News and Insights

CRA Excise Taxes and Special Levies Policy Statement EP-003

Tax Development Jan 24, 2008

“Application of Excise Tax to Diesel Fuel Used in the Generation of Electricity for the Provision of Hotel Services on Vehicles”

The Canada Revenue Agency is revising its policy with respect to the application of excise tax on diesel fuel used in the generation of electricity on vehicles for purposes of “hotel” services. Under paragraph 23(8)(c) of the Excise Tax Act, excise tax is not payable in the case of diesel fuel for use in the generation of electricity, except where the electricity generated is primarily foruse in the operation of a vehicle. Only diesel fuel used primarily to generate electricity will be eligible for the exemption. This means that diesel fuel used primarily to propel a vehicle will not be considered as eligible fuel for purposes of the exemption. Under this revised policy partial excise tax relief is not available for diesel fuel used to electrically power individual pieces of equipment or components of a vehicle.