RST Guide 209, January 1998

Used Vehicle Information Program

Ontario retail sales tax (RST) is payable on the "fair market value" of used vehicles purchased from a seller who does not hold a Vendor Permit issued by the Retail Sales Tax Branch of the Ministry of Revenue, and a valid motor vehicle dealer's licence issued by the Ontario Motor Vehicle Industry Council (OMVIC).

"Fair market value" means RST is to be paid on the greater of the purchase price or the vehicle's average wholesale value. The average wholesale value of a vehicle is the amount stated in the Canadian Red Book (Red Book). The Red Book, published by Canadian Red Book Inc., is a well-known standard for used vehicle prices. Since the Red Book is not a government publication, copies must be ordered from the publisher and not from the Retail Sales Tax Branch (Branch). Copies may be available at your local public library. Used vehicles affected by this program include passenger cars, vans, motorcycles, and light trucks that have an empty weight of 2,200 kilograms or less.

Since the Red Book does not provide amounts for used motorcycles, the Retail Sales Tax Act states the average wholesale price of a used motorcycle is equal to its "fair value". RST will be collected at the time of transfer on the purchase price of the motorcycle. These transfers will be investigated by the Branch at a later date to see if the price declared is reasonable. If the price is not considered reasonable, an assessment could be levied for the difference between the RST payable on the fair value determined by the Branch and the RST paid at the time of transfer.

Purchasers must pay the RST on vehicles bought from sellers who do not have both a Vendor Permit and a motor vehicle dealer's licence. Payment is made at the Ministry of Transportation, Driver and Vehicle Licence Issuing Office (licensing office), when the ownership is transferred. For further information, please call 1 866 ONT-TAXS (1 866 668-8297).

Excluded Vehicles

The fair market value mentioned above does not apply to the following items:

• buses
• imported vehicles registered for the first time in Ontario
• mopeds
• motor homes
• off road vehicles
• snowmobiles
• trailers
• trucks that have any empty weight greater than 2,200 kilograms

Sellers registered as vendors with the Branch must collect RST on sales of the excluded vehicles listed above. They do not need to hold a motor vehicle dealer's licence to collect the applicable RST. If the seller is not registered with the Branch, the purchaser of these vehicles must pay the RST at the licensing office when the ownership is transferred.

For motor vehicles that are 20 years or older at the time of registration, RST is payable on the greater of the purchase price, the replacement value for insurance purposes or the appraised value of the vehicle. A copy of the bill of sale, and, either a copy of the appraisal document, or a copy of an insurance policy showing the insured value of the vehicle is to be given to the licensing office.

Vehicles may be purchased from a federal government department which has charged RST. In such cases, RST will not be charged by the licensing office if the ownership is going directly from the federal government department to the purchaser shown on the bill of sale, and proof is provided that RST has been paid.

Used Vehicle Information Package

Sellers are required to provide purchasers with a vehicle transfer package. The ownership of the vehicle will not be transferred if the purchaser cannot provide the licensing offices with the necessary documents from this package.

The package costs $20 and includes these necessary documents:

• vehicle registration history in Ontario
• vehicle lien information (any outstanding debts in Ontario on the vehicle)
• average wholesale value per the Canadian Red Book
• other information dealing with vehicle safety standards, RST, etc

This package is not required:

• by dealers who hold both a Vendor Permit and a motor vehicle dealer's licence
• for vehicles imported for use in Ontario that have never previously been registered in Ontario.

Other exemptions from purchasing this package may exist; please contact the Ministry of Transport or the Ministry of Consumer and Commercial Relations (MCCR) for further information.

"Used Vehicle Information Packages" are available at any licensing office, and from MCCR.

Trades

Private purchases may include exchanging or trading motor vehicles. RST will apply to the fair market value of any passenger car, light truck or van that is acquired as the result of an exchange or trade in a private transaction. The fair market value is not reduced by the value of the vehicle accepted as a trade or exchange.

Where tangible personal property (other than a passenger car, light truck, or van) is traded for a passenger car, light truck or van, RST will be payable (by the receiver of the vehicle) on the fair market value of the vehicle. The receiver of the tangible personal property will only be liable for RST on the fair value of the property. For example: Someone trades a boat for a light truck and $5,000 in cash. The receiver of the light truck is liable for RST on the fair market value of the truck; the receiver of the boat is liable for RST on only the $5,000. No RST would be payable by the receiver of the boat if it is an even-trade (boat is traded for the light truck).

RST will apply on the fair value of any motorcycle that is acquired as the result of an even trade, trade-down or trade-up.

No RST will apply to any vehicle listed in the "Excluded Vehicles" section of this guide, that is acquired as the result of an even trade or trade down. RST is payable (on the excluded vehicles) on any net amount (value before trade-in amount less trade-in amount) paid to the seller.

Motor Vehicle Appraisals

If the average wholesale value per the Red Book is less than $1,000, RST is to be paid on the purchase price.

For excessively worn or damaged vehicles that have a Red Book value of $1,000 or more, the purchaser or new owner has the option of having the vehicle appraised. If the appraisal is done before the ownership is transferred, RST will be collected on the greater of the purchase price or appraised value.

The appraiser must complete the required information on the "Motor Vehicle Appraisal Record" form that is provided by the Branch. The "appraised value" of the vehicle will only be accepted if the appraisal is done by:

• motor vehicle dealers that are licensed by the Ministry of Consumer and Commercial Relations under the Motor Vehicle Dealers Act, and registered as vendors with the Branch; or
• independent motor vehicle appraisers who perform appraisals for insurance companies who are licensed under the Insurance Act. To be authorized as an independent appraiser, confirmation letters from the insurance companies for whom appraisals have been done must be provided by the appraiser to the Branch. The independent motor vehicle appraiser number must be recorded on all appraisals.

Appraisals will not be accepted to support a value lower than the average Canadian Red Book value if the appraisal is done by a person not meeting either of the above qualifications. The appraisal must be obtained by the purchaser within 60 days of the date of sale.

Exemptions

• Diplomats

  Diplomatic Identity Cards issued to diplomats by the federal government must specifically state that the cardholder is exempt from Ontario provincial sales tax. If the word "NIL" is shown beside Ontario, the holder is required to pay RST. See Retail Sales Tax Guide 803, "Foreign Representatives and Officials". If the holder is exempt, the card must be presented to the licensing office, or to the motor vehicle dealer if the vehicle was purchased from a dealer.

• Estate Bequests

  The ownership of a vehicle can be transferred exempt from RST to any beneficiary named in the will.

  A copy of the will must be shown to the staff at the motor vehicle licensing office at the time the ownership of the vehicle is transferred. If a copy of the will cannot be presented and the ownership of the vehicle is to be transferred to one of the beneficiaries, a letter from a lawyer or from a court must be provided by the beneficiary to confirm that he or she qualifies for the exemption. If the will or letter cannot be provided, or if the ownership of the vehicle is to be transferred to someone other than a named beneficiary, RST must be paid on the vehicle's fair market value.

• Farmers

  Persons who are "farmers" under the Retail Sales Tax Act may purchase harvesters, tractors, ploughs, and all-terrain vehicles with an engine displacement of 200 cubic centimetres or more and equipped with a carrying platform or rack exempt from RST. Licensed and plated trailers specifically designed for the transportation of livestock or farm crops and that are exclusively devoted to farming are also exempt from RST when purchased by a farmer.

  In addition to the above, unplated trucks, buses or automobiles may be exempt from RST if they are converted into farm implements, farm machinery, or farm equipment. Converted means installing certain equipment (e.g. crop spraying equipment; manure spreading equipment, etc.) so that the vehicle can no longer be considered a truck, bus, or automobile. If these vehicles are transferred prior to conversion, a refund may be available if they are converted within 30 days from the date of purchase.

  Farmers must pay RST on their purchase of motor vehicles, including snowmobiles and general purpose trailers such as a box or flatbed. See Retail Sales Tax Guide 807, "Farmers", for further details.

• Gifts Between Family Members

  Under the Retail Sales Tax Act, a family member means a spouse, parent, stepparent, grandparent, step-grandparent, child, stepchild, grandchild, step-grandchild, son-in-law, daughter-in-law, mother-in-law, and father-in-law. Other family members, such as brothers, sisters, aunts, uncles, and cousins, and friends do not qualify for this exemption and are required to pay the applicable RST on the vehicle's fair market value.

  If a motor vehicle is given as a gift between qualifying family members, the family members must complete the form, "Sworn Statement for a Family Gift of a Used Vehicle in the Province of Ontario", which also requires the signature of a Commissioner of Oaths. These forms are available at any licensing office and local Retail Sales Tax offices.

  The completed form is to be given to the licensing office at the time the ownership of the vehicle is transferred. Only one exempt transfer under this section is permitted per vehicle per family in any 12 month period.

• Settlers

  Individuals who are considered "settlers" under the Retail Sales Tax Act may be exempt from RST. See Retail Sales Tax Guide 202, "Goods Brought Into Ontario", for further details on settlers' effects. Proof must be provided to show that the vehicle was licensed in a jurisdiction outside Ontario.

• Status indians

  Used vehicles can be purchased exempt from RST by status Indians provided the ownership of their vehicle is registered to a reserve address. They must show to the motor vehicle dealer or to the licensing office their Certificate of Indian Status card, issued to them by the federal government. See Retail Sales Tax Guide 808, "Status Indians, Indian Bands and Band Councils".

Transfers Between Related Corporations or Between Corporation and Shareholder

Related party transfers include a transfer between an individual and their wholly-owned corporation, or between a corporation and its wholly-owned subsidiary. Wholly-owned is defined to mean the beneficial ownership of not less than 95% of the total issued and outstanding share capital of a corporation by a person or by a person and persons who are members of his or her family. A one time RST-exempt transfer is allowable between related parties as defined above. For this section, members of the family means spouse, parent, grandparent, child, grandchild, son-in-law, daughter-in-law, father-in-law or mother-in-law.

When transferring a vehicle between related corporations or between corporation and shareholder, a "Sworn Statement for the Transfer of a Used Motor Vehicle in the Province of Ontario" form, providing the particulars of the reason for the transfer and that has been witnessed and signed by a Commissioner of Oaths, must be presented to the licensing office. A completed "Addendum to Sworn Statement" (addendum) form must also be presented along with a copy of the bill of sale, invoice or receipt showing RST was paid by the current registered owner. Documentation outlining the relationship between seller and purchaser of the vehicle must also be attached to the addendum. The acceptable documentation is either a letter from a lawyer or accountant indicating he or she has personal knowledge of the total issued and outstanding share capital of the corporation; and the number and value of issued and outstanding shares of each class and who owns them, and the relationship of the shareholders; OR current copies of the corporation's balance sheet and share register, and the relationship of the shareholders.

Please note that if the vehicle is transferred directly from a wholly-owned corporation to a member of the family who is not a shareholder, RST will be payable on the fair market value of the vehicle, unless it is first put into the name of an individual who wholly-owns the corporation.

This section does not apply to transfers from/to partnerships or associations.

Commissioner of Oaths

Some of the forms mentioned in the above section, "Exemptions", require the signature of a Commissioner of Oaths. The following is a brief list of persons who qualify as commissioners:

• members of the Legislative Assembly (MPPs)
• provincial judges and justices of the peace
• barristers and solicitors entitled to practise law in Ontario
• clerk, deputy clerk and treasurer of local municipalities
• heads of municipal council, reeves, and members of city council.

A Commissioner of Oaths is also available at most licensing offices.

Refunds

The following are instances when a refund application for RST can be made on the purchase of a motor vehicle. (See Retail Sales Tax Guide #700, "Refunds and Adjustments" for further details regarding the type of application form to be used, unless specified below.)

• Corporation to Shareholder

  A motor vehicle may be transferred from a corporation to a shareholder who does not wholly-own the shares of the company. RST is to be paid by the shareholder at the time the ownership is transferred at the motor vehicle licensing office. Once the tax has been paid, the shareholder can claim a refund based on the percentage of share capital they own. As an example, if the shareholder owns 25 per cent of the share capital of the corporation, they can submit a refund claim for 25 per cent of the RST paid at the licensing office. The application can be mailed along with proof that RST was paid and supporting documents for the percentage of shares owned.

• Tax Paid Twice

  Where RST was paid to the seller and at the motor vehicle licensing office, a refund application can be made and mailed along with proof that RST was paid both to the seller and to the licensing office when the ownership was transferred.

• Appraisals

  If the appraisal is done after the ownership is transferred, a partial refund can be claimed from the Branch if the vehicle is appraised within 60 days from the date it was purchased. The refund amount is based on the RST paid at the licensing office on the Red Book value and deducting the RST payable on the greater of the purchase price or the appraised value. There is no legislative provision to refund the cost of having the appraisal done on the vehicle.

• Transportation for People With A Permanent Physical Disability

  If a motor vehicle is specifically purchased or leased on a long-term basis (12 months or more) to provide transportation for a person with a permanent physical disability, a refund claim can be submitted for the RST paid. Retail Sales Tax Guide 701, "Transportation for People With Physical Disabilities" has further details on this refund program and also contains the applicable refund application form.

• Vehicles Powered By Alternative Fuels

  People who purchase or lease (12 months or more) vehicles licensed under the Highway Traffic Act may qualify for a refund of RST if the vehicles operate or are converted to operate:

  • exclusively on electrical energy
  • exclusively on propane, natural gas, ethanol, methanol, or other manufactured gases, or
  • as dual-powered vehicles.

  Dual-powered vehicles are vehicles that are equipped to operate independently on one of the alternative fuels mentioned above or by gasoline or diesel fuel. A refund is not available on vehicles that use a mixture of an alternative fuel and gasoline or diesel fuel. Retail Sales Tax Guide 702, "Vehicles Powered by Alternative Fuels" has further details on this refund program and also contains the applicable refund application form.

• Vehicles Removed For Permanent Use Outside Ontario

  RST paid on motor vehicles that are removed from Ontario within 30 days from the date of purchase for permanent use outside the province may be refunded. If the vehicle is to be registered in another Canadian province, proof must be provided that the applicable provincial tax in the other province is paid. If no tax is to be paid in the jurisdiction where the vehicle is to be registered, proof of delivery, i.e. copy of the bill of lading or customs document is sent with the claim for refund. The RST charged on the invoice or bill of sale must be $50 or more. Further details are contained in Retail Sales Tax Guide 700, "Refunds and Adjustments".

For More Information

The information contained in this publication is only a guideline. For more information, please contact the Ontario Ministry of Revenue at 1 866 ONT-TAXS (1 866 668-8297) or visit our website at ontario.ca/revenue.

ISSN 1206-5641