Dewan Enterprises v. R. - TCC: GST/HST payable on sale of used vehicles - Ontario Motor Vehicle Tax irrelevant

Dewan Enterprises v. R. - TCC:  GST/HST payable on sale of used vehicles - Ontario Motor Vehicle Tax irrelevant

Brian & Deborah Dewan Enterprises Ltd. v. The Queen (July 29, 2017 – 2017 TCC 135, D’Auray J.).

Précis:  This is another decision virtually on all fours with the Aswal decision of the same Judge rendered a few days earlier on July 19, 2017.  Put simply, it was no answer to the taxpayer’s failure to collect GST/HST on the sale of vehicles that had been used in its business that the purchaser had paid Ontario Motor Vehicle Tax.  Appeal dismissed.

Decision:  The taxpayer found itself in an unfortunate position but there was nothing the Court could do other than dismiss the appeal:

[1]             The facts are straight forward and were admitted by both parties. During the period under litigation, the appellant operated a transportation service business known as “Dewan Limousine” and was a GST/HST registrant.

[2]             In 2011, due to its financial situation, the appellant started to liquidate its assets, notably three limousines (the “limousines”) that had been used in the course of its commercial activities. These limousines were sold for an amount of $105,700.00. The appellant did not collect and remit GST/HST on the sales of the limousines, which amounted to $13,741.00.

 [11]        In practice, issues arise when the documentation provided to evidence the sale does not indicate that the vehicle is sold by a person that is a registrant. For example, the invoice does not indicate a registration number for GST/HST and it is clear from the invoice that no GST/HST has been charged on the sold vehicle. In these cases, the Ministry of Transportation correctly assumes that the transactions are private sales between non-registrants. In such cases, the Motor Vehicle Tax must be paid by the purchaser of the vehicle upon registration.

[12]        This was exactly the case in this appeal. The invoice provided was unfortunately inadequate. Therefore, the 13% Motor Vehicle Tax was charged upon the registration of the limousines by the Ministry of Transportation.

[13]        This situation places both the vendor and the purchaser in a disadvantageous position since the former is still liable to remit the GST/HST to the federal government, which should have been collected from the purchaser, and the latter is not eligible to claim input tax credits because he/she did not pay GST/HST on this specific transaction.

[14]        To avoid this type of issue, clear documentation should be provided to the Ministry of Transportation, upon the registration of the vehicle.

[15]        That said, if the Motor Vehicle Tax is erroneously paid by a purchaser upon registration of the vehicle, a purchaser may ask the Ministry of Transportation for a refund. Some conditions must be met for the Motor Vehicle Tax to be refunded. Only the purchaser will be allowed to request a refund and there is a statutory time limit after which it is not possible to claim a refund. The form is entitled “Application for Refund of Ontario Retail Sales Tax for Motor Vehicles Purchased Privately” and can be found on the Ontario Ministry of Finance’s website. However, I do not know if the appellant meets the conditions for a refund in this appeal, the appellant could get in touch with the Ontario Ministry of Transportation to inquire.

[16]        Although the appellant mistakenly believed that the GST/HST had been paid to the Ministry of Transportation, by the person who purchased its limousines, this was not the case.

[17]        This is a very unfortunate situation but as I have already stated, I do not have any other choice than to dismiss the appeal.