Tax Status of 'Drive Clean' Charges

Information Notice 71
Published:
Content last reviewed: August 2010
ISBN: 978-1-4249-9226-3 (Print), 978-1-4249-9228-7 (PDF), 978-1-4249-9227-0 (HTML)

Notice to the reader: For Retail Sales Tax (RST) – On July 1, 2010 the 13 per cent Harmonized Sales Tax (HST) took effect in Ontario replacing the existing provincial Retail Sales Tax (RST) and combining it with the federal Goods and Services Tax (GST). As a result, RST provisions described on this page and in other publications ended on June 30, 2010.

Effective July 1, 2010 this publication was archived for RST purposes only. Use caution when you refer to it, since it reflects the law in force for RST at the time it was released and may no longer apply.

This Notice explains the Ministry of Finance's revised policy for the application of Retail Sales Tax (RST) to charges for Drive Clean emissions tests.

Background

The Drive Clean emissions test fee is set by law at a maximum of $35.00 per test and $17.50 for a retest. Since the inception of the Drive Clean program in 1999, it has been ministry policy that Drive Clean charges are not taxable when no other work is done at the same time on the vehicle. This is consistent with the tax treatment of other vehicle testing (diagnostic tests and safety inspections) when no further work is done at the same time.

However, when repairs were done at the same time as the emissions test, both the charge for the emissions test and the charge for repairs were considered taxable even if the charges were separated on the invoice or billed on separate invoices.

What Changed?

Effective immediately, RST no longer applies to charges for Drive Clean emissions tests regardless whether the Drive Clean charges are shown separately on the invoice or billed with repair charges.

Diagnosis and Inspection Tests

It remains ministry policy that where repairs are performed on a motor vehicle pursuant to a diagnosis or safety inspection, the entire charge is taxable. Where the inspection or diagnostic testing results in repair work that is done as part of one transaction, these charges form part of the fair value of the taxable service. Therefore, RST applies to the total bill regardless whether the charges for inspections or diagnostic tests are separated on the invoice.