The Canada Revenue Agency has issued this new info sheet to explain a new place of supply rule that would apply in certain situations to determine the province in which the supply of a specified motor vehicle by way of sale is made, and whether the supply is subject to the provincial component of HST. For purposes of this bulletin, a “specified motor vehicle” is defined in the Excise Tax Act to mean a vehicle that is, or would be, if it were imported, classified under one of several tariff items in Schedule I to the Customs Tariff. Generally this would include all motor vehicles, other than racing cars classified under heading number 87.03, and any prescribed motor vehicles.
Under the general place of supply rule for goods made by way of sale, the place of supply is made in a province if the supplier delivers the goods or makes them available in a province to the recipient of the goods. However, a vehicle is also deemed to be delivered in a province if the supplier: i) ships the vehicle to a destination in a province specified in the contract for carriage of the vehicle; or ii) transfers possession of the vehicle to a common carrier or consignee that the supplier has retained on behalf of the recipient to ship the vehicle to that province.
The Department of Finance has recommended a regulatory change to the Excise Tax Act that would deem the supply of a specified motor vehicle by way of sale to be made in the particular province in which the vehicle is registered, if that registration occurs within seven days after the day on which delivery occurs to the recipient in a participating province, other than the particular province. In response to this recommendation, the CRA will begin administering the new place of supply rule immediately, where vendors choose to apply the new rule.
To demonstrate how these new rules apply, the following are illustrative examples included in the publication:
Example 1:
An automobile dealer located in Ontario sells a specified motor vehicle to a recipient who is resident in Quebec. Delivery of the vehicle occurs at the dealer’s location in Ontario. Before delivery of the vehicle, the dealer registers the vehicle in Quebec on behalf of the recipient.
In this scenario, although the delivery of the vehicle has occurred in Ontario, the supply of the vehicle would be deemed to be made in Quebec under the new rule because the vehicle is registered in Quebec on behalf of the recipient within seven days after the delivery of the vehicle to the recipient in Ontario. The dealer would collect GST at 5% in respect of the supply of the vehicle.
Example 4:
An automobile dealer located in Alberta sells a specified motor vehicle to a recipient who is resident in British Columbia. Delivery of the vehicle to the recipient will occur at the dealership in Alberta. Before delivery of the vehicle to the recipient in Alberta, the recipient registers the vehicle in British Columbia and provides the dealer with a copy of the registration.
As the delivery of the vehicle occurs in Alberta, which is a non-participating province, the new rule would not apply. The supply of the vehicle would be deemed to be made in Alberta, and the dealer would collect 5% GST on the supply. The recipient would be required to pay the 7% British Columbia provincial component of HST to the provincial motor vehicle registration authority upon registering the vehicle in British Columbia.
The info sheet also contains a table in the appendix that provides an overview of the application of the provincial component of HST to different scenarios of vehicle delivery and vehicle registration, including the application of the new administrative place of supply rule.