McDavid v. R. – TCC: Truck driver largely successful in claims for ITCs – no resupply by truck company

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McDavid v. The Queen
(April 10, 2014 – 2014 TCC 112) involved a truck driver who was disallowed ITC’s either on the basis that the expenditures in question were personal in nature or that the documentation was insufficient (at trial the Crown also added a new argument based on resupply):


[6] It is not in dispute that the appellant worked as a transport truck driver for Quality Carriers Inc. (QCI), a registrant for the purposes of the ETA and having its head office in Oakville, Ontario. As part of his duties with QCI the appellant drove a transport truck in the United States and in various Canadian provinces.

[7] The appellant owned and operated his own transport truck and worked as an independent contractor. When performing his duties for QCI, the appellant used a fuel card (T-Chek card) which was provided by QCI for the purchase of fuel, parts and other items for his transport truck.

[8] The evidence also revealed that when he was not hauling for QCI, the appellant did some work as an excavation/landscaping contractor and attempted providing a “hot shot” delivery service. When the amount of work from QCI declined, he turned to providing a mobile mechanic service.


[9] There are mainly two categories of ITC claims at issue here. The first set of claims comprises those that the appellant submits were for expenses incurred in the course of his business ventures and that the respondent contends were personal in nature.

[10] The second set of claims comprises the expenses that the appellant incurred while working as a trucker. These expenses include claims for a radio phone, as well as fuel and other items purchased by the appellant using a T-Chek card supplied by QCI. With respect to these claims, the respondent’s sole argument in her Reply is that they were properly disallowed because the appellant did not have sufficient supporting documentation. It was argued that the invoices were deficient as not meeting the requirements of subsection 169(4) of the ETA and section 3 of the Input Tax Credit Information (GST/HST) Regulations (Regulations). The relevant provisions are appended to these reasons.

The case was heard in New Brunswick where Mr. McDavid lived when the appeal was commenced. He subsequently moved to Alberta. His spouse, Ms. Ryan, flew to New Brunswick for the trial and testified on the basis that she had prepared all of the claims and was very familiar with her husband’s activities.

The court first accepted that the expenditures in question were of a business nature:

[24] In my view, Ms. Ryan identified a business purpose with respect to all of the claims. The respondent did little to contradict Ms. Ryan’s testimony or the documentary evidence other than suggesting that her testimony was second-hand knowledge or guesswork. I believe that the appellant made out a prima facie case sufficient to demolish the minister’s assumptions (House v. the Queen, 2011 FCA 234, 2011 DTC 5142, at paragraph 61).

The court next turned to the adequacy of the documentation. The Crown argued that the radio phone documentation was inadequate since Ms. Ryan’s name appeared on the invoices, not Mr. McDavid. The court rejected this argument:

[30] I am therefore of the view that Ms. Ryan acted as the duly authorized agent or representative of the appellant and that, this being so, her name appearing on the invoices does not bar the appellant from claiming ITCs with regard to these invoices (subparagraph 3(c)(ii) of the Regulations).

Next it rejected the Crown’s argument that the QCI documentation was not sufficiently specific:

[33] I will now deal with the first argument of the respondent and the only one put forward in her Reply. On this point, I do not agree with the respondent. In order to meet the supporting documentation requirement, the appellant provided a sample of a T-Chek receipt issued to him at a fuel station. The sample showed his truck number (53072), the supplier’s name and GST registration number, the quantity of fuel and the purchase amount on which GST was paid. Ms. Ryan testified that every time the appellant used his T-Chek card in the machine at the fuel station he received the same kind of receipt. The appellant also provided the breakdown (the T-Chek fuel purchase table) of the T‑Chek fuel purchases deducted from his pay statements. The T-Chek fuel purchase table showed the appellant’s name and truck number, the supplier’s name, the date of purchase, the quantity of fuel, as well as the total amount paid according to each receipt. Contrary to the respondent’s contention, in the case of the receipt submitted as an example it looks as if the price shown on the T-Chek fuel purchase table and deducted on the appellant’s pay statement includes GST. Indeed, on the table, the breakdown for that receipt shows a cost of 1.0690 per litre times 472 litres, which gives a total cost of $504.57. The price shown on the receipt indicates 1.01472 per litre times 472 litres, which works out to $478.95, plus $25.62 GST, for a total of $504.57 (Exhibit A-1, Tab 1, pages 3, 5 and 7). A quick calculation shows that it is possible to reconcile the T-Chek fuel purchase table figures and the receipt and that GST was in fact paid by the appellant.

Finally the court turned to the Crown’s argument, not contained in its reply, that there had been a resupply by QCI to the appellant:

[37] With respect to this particular issue, which is the second argument, raised for the first time by the respondent at the hearing, it was argued that those purchases resulted in a resupply by QCI to the appellant. This would mean that whenever the appellant used the T-Chek card provided by QCI, QCI was in fact purchasing the fuel on its own behalf and then reselling it to the appellant. If this was the case, the appellant would have to prove that it paid GST to QCI in order to be able to claim ITCs. This position was not pleaded in the Reply and the respondent does not benefit from the rebuttable presumption whereby this allegation is presumed to be true for the purposes of this appeal.

Again the Crown was not successful:

[54] Here, while the appellant’s invoices and records were presented at trial, the corresponding records of QCI were not. Evidence concerning how the T-Chek cards worked on QCI’s side would have been helpful. There is no evidence that QCI either reported GST or claimed ITCs on the fuel or other purchases made with the T‑Chek card.

[55] On the contrary, there is a letter from QCI’s head office in Florida (on Quality Carrier letterhead) stating that they did not claim GST rebates on fuel purchases and that it would be up to the individual drivers to request such rebates (Exhibit A-1, Tab 1, page 2). Counsel for the respondent pointed out that the letter referred to Quality Distribution Inc. rather than to QCI. However, the respondent did not bring any evidence to show that QCI itself claimed GST rebates on fuel. Nor did the auditor testify that Ms. Bottorff, the author of that letter, had said that QCI claimed those rebates. She said that Ms. Bottorff had told her that QCI did “claim GST/HST” whenever it could (Transcript, volume 2, page 16). On the other hand, Ms. Ryan had spoken to QCI’s terminal managers in Montreal and Oakville, who both referred her to Ms. Bottorff. All three told her that the appellant, as an independent contractor, had to claim the ITC’s on fuel himself and that QCI would not claim them (Transcript volume 1, pages 130 and 131). Presumably, the minister would be aware of it if QCI was claiming ITCs on fuel, given the fact that he had QCI’s registration number and had been in contact with QCI over the matter.

[56] Fourth, the contract itself as drafted, setting out the appellant’s obligation to cover out of his escrow funds the cost of fuel or other items purchased with the T‑Chek card, is a strong indication that the appellant bore the economic risk with regard to fuel purchases. Indeed, as I have already said, if a customer did not pay for a delivery, the cost of the fuel for that delivery would be removed from the appellant’s escrow fund.

[58] In my view, there is no prima facie evidence that QCI resupplied to the appellant fuel or anything else purchased with the T-Chek card. I find that the evidence tends to show that the situation here is different than those in Vanex, Maritime-Ontario and Transport Roberge.

[59] I therefore conclude that the respondent’s argument does not stand up.

The court allowed the appeal with the exception of the HST on meals (with respect to which the claim could not exceed 50%), and a reduction for the extra amount of $1,000 that was mistakenly added by Ms. Ryan for the first period of 2006.

Counsel for the taxpayer argued for solicitor-client costs on the basis of a pre-trial settlement offer of 50% of the disputed amounts. The court declined to make such an order but did allow Ms. Ryan all of her costs for travel from Alberta to New Brunswick for discovery, settlement conferences and trial.