Canada’s Tax Court ruled that American RV manufacturer Jayco Inc. doesn’t have to pay a portion of the C$14.7 million assessed in value-added taxes on its exports of RVs and parts.
The ruling confirms that suppliers who provide or arrange freight services for goods they ship to Canada risk being liable for federal goods and services tax or federal-provincial harmonized sales tax, Toronto tax lawyer Bobby B. Solhi told Bloomberg Tax.
Jayco’s exports of vehicles to Canada weren’t taxable under the Excise Tax Act because the supply of RVszz was deemed to be made outside Canada under Section 142(2)(a) of the act, Justice Johanne D’Auray said in the ruling, dated Feb. 16 and released March 5.
The evidence showed agreement between Jayco and its Canadian dealers for delivery of RVs at the company’s U.S. factory, and that Jayco arranged for transportation of the vehicles to Canada on the dealers’ behalf, D’Auray said. The court rejected the Canada Revenue Agency’s argument that Jayco was liable for tax on the RVs because it used a related entity, Jayco Enterprise Transportation Inc., to deliver them to Canada.
However, the contracts for purchases of RV parts were ‘‘quite different,’’ and while the goods were trans-ported by an independent third party, they were effectively delivered in Canada on Jayco’s behalf and were subject to tax, the court said. The freight service hired by Jayco acted as its agent and Jayco was the importer of record, it said.
‘‘Title did not pass, and the delivery did not occur at the business premises of Jayco,’’ it said. ‘‘The parts were delivered or made available in Canada.’’
‘‘At a minimum, suppliers need to make it very clear in the commercial documentation that they do not act as an agent in providing or arranging logistical services and to clearly state the place of delivery of their goods,’’ Solhi told Bloomberg Tax.
