Multijurisdictional Vehicle Tax Payable under the International Registration Plan

RST Guide 809, October 2001

This Guide provides information on how tax applies to multijurisdictional vehicles that are registered under the International Registration Plan (IRP) and used in Ontario. The information in this Guide replaces information contained in Information Notice - Retail Sales Tax Implications of Ontario's Registration in the International Registration Plan (IRP) - August 2001.
Please note that this Guide also replaces all information pertaining to interprovincial or international carriers as outlined in RST Guides 516 - Truck Rentals to Carriers, January 1997 and 801 - Ontario-Based International Carriers, May 1997.

International Registration Plan (IRP)

Introduction

On April 1, 2001, Ontario became a member of IRP. To accommodate Ontario's membership in IRP, the previous proportional 8% retail sales tax (RST) on multijurisdictional vehicles used in Ontario (i.e., trucks and buses) is replaced with an annual prorated sales tax, known as "multijurisdictional vehicle tax", which is collected at the time of registration. Effective October 1, 2001, owners of multijurisdictional trucks and buses will pay the RST in annual instalments over the life of the vehicle rather than up front, in a larger lump sum.

What is IRP?

IRP is a multijurisdictional licencing agreement that establishes a single uniform system for administering and collecting licence fees and other recurring fees and taxes from persons operating multijurisdictional vehicles in Canada and the USA for the commercial carriage of passengers or goods.

Under IRP, multijurisdictional carriers register or license their multijurisdictional vehicles with their base jurisdiction only. The base jurisdiction assigns a carrier account number and issues one cab card and a base plate for each of the carrier's vehicles. The base jurisdiction also collects all applicable licencing fees and taxes from the carrier on behalf of the other member jurisdictions, and distributes the amounts collected to the applicable jurisdictions. The base plate and cab card allow the carrier to operate in the jurisdictions that are listed on the cab card. (For purposes of this Guide, the term "carrier" means an IRP registrant).

Detailed information on IRP registration can be obtained at any Ministry of Transportation (MTO) Prorate Office, the IRP Transition Office at 416 235-3923 or 1 866 587-6770, or at its website at www.mto.gov.on.ca/english/trucks/irp/. The IRP Transition Office can also be reached by fax at 416 235-3924 or 1 866 587-6771, or by e-mail at irp@mto.gov.on.ca.

Multijurisdictional Vehicle (MJV) Tax

General Information

In this Guide, "multijurisdictional vehicle (MJV) tax" refers to the annual prorated Ontario RST payable on multijurisdictional vehicles operating both in Ontario and in another jurisdiction.

MJV tax:

applies on a new vehicle, to the vehicle purchase price before trade-in allowance.
applies on a leased vehicle, to the vehicle purchase price where it is provided in the lease agreement or to the value determined by the Minister where no purchase price is provided in the lease agreement.
is calculated annually on proportional distances travelled in each jurisdiction in the previous calculation year (July 1 to June 30).

The MJV tax rates have been designed to take into account the purchase price of multijurisdictional vehicles, trailers, and the average costs for repair parts and labour for such vehicles and trailers, all of which may be purchased exempt from RST.

Vehicles Subject to the MJV Tax

The MJV tax is imposed on vehicles that are registered in Ontario, or that are registered in another jurisdiction, for multijurisdictional commercial purposes and that travel on Ontario highways.

Carriers who are registered under IRP, and broker drivers who are currently under contract with a registered carrier, may purchase or lease multijurisdictional vehicles exempt from RST on or after October 1, 2001.

Leases of multijurisdictional vehicles and their respective trailers in effect prior to October 1, 2001, will continue to be subject to RST until the MJV tax has been paid on the multijurisdictional vehicle.

Trailers to be used with multijurisdictional vehicles, repair and maintenance parts and labour for multijurisdictional vehicles and their respective trailers may also be purchased exempt from RST on or after October 1, 2001.

Vehicles Not Subject to the MJV Tax

Vehicles not registered under IRP will remain subject to RST at 8% at the time of purchase or lease. In addition, their respective trailers, repair and maintenance parts and labour are also fully taxable in Ontario at 8%.

How the MJV Tax is Calculated

The MJV tax is calculated using the following formula:

Tax = VTV × R × OTR × M where,

VTV is the vehicle taxable value
R is the tax rate (see Tax Rate Chart) for the applicable year and type of vehicle (i.e., trucks and buses have different tax rates)
OTR is the Ontario travel ratio for the fleet of vehicles
M is the number of whole or partial calendar months in the fleet registration year of the vehicle at the time that the vehicle is registered divided by 12.

Vehicle Taxable Value (VTV)

New Vehicles

If the multijurisdictional vehicle is acquired new, the VTV is the fair value of the vehicle (i.e., the purchase price), including the purchase price of any accessories and modifications made to the vehicle at the time of purchase before any trade-in allowance.

Leased Vehicles

If the multijurisdictional vehicle is leased, the VTV is the purchase price of the vehicle as described in the lease agreement, or if no purchase price is provided in the lease agreement, the value of the vehicle is calculated using Schedules 2 and 3 (Appendix A), including the purchase price of any accessories and modifications made to the vehicle at the time of acquisition.

Used Vehicles

If the multijurisdictional vehicle is acquired used, the VTV is the fair value of the vehicle (i.e., the purchase price), or the value of the vehicle calculated using Schedules 2 and 3 (Appendix A), whichever is greater, including the purchase price of any accessories or modifications made to the used vehicle at the time of acquisition before any trade-in allowance.

If the computed value of the used multijurisdictional vehicle exceeds the purchase price of the vehicle due to severe damage or excess use, then the Minister may, upon submission of satisfactory proof (e.g., an appraisal from a dealer or recognized appraiser), accept the purchase price as the VTV.

Tax Rate Chart (R)

The tax rate (R) with respect to a multijurisdictional vehicle is the rate determined by reference to the applicable year and type of vehicle as follows:

Applicable Year	Tax Rates for Trucks (%)	Tax Rates for Buses (%)
Acquisition year	3.000	2.491
Acquisition year +1	2.700	1.841
Acquisition year +2	2.250	1.372
Acquisition year +3	1.901	1.074
Acquisition year +4	1.612	0.845
Acquisition year +5	1.570	0.830
Acquisition year +6	1.483	0.705
Acquisition year +7	1.447	0.575
Acquisition year +8	1.448	0.506
Acquisition year +9 or more	1.475	0.438

Travel Ratio

The travel ratio for each jurisdiction is based on the distance travelled by a fleet in the calculation year (defined as the period from July 1 to June 30) preceding the fleet registration year (which is a full year beginning on the fleet registration date). The fleet registration date is the date in the year that the fleet of vehicles is licensed in Ontario, including licencing renewals or re-registration.

Ontario Travel Ratio (OTR)

"Ontario travel ratio" (OTR) is the ratio of the distance travelled in Ontario by the fleet in which the vehicle is registered, to the total distance travelled by that fleet. Where a fleet of vehicles has operated in Ontario for at least 90 days (three months or more) during the previous calculation year, the OTR is the ratio of the actual distance travelled in Ontario by the fleet of vehicles during the previous calculation year to the total actual distance travelled everywhere by the fleet of vehicles during the same period.

Where the fleet of vehicles has operated in Ontario for fewer than 90 days, the carrier can use a reasonable estimate of the distance that the fleet of vehicles will travel in Ontario during the fleet registration year to a reasonable estimate of the total distance that the fleet of vehicles will travel in the fleet registration year.

Where the MJV tax for a fleet registration year has been calculated using an estimate and the actual calculation for the fleet registration year is different, then the carrier must recalculate the MJV tax. If MJV tax is owing, the carrier is required to remit the MJV tax to the Ministry of Revenue at the beginning of the next fleet registration year. If MJV tax has been overpaid, then the carrier may apply to the Ministry of Revenue for a refund.

"Fleet of vehicles" means one or more multijurisdictional vehicles that are designated as a fleet by the carrier. The calculation for OTR is the same whether the fleet consists of one vehicle or several vehicles.

Paying the MJV Tax

A carrier is required to pay the MJV tax directly to an MTO Prorate Office. MTO will calculate the MJV tax payable using the formula described earlier. The MJV tax payable for a registration year must be paid when the multijurisdictional vehicle is registered in Ontario or in a member jurisdiction under IRP.

Credits

Credits for Previously Paid RST

Carriers who register a multijurisdictional vehicle under IRP, on which Ontario RST was previously paid, may be eligible for a credit of the RST previously paid on that vehicle.

To be eligible for the credit, the following criteria must be met:

the carrier or vehicle owner, on the purchase of the vehicle or upon bringing or sending into Ontario, must have paid the RST under the Retail Sales Tax Act, and
the RST must have been paid within five years for vehicles other than a bus, or within eight years for a bus, before the date the vehicle became a multijurisdictional vehicle.

If the multijurisdictional vehicle was purchased by a broker driver of the carrier, the credit will be given to the carrier on behalf of the broker driver.

Calculating the Credit

The credit is calculated using the following formula:

Credit = VTV × CR × OTR × M where,

VTV is the vehicle taxable value
CR is the credit tax rate (see Credit Tax Rate Chart) for the applicable calendar year and type of vehicle (i.e., trucks and buses have different credit tax rates)
OTR is the Ontario travel ratio for the fleet of vehicles
M is the number of whole or partial calendar months in the fleet registration year of the vehicle at the time that the vehicle is registered divided by 12.

Credit Tax Rate Chart

Calendar Year	Tax Rates for Trucks (%)	Tax Rates for Buses (%)
Acquisition year	2.143	2.411
Acquisition year +1	1.871	1.761
Acquisition year +2	1.522	1.292
Acquisition year +3	1.279	0.884
Acquisition year +4	1.185	0.610
Acquisition year +5	0.000	0.600
Acquisition year +6	0.000	0.402
Acquisition year +7	0.000	0.040

The credit for RST previously paid will be calculated at the time the carrier is required to pay the MJV tax and will be applied against the MJV tax payable.

Note: Credits cannot be claimed for RST paid on lease payments. Lease payments apply to specific lease periods and retain no value once the lease period has expired.

Credits Due to Fleet Changes

Carriers may change the multijurisdictional vehicles in their fleets throughout the year, resulting in proportional tax liabilities for their multijurisdictional vehicles.

If a multijurisdictional vehicle that was registered as part of a fleet is, before the end of the fleet registration year, registered as part of another fleet of the same carrier, a credit may be available for the MJV tax for the balance of the fleet registration year for that vehicle with respect to the first fleet. The credit will be applied to the tax liability of the vehicle in the other fleet.

If a multijurisdictional vehicle owned by a carrier or a broker driver ceases to be part of a carrier's fleet of vehicles before the end of the fleet registration year, a credit may be available for the MJV tax for the balance of the fleet registration year for that vehicle. If the owner is a broker driver, the credit will be provided to the carrier on behalf of the broker driver. This credit may be applied to any MJV tax liability of the carrier in respect of the fleet of vehicles for the registration year or for the immediately following registration year, but not to any subsequent registration year.

Refunds

Refunds are available under certain circumstances. Carriers may be eligible for a refund if:

a multijurisdictional vehicle is being used as a trade-in on the purchase of another multijurisdictional vehicle; or
another vehicle is leased to replace a multijurisdictional vehicle which is under repair; or
the carrier is a non-Ontario IRP registrant.

Trade-Ins

A trade-in vehicle is a multijurisdictional vehicle on which the MJV tax has been paid and, before the expiration of its current registration year, is accepted at the time of sale by the seller on account of the purchase price of another multijurisdictional vehicle.

Where a multijurisdictional vehicle is traded in during its registration year, a refund or credit equal to the MJV tax paid on the trade-in vehicle for the balance of that vehicle's fleet registration year may be obtained. The carrier may request that the credit be applied against the MJV tax payable on the new multijurisdictional vehicle.

Where a refund is claimed, refund applications should include copies of:

cab cards;
vehicle and fleet fee notices for both vehicles; and
the bill of sale that identifies the trade-in vehicle.

Replacement Vehicles

A proportionate refund is available for the MJV tax paid on a multijurisdictional vehicle that is being repaired when a vehicle is leased to be used as a replacement for the multijurisdictional vehicle while it is being repaired. To qualify for the refund, the replacement vehicle must only be used in accordance with the terms of the licence issued for the multijurisdictional vehicle under repair, and for the purpose for which the original multijurisdictional vehicle would be used if not under repair.

The refund cannot exceed the MJV tax paid on lease payments for the replacement vehicle in respect of rental periods that are within the period during which the multijurisdictional vehicle is being repaired and the registration year of the multijurisdictional vehicle.

Refund applications should include copies of:

the cab card, vehicle and fleet fee notices for the vehicle under repair;
the short-term lease agreement for the replacement vehicle identifying the tax paid; and
a copy of the repair invoice identifying the vehicle under repair and signed by an authorized repair shop representative. The invoice should also detail the length of time the vehicle was held for repair.

Non-Ontario IRP Registrants

Other jurisdictions have the ability to collect and distribute IRP tax but do not have the ability to apply Ontario's tax credits.

A person who registers a vehicle under IRP in a jurisdiction other than Ontario may apply for a refund equal to the credit for previously paid RST that is available to Ontario carriers if the person:

had previously paid RST on the vehicle; and
pays MJV tax to Ontario under IRP in respect of the vehicle.

Non-Ontario IRP registrants may also be eligible for a refund of the MJV tax paid to Ontario for the balance of the fleet registration year with respect to the first fleet, if they transfer vehicles during the registration year between IRP fleets which travel into Ontario.

Obtaining a Refund

Refunds can be claimed by completing a General Application for Refund of Retail Sales Tax form.

All refund claims must be received by the Ministry of Revenue within four years of paying the tax.

Purchase and Lease of Vehicles and Trailers

Obtaining the RST Exemption

On or after October 1, 2001, carriers and/or broker drivers may purchase or lease multijurisdictional vehicles and multijurisdictional trailers (including optional or extended warranties and maintenance contracts) without paying RST at the time of purchase or lease. To obtain the RST exemption, they must provide the vendor or lessor with a properly completed Purchase Exemption Certificate (PEC) quoting the carrier's carrier account number. Details about PECs can be found in RST Guide 204 - Purchase Exemption Certificates.

Trailers that are acquired for use with vehicles that do not qualify as multijurisdictional vehicles are not eligible for the exemption. RST applies to the purchase or lease of such trailers.

Note: RST applies to the full purchase price or lease payments for vehicles and trailers that are acquired for use solely in Ontario.

Unregistered Carriers

Carriers who are not yet registered under IRP and broker drivers who are not currently under contract with a registered carrier, must pay RST on their purchases of trucks, trailers and buses.

Dual Purpose Trailers

Where the carrier is unable to designate specific trailers that are used solely for multijurisdictional commercial purposes and those that are used solely within Ontario, a reasonable allocation may be made to determine the trailers that are subject to RST. The method of allocation is subject to audit.

Repairs to Multijurisdictional Vehicles and Trailers

Repair and Maintenance Services

On or after October 1, 2001, carriers and/or broker drivers may purchase repair parts, labour and maintenance services for multijurisdictional vehicles and their respective trailers without paying RST. To obtain the RST exemption, they must quote the carrier's carrier account number to the supplier and provide a copy of the IRP cab card for the multijurisdictional vehicle being repaired.

Note: Repair parts, labour and maintenance services for vehicles and trailers used solely in Ontario are subject to RST on the total purchase price.

Separate Inventory for RST-Exempt Repair Parts

Carriers should maintain a separate inventory of parts purchased RST-exempt for multijurisdictional vehicles and trailers and a separate inventory of RST-paid parts for vehicles and trailers that travel solely in Ontario. Where this is not possible, the carrier's records must support which parts were used on which units. The primary use of the repair parts will determine whether the initial purchase of repair parts should be on an RST-exempt or an RST-paid basis. The carrier must make RST adjustments accordingly as parts are removed from inventory for own use, i.e., RST must be paid on RST-exempt parts put on vehicles registered only to travel in Ontario and a refund can be applied for on RST-paid parts put on multijurisdictional vehicles.

Consumable Supplies

When consumable supplies, such as grease, lubricants, or oils, are purchased in Ontario, RST is payable on the full purchase price.

If the consumables are supplied as part of a work order issued by a vendor for work done on a multijurisdictional vehicle or trailer, they may be purchased exempt from RST.

Capital Modifications or Additions

Capital modifications or additions, such as sleepers, tanks, pumping or handling equipment, made to a multijurisdictional vehicle at the time of purchase or lease, are not subject to RST.

Any capital modifications or additions, (including installation labour) purchased subsequent to the original purchase or lease of the multijurisdictional vehicle are subject to RST.

Vehicles Ceasing to be Registered Under IRP

Exit Tax

A vehicle that switches from multijurisdictional travel, to travel in Ontario only (i.e., exits the IRP system) will be liable for 8% RST on the depreciated value of the vehicle (exit tax).

Depreciated Value

The depreciated value of a multijurisdictional vehicle is calculated using the following formula:

DPV = VTV − (VTV × 1.00% × M)

where,

DPV is the depreciated value of the vehicle
VTV is the vehicle taxable value
M is the number of months or partial months that the vehicle was owned by the owner of the vehicle.

Note: For the purposes of this calculation, DPV cannot be less than 40% of VTV.

The amount of RST payable will be adjusted according to the amount of RST paid by the owner prior to the vehicle being registered under IRP.

If 8% RST had been paid by the owner on the basis that the vehicle was used solely in Ontario prior to the vehicle being registered under IRP, the owner, upon application and upon providing proof of the amount of RST paid, will be entitled to a credit equal to the exit tax payable.
Where pro-rated RST has been paid under previous interjurisdictional tax agreements (such as ISTA), exit tax will be calculated on the depreciated value of the vehicle and a credit will be calculated for the Ontario travel distance previously taxed.

The owner must pay the exit tax at the time the multijurisdictional vehicle is registered under the Highway Traffic Act for use in Ontario only. Where a vehicle exits IRP on or before June 2, 2002, this tax must be remitted to the Ministry of Revenue, Centralized Programs Unit, PO Box 623, Station A, Oshawa, Ontario, L1H 9Z9. A vehicle that exits IRP after June 2, 2002 will pay this tax at an MTO Prorate Office at the time the vehicle is registered for commercial use in Ontario.

No exit tax is payable upon any subsequent registration of the same vehicle by the same owner under the Highway Traffic Act for use in Ontario only.

Insurance Premiums

RST is payable (currently at 3%) on the Ontario portion of an insurance premium, under a contract of insurance entered into by a person for a multijurisdictional vehicle, or a trailer used in Ontario with a multijurisdictional vehicle. The amount is determined by multiplying the premium paid under the contract of insurance by the OTR for the vehicle. The insured must provide a PEC to the insurer for that portion of the premium that is not the Ontario portion.

Record Keeping

The Retail Sales Tax Act requires that you keep all books and records for at least seven years.

What Records Must I Keep?

Carriers who register vehicles under IRP must maintain records that substantiate the reported distances travelled, the costs of all vehicles in the IRP fleets, and details of exempt purchases and RST 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.

ISBN 0-7794-2127-2

Appendix A

Determination of Value for Leased or Used Vehicles

For the purpose of calculating the VTV for leased or used vehicles, as outlined on page 3, the following formula is used:

V = N ×D