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Interpretation Letter TFFC-0001, March 24, 2009
We refer to our telephone conversations with Mr. X regarding the application of the tax for fuel conservation (TFFC) to used vehicles imported into Ontario. Mr. X has requested that our ruling be sent to you.
Understanding of Facts
We understand that an Ontario resident imported a used vehicle into Ontario from the United States (US) in 2007 and arranged to lease this vehicle from Company A. This vehicle had not been registered in Ontario prior to being imported by your customer.
Company A included amounts for both Ontario retail sales tax (RST) and TFFC in the monthly lease payments charged to the customer. However, the customer disputed the payment of TFFC based on the following statement made on the Ministry of Finance's (ministry's) website:
- New vehicles purchased outside Ontario and brought into Ontario for personal use are subject to both the applicable TFFC and the 8 per cent RST.
As a result of the customer's complaint and of the information contained on the ministry's website, Company A restructured this customer's monthly lease payments to exclude TFFC. However, it was Mr. X's opinion that the website contradicted RST Guide 513 – Tax for Fuel Conservation (version dated June 2001) which stated:
- Vehicles (new or used) purchased outside Ontario and brought into Ontario for personal use are subject to both the applicable TFFC and the 8% RST.
Mr. X enquired as to the correct application of TFFC to imported used vehicles.
Legislation and/or Administrative Policy
Under section 1 of the Ontario Retail Sales Tax Act (Act), "sale" is defined to include:
- any transfer of title or possession, exchange, barter, lease or rental, conditional or otherwise, including a sale on credit or where the price is payable by instalments, or
- any other contract whereby at a price or other consideration a person delivers to another person tangible personal property ...
Section 1 of the Act also defines the term "purchaser" to mean, in part, "a consumer or person who acquires tangible personal property anywhere ... for his, her or its own consumption or use…".
Section 4 of the Act contains the provisions which govern the payment of TFFC by purchasers of new passenger or sport utility vehicles.
Subsection 4(2) of the Act specifies that for the purposes of section 4 of the Act,
"passenger vehicle" and "sport utility vehicle" mean a vehicle or type of vehicle determined by the Minister to be a passenger vehicle or a sport utility vehicle and in respect of which the Minister determines that a highway fuel consumption rating of 6.0 or more litres of gasoline or diesel fuel per 100 kilometres applies.
Under subsection 4(4) of the Act, the purchaser of a new passenger vehicle or sport utility vehicle shall be deemed to be liable to pay TFFC if:
- the first sale of the vehicle to the purchaser is a retail sale in Ontario of the vehicle or is a rental or lease in Ontario of the vehicle for a term of at least one year;
- the first sale of the vehicle is outside Ontario on or after the 1st day of August, 1991 and, on the date the purchaser is required by subsection 2(18) to pay tax, the vehicle is a vehicle prescribed by the Minister as mentioned in subsection (2); or
- the first sale of the vehicle in Ontario on or after the 1st day of August, 1991 is a lease or rental of the vehicle for term of less than one year and the purchaser leases or rents the vehicle within 180 days of the first sale.
Subsection 2(18) of the Act stipulates, in part, that
Every person who brings into Ontario or who receives delivery in Ontario of tangible personal property acquired by the person for value for his, her or its own consumption or use ... shall immediately report the matter in writing to the Minister and shall supply the Minister with the invoice and all other pertinent information required by him or her in respect of the consumption or use of such property and at the same time shall pay to Her Majesty in right of Ontario the same tax in respect of the consumption and use of such property as would have been payable if the property had been purchased at a retail sale in Ontario at the time such tangible personal property is brought into Ontario or delivery thereof is received in Ontario...
Analysis and Conclusion
Under subsection 2(18) of the Act, a purchaser is responsible for paying RST on tangible personal property, including motor vehicles, purchased anywhere and brought into Ontario for that person's own consumption or use.
Similarly, under paragraph 4(4)(b) of the Act, a purchaser who imports a new motor vehicle into Ontario is liable to pay TFFC if the following conditions are met:
- the vehicle was purchased outside Ontario on or after August 1, 1991 and has not previously been registered in this province, and
- the vehicle is a passenger vehicle or a sport utility vehicle with a highway fuel consumption rating of at least 6.0 or more litres of gasoline or diesel fuel per 100 kilometres.
A purchaser is, therefore, liable for both the applicable RST and TFFC on new vehicles purchased outside Ontario and brought into Ontario for personal use. TFFC does not apply to vehicles that are purchased used outside Ontario and brought into Ontario for personal use.
RST Guide 513 – Tax for Fuel Conservation (current version dated April 2008) was revised and states:
New vehicles purchased outside Ontario and brought into Ontario for personal use are subject to both the applicable TFFC and the 8 per cent RST.
A motor vehicle dealer who imports used vehicles for resale in Ontario does not meet the definition of a "purchaser" under the Act. As such, no TFFC is payable by the motor vehicle dealer at the time of importation of the used vehicle. In addition, the retail sale of such used vehicles does not attract TFFC as none of the conditions outlined in subsection 4(4) of the Act are met.
