Tax & Trade Blog

Effective July 1, 2022, tobacco retail dealers in British Columbia (“BC”) must register to collect and remit provincial sales tax (“PST”).

The tobacco industry is no stranger to high taxes and complicated regulatory schemes – but BC appears made the situation even worse, by making provincial sales tax (“PST”) apply on top of its pre-existing stand-alone tobacco tax!

While New York City’s (in)famous soda ban was ultimately struck down, in the years since other jurisdictions have moved forward with their own schemes to regulate sweetened beverages – now including Newfoundland & Labrador (“NL”).

On September 1, 2022, NL will introduce its so-called “Sugar Sweetened Beverage Tax” (“SSBT”). Interestingly, despite ostensibly being introduced to encourage “better beverage choices”, the tax does not depend on the amount of sugar in the drink – just the amount of drink itself!

In our previous blog, we discussed the Federal Court of Appeal’s decision in Canada v. Cameco Corporation (“Cameco”) which considered the CRA’s broad audit powers in paragraph 231.1(1)(a) of the Income Tax Act (“ITA”) (and/or 286 of the Excise Tax Act(“ETA”)), ultimately holding that a request for oral interviews was outside of the scope of those powers. Recently, the Federal Court (the “FC”) in Canada (National Revenue) v. Miller (“Miller”) considered the Cameco decision and the same ITA provisions but this time with respect to CRA’s use of Requests for Information (“RFIs”) to compel taxpayers to provide information that ought to be in the taxpayer’s books and records – even if it was not recorded/diarized there. In Miller, the FC upheld the CRA’s use of RFIs as within the scope of legislation, and issued a compliance order.

A CRA Audit is often a lengthy and tedious process, but if an assessment is ultimately issued, that can be its own uphill battle! CRA’s dispute resolution process – also referred to as the Notice of Objections (generally “Objections”) process – often takes multiple years to complete, draining taxpayer time and resources along the way!

In this context, taxpayers need to know their right to by-pass the CRA Appeals process after 180 days (or 90 days in case of income tax matters), and bring their tax disputes directly to the Tax Court of Canada (“TCC”) for resolution!

Judicial review applications for injunctive relief attempting to circumscribe or prohibit the CRA’s collections powers are usually doomed to failure – the test requires a high threshold to meet! Such matters must be dealt with immediately on audit, as unlike in the Income Tax situation, all GST/HST is due and payable immediately and cannot be delayed by filing a Notice of Objection!

In Iris Technologies Inc. v. Canada (National Revenue), the Federal Court denied a motion for injunctive relief to prohibit the CRA’s collections actions after a $79 million GST/HST Assessment – demonstrating in spades how difficult it is to obtain an order prohibiting CRA collections!