Northern Affairs and National Resources had informed the Indian Affairs Branch that the lands had been set aside "for the Indian Affairs Branch", there was no evidence that particular Crown officials with authority to bind the Crown or who could reasonably be seen by a First Nation as having such authority had made such a determination. Accordingly, the lands were not a reserve.

The appellants, all status Indians, were gasoline retailers on the Kahnawake Reserve who did not charge or collect taxes under the Excise Tax Act, Quebec Sales Tax Act or Quebec Fuel Tax Act on their gasoline sales notwithstanding that most of their customers were not Indian.

After finding that s. 35 of the Constitution Act, 1982 did not accord an unfettered right to trade, and after noting (at para. 73) that having regard to the findings in the references on GST ([1992] 2 S.C.R. 445) and QST ([1994] 2 S.C.R. 717) that “in all instances, it is the purchaser who pays the tax, not the vendor,” Hesler CJQ stated (at para 78):

The fact that the appellants choose not to collect GST and QST (despite their obligation to do so) does not transform the tax assessments to which they have become subject into a tax on their personal property….[T]hey cannot claim the tax exemption contemplated in s. 87 of the Indian Act and thus, by ricochet, protect their customers who are not Indians from the application of the GST and the QST.

Under the Fuel Tax Act, the appellants were required to pay fuel tax on their purchases and could claim reimbursement of the portion of those amounts paid on fuel then sold to Indians (based certification procedures.) Alternatively, they could purchase (subject to “formalities”) fuel from a designated supplier on the basis of a percentage reduction corresponding to the expected sales to Indians. Hesler CJQ stated (at para. 90):

[T]he retailer is not personally responsible for any tax: either the retailer is reimbursed if the exemption program applies, or the retailer, as a mandatary, collects the tax from the customer and remits it to the tax authorities.

The taxpayer's tax appeal was based on an alleged exemption, in an aboriginal treaty ("Treaty 8"), from all taxation. The motions judge found that he was bound by the legal finding in Benoit that there was no such exemption in Treaty 8, and granted the Minister's motion to strike references to Treaty 8 from the taxpayer's pleadings.

Webb JA reversed the motion judge's decision. Benoit made a factual conclusion, on whether "the Aboriginal signatories understood that they would be exempted from taxation for any reason," finding that there was "insufficient evidence" to support this view - therefore, the question was not whether stare decisis applied on the findings of law in Benoit, but rather whether issue estoppel applied on the findings of fact (para. 21).

Issue estoppel did not apply. Although the issue was the same, there was no evidence that any litigant in Benoit was the present taxpayer or his privy.

The taxpayer's income came from a fishing business, which he operated through four personally held corporations. The taxpayer argued that, because the corporations' books and records were located on a reserve, and his income came from those corporations, that income must have come from property situated on a reserve.

C Miller J rejected the taxpayer's argument as being "facile." He stated (at TCC para. 63):

[T]he use of non-arm's length corporate intermediaries located on-Reserve should not so colour the location of the property, in this case, Charles Pilfold's business income, as to artificially create the situs of the business income.

The evidence otherwise demonstrated that the business was not connected to a reserve - the business management, fishing, sales, equipment, and customers were all off-reserve.

In affirming the Tax Court reasons, Sharlow JA stated (at para. 6):

[The connecting factors test] requires a complete consideration of all of the facts relating to the income, which must include but cannot be limited to the formal legal structure through which the income is received.

The taxpayer worked as a consultant, and claimed the s. 87 exemption in respect of consulting income purportedly earned on a reserve. The trial judge found that the taxpayer's services to on-reserve clients were "entrenched in the traditional, social and cultural integrity of life on reserves" and "promote the preservation and furtherance of the traditional way of life on reserves" benefiting the "Native community as a whole," but nevertheless found that the s. 87 exemption did not apply because the taxpayer earned his income in the commercial mainstream.

Stratas JA granted the taxpayer's appeal and ordered a new trial. The trial judge's commercial mainstream analysis could no longer apply post-Bastien. Regarding the connecting factors test, Stratas JA stated (at para. 45):

In light of Bastien, the approach of listing factors in the abstract, as if they are relevant and deserving of weight in all cases, and then simply applying them to the facts of a particular case can no longer stand ... .

The taxpayers lived on a reserve and were employed at a sawmill built on former reserve land, which had been ceded for the sake of establishing the sawmill. The taxpayers' assessments for 1985-2002 were made on the basis that, as the taxpayers did not work on reserve land, their income was not exempt under s. 87 of the Indian Act. In the Boubard decision in 2008, it was found that s. 87 did apply and the taxpayers' assessments for 2000-2002 were varied. The taxpayers then applied in 2009 for discretionary relief under s. 152(4.2) of the Income Tax Act in respect of the remaining years. (The version of s. 152(4.2) in force during the relevant years did not have a limitations period.) The application was denied in respect of 1985-1998 on the basis that the Minister would presumably not have exempted the taxpayers' employment income from tax in those years.

In the course of affirming the Minister's decision to deny relief (and reversing the decision at trial), Stratas J.A. stated that the wording of s. 152(4.2) invites a "year-by-year examination of the state of the law" (para. 61). The Court found that it was reasonable for the Minister's delegate to evaluate the state of the law in 1985-1998 by reference to the state of the jurisprudence - and until the Amos decision the jurisprudence held that income earned in the taxpayers' circumstances was not exempt under s. 87 of the Indian Act.

The taxpayer fished on and near a reserve, and sold his fish to an on-reserve co-op which sold the fish to a commercial fish seller ("Freshwater"). The Court found that the taxpayer's income from fishing was exempt under s. 87 from taxation.

Although the Court accepted the Minister's position that the co-op was legally an agent for the taxpayer's sale of fish to Freshwater, the Court nevertheless found that this arrangement was sufficiently connected with the reserve that the taxpayer's income was income from property on the reserve. The taxpayer's dealings with the co-op were entirely on-reserve, and the co-op itself was very important to the general economic life on the reserve, which was the biggest contributor to the reserve after the federal government. The reserve also controlled the quota and provided financial support through loans for capital fishing assets. The Court concluded that the Co-op was a "critically important institution in the economic life of the Reserve."

The taxpayer's fishing activities were "no more than a weak indicator" that the taxpayer's fishing income was situated on the reserve (para. 68). Although the taxpayer's fishing preparations were conducted on the reserve, his fishing was often carried out on lakes outside the reserve.

The deceased taxpayer was a status Indian residing on a reserve who held term deposits with a Caisse Populaire Desjardins situated on the reserve. The Tax Court and Court of Appeal held that the resulting interest income was not exempted under s. 87 because the Caisse had earned the income to pay the interest in the commercial mainstream. The Supreme Court granted the taxpayer's appeal on the grounds that the interest income was property of an Indian situated on a reserve.

After referring to the two-step test in Williams, Cromwell J referred (at para. 41) to "the ongoing relevance to the Indian Act exemption of general legal principles about the location of property," noted (at para. 45) that "the type of property [namely, passive income on a debt] supports the view that the connecting factors of the place of contracting, the place of performance and the residence of the debtor should weigh heavily in attributing a location to the interest income," and that, conversely, "the Caisse's income-producing actions and contracts after Mr. Bastien invested in term deposits cannot be deemed his own" (para. 51). He went on to state (at para. 52):

[T]he Recalma line of cases has sometimes wrongly elevated the "commercial mainstream" consideration to one of determinant weight. More precisely, several decisions have looked to whether the debtor's economic activity was in the commercial mainstream even though the investment income payable to the Indian taxpayer was not.

Létourneau J.A. for the court at para. 6 (official translation):

The services rendered by the appellant were done so [sic] at his customer's place of business situated off the reserve where, according to the evidence, he had his office and worked at least eight (8) hours a day, every business day. It was neither erroneous nor unreasonable for the judge to find that the income had been earned off reserve. We agree with the judge that the fact that the appellant lived on the reserve and had an office in his home does not obliterate the [finding].

The registrant's business hired status Indians and sold their services to off-reserve organizations. The Court found that s. 87 of the Indian Act did not exempt the registrant from his obligation to collect and remit GST, because those were taxes imposed not on the registrant, but his clients.

Interest income that the taxpayer earned from an investment with a Caisse Populaire situated on a reserve different from his own, was not exempt given that the income was generated off the reserve. The fact that this financial institution was situated on a reserve merited little weight.

The taxpayer's fishing activity was found to be carried on in the commercial mainstream rather than being exempt under s. 87 given that he caught fish off the Reserve, spent most of his working time while carrying on his business during the fishing season off the Reserve and sold his entire catch to an agent for a Crown corporation, which was located off the Reserve and transported the entire catch off the Reserve as soon as possible.

The Trial Judge did not misapply the connecting factors test in finding that employment income earned by band members from a pulp mill situate off the reserve was exempt on the basis of the weight he gave to the fact that the lands on which the mill was situated had been surrendered to the Crown for sale in order to permit the mill to be built and provide employment to the band members.

The employment income of status Indians employed by an employment services agency that was headquartered and administered on a Six Nations Reserve was not exempt given that the services of the employees was provided off-reserve to a largely off-reserve clientele.

The income of the taxpayer from a business operated on lands within Newfoundland that subsequent to the taxation year in question became a reserve, was not exempt.

None of the employment income of a status Indian employed in Hull, Quebec with the Department of Indian Affairs and Northern Development was property situated on a reserve. Noël J.A. stated (at p. 6010) that "it cannot be said that the taxation of the respondent's income would result in the erosion of his entitlement qua Indian on any or all of these reserves as there is no connection whatsoever between this income as such and these reserves as economic bases or physical location ... ."

The employment income earned by Indian employees residing in the National Capital Region and working for the Department of Indian Affairs and Northern Development in jobs relating to Aboriginal issues did not have a sufficient connection to a reserve to justify a conclusion that their income was located on a reserve.

Interest income earned by an Indian, who did not reside on a reserve, on deposits held in a Caisse Populaire located on a reserve was not exempt.

The trial judge had erred in finding that the Dene and Cree peoples who are affected by a particular treaty were entitled to exemption from income tax on the basis of an assurance of the Commissioners negotiating the treaty contained in their report notwithstanding that the Commissioners had no intention of promising an exemption from taxation and no such promise was contained in the terms of the treaty.

S.87 did not exempt reserve Indians from New Brunswick sales tax on the purchases of goods outside the reserve given that such tax was imposed on sales of goods rather than the consumption of goods, and at the point of sale the location of the property and its "paramount" (i.e., normal) location was outside the reserve.

Indians who did not reside on reserves and who were employed by an Indian childcare agency that was funded by the Department of Indian Affairs and that provided many of its services off reserves were not exempt on their employment earnings.

Interest income received by an Indian who was on a waiting list to reside on a reserve, from a Caisse Populaire whose head office and chief place of business were located on a reserve, was not exempt. Tardif T.C.J. stated (at p. 487) that:

"Where the only thing Indian about a credit union is the location of part of its operations, the fact that property income has gone through the credit union does not make it non-taxable."

One of the taxpayers was a status Indian residing close to a reserve, and the president and sole shareholder of a company employing 100 individuals (including 12 to 18 status Indians living on or near the reserve) in the company's business of commercial fishing. The Court affirmed the finding of the trial judge that the maintenance of a small office on the reserve that was used principally for the purpose of distributing cheques to the Indian employees of the company, and the fact that the earning of remuneration or profits from the company had a general economic benefit for the reserve, were not sufficient connections to the reserve to establish exemption. "Indians who acquire, hold and deal with property 'in the commercial mainstream' must do so on the same terms as their fellow citizens." (p. 6372).

Since Winnipeg was the residence of the taxpayer's employer, the taxpayer's residence, the place where he performed his work and where he was paid, the fact that the nature of the work related to assisting reserve Indians when they moved off the reserve was not sufficient to establish exemption.

The plaintiff was an Indian residing in Toronto but with personal ties to an Ojibway reserve who worked in Toronto for a Mohawk Indian who provided the services of employees, including the plaintiff, to a native health centre in Toronto. The employment income of the plaintiff was found to be exempt because her employer was located on a reserve and her work benefited the business of that employer.

The taxpayers resided on a reserve but worked off the reserve for a forestry company that had obtained a lease of reserve lands for use in storing fuel and wood chips for the operation of an off-reserve mill. Because the Band had leased the reserve lands for the procurement of access to employment that would flow from having the pulp mill operation established on and contiguous to their lands, the taxpayers' "employment was directly related to the realization by the Band and its members of their entitlements to the reserve land and, in accordance with the purpose of the tax exemption in section 87, the government should not be able through income taxation to erode income from such use, direct or indirect, of their land (p. 5357)". Accordingly, their employment income was exempt.

After finding that investment income that the taxpayers derived from bankers' acceptances and mutual funds purchased by them from the Bank of Montreal at a branch located on other reserve land were not exempt, Linden J.A. stated (at p. 6240) that "when Natives, however worthy and committed to their traditions, choose to invest their funds in the general mainstream of the economy, they cannot shield themselves from tax merely by using a financial institution situated on a reserve to do so".

A status Indian, who resided on a reserve, and who provided logging services to a non-Indian business situate off the reserve but who kept his business records at his residence on the reserve and stored his equipment there when it was not being used, was found not to be exempt on his earnings from that business.

Employment income that a status Indian, who resided on a reserve, earned as administrator of a hospital that had been relocated from the reserve to a location nearby and 80 percent of whose patients were status Indians, was exempt.

Employment income that a teacher earned from teaching at a school located close to the reserve was found to give rise to exempt property given that her employer (the Frontier School Division which was administered from an office on the reserve) resided on the reserve, she resided on the reserve and the school had a close connection to the reserve (most of the students were Indians and the school in question and the schools on the reserve were seen as one system by the Frontier School Division and the Indian Band).

Unemployment insurance benefits received by an Indian were exempt from tax given that the employment by which he qualified for the benefits was clearly located on the reserve (the employer was located there, the work was performed there, the Indian resided there and was paid there). In rejecting a submission that the situs of the benefit should be determined on the basis of the situs of the debtor (the federal Crown), Gonthier J. stated (p. 6325):

"It is simply not apparent how the place where a debt may normally be enforced has any relevance to the question whether to tax the receipt of the payment of that debt would amount to the erosion of the entitlements of an Indian qua Indian on a reserve. The test for situs under the Indian Act must be constructed according to its purposes, not the purposes of the conflict of laws."

A provision of the Health Services Tax Act (N.S.), which provided that exempt persons must pay an amount equal to the tobacco tax and then apply for a rebate, was contrary to the exemption.

The reference in s. 87(b) to a "reserve" does not include surrendered lands.

It was stated, obiter, with respect to s. 87(a) that a band "is probably exempt from capital gains tax on the sale of absolutely surrendered lands."

Wages of an Indian residing on an Indian reserve that were paid to him by an employer also resident on the reserve fell within the exemption from taxation in respect of personal property situate on a reserve. The reserve was the situs of the wages paid to him, the wages were his personal property and income taxes would in reality be a tax on that property.

The Appellant, an Indian living on a reserve, was entitled to a declaration that no tax could be imposed on her under the Social Services Tax Act (BC) on the purchase price of electricity sold and delivered to her at her home on the reserve. Electricity was personal property at common law, and such property was "situated", in the sense of "located", on the reserve as it was clearly delivered to and located on the reserve.

S.87 "contemplates taxation in respect of specific personal property qua property and not taxation in respect of taxable income as defined by the Income Tax Act, which, while it may reflect items that are personal property, is not itself personal property but an amount to be determined as a matter of calculation by application of the provisions of the Act."

A provincial scholarship received by an Indian attending the University of Calgary was exempt because (a) it was paid by the government, and accordingly was deemed to be personal property of the Indian situate on a reserve (s.90(1)), and (b) s. 87 provided that the Indian was not subject to taxation "in respect of" the property.

In finding that s. 90 did not apply to salary paid to an Indian band chief pursuant to a federal funding program known as Band Support Funding, Marceau J.A. stated (at p. 5642) that an "agreement" in the context of that agreement was "'ancillary agreement' - that is to say an agreement in the nature of a treaty or attached to a treaty".

The taxpayer, who was a member of the Penticton Indian Band residing on the Penticton Indian Reserve, received enhanced unemployment insurance benefits under a job creation project administered on the Reserve by the Band, which arose as a result of a written agreement between the Band and the Canada Employment and Immigration Commission providing for a job creation project (within the meaning of section 38 of the Unemployment Insurance Act, 1971) to be carried on at the Reserve. Stone J.A. found the enhanced benefits were made available to the taxpayer because of the agreement between the Band and Her Majesty, notwithstanding that the benefits were made available in pursuance of a national policy to alleviate unemployment recognized in section 38.