[13] Section 9 of the
Revenue Tax Act (the Act) reads, in part, as
follows:
. . .
9(3) Every person who
brings or causes to be brought, into the province or who receives delivery
in the province of goods, for his own consumption or for the consumption of
another person at his expense, or, on behalf of or as agent for a principal
who desires to utilize such goods for consumption by such principal or by
any other person at his expense, shall immediately report the matter to the
Commissioner and forward or produce to him the invoice, if any, in respect
of such goods and any other information required by the Commissioner with
respect to the same.
(4) If the goods so
brought in are primarily intended for consumption by use only, he shall pay
the tax payable with respect to their consumption at the time the goods are
brought into the province.
(5) If the goods are
primarily intended for consumption, otherwise than by use only, he shall pay
such tax at the time of consumption.
[14] Clauses 1(b)(i)
and 1(c)(i) of the Act read as follows:
1(b) "consumer" means a
person who
(i) utilizes or intends
to utilize within the province goods for his own consumption or for the
consumption of another at his own expense…
1(c) "consumption" includes
(I) use,
[15] In the
Commission's view, there appear to be two matters at issue. The first is the
question of whether the Appellant is required to pay sales tax on goods
purchased outside Prince Edward Island and intended for use outside the
province but brought into, and stored in, Prince Edward Island. The second
question appears to be a question of fact: did the Appellant make use of, or
consume the goods in Prince Edward Island. If the goods were consumed, what
degree of consumption in Prince Edward Island is necessary to attract tax.
[16] The Tax
Commissioner, in his decision, stated that there is a presumption that goods
brought into the Province will be consumed in the Province. Based upon the
evidence of Mr. Chapman—which the Tax Commissioner did not challenge—the
Commission finds, however, that the Appellant did not intend to consume the
goods in Prince Edward Island.
[17]
The proper interpretation of Section 9 of the Act
was the subject of lengthy legal argument by counsel for the Appellant and
counsel for the Respondent who dealt at length with a recent Supreme Court of
Canada case (Union of Nova Scotia Indians v. New Brunswick (Minister of
Finance), [1998] 1 S.C.R. 1161.
[18] The matter at
issue in that case involved the application of New Brunswick provincial sales
tax legislation to status Indians. The Province of New Brunswick sought to
levy provincial sales tax on a native person residing on a reserve where the
goods had been purchased in New Brunswick, off reserve, but the goods were
intended for consumption on reserve lands. The Court found that the tax was
payable.
[19] At paragraph 22 of
its closing argument, the Tax Commissioner reproduces a lengthy quote from
this case. The gist of the quote is as follows:
Despite their [Sales Tax
Statutes] references to ‘consumer[s]' and ‘consumption', these taxes have
long and uniformly been held by the courts to be, in essence, sales taxes,
not consumption taxes…
Provincial sales taxes,
when they are levied on retail sales, are just that – sales taxes –
notwithstanding their references to ‘consumer[s]' and ‘consumption' to avoid
the charge of indirect taxation…
[20] The Tax
Commissioner thus submits that the intended use of the goods by the Appellant
is not relevant to whether a tax is payable. The Tax Commissioner's view is
that the administration of the tax would be unworkable if taxation were
dependent upon the anticipated place of use.
[21] The Appellant's
position is that the Union of New Brunswick Indians case deals
only with retail sales within the province. The Appellant submits that, to
give the case any wider application and to conclude that the principle in the
case extends to all retail sales wherever they occur, is a misinterpretation.
[22] In its submissions
to the Commission, the Appellant deals at length with the views of various
judges on the Supreme Court of Canada in the Union of New Brunswick
Indians case and another case. From these, the Appellant concludes
that, whether the cases were intended to create both a consumption tax and a
sales tax, or merely a tax on consumption, there must be consumption within
the province on goods purchased outside a province for tax to be payable. In
our view, this would appear to be a logical conclusion.
[23] The Appellant also
claims that consumption within the meaning of the Act must involve more than a
transitory connection with the Province. In this respect, the Appellant refers
the Commission to the decision of the Prince Edward Island Court of Appeal in
Island Telecom Inc. v. IRAC (P.E.I.) (2001), P.E.I.S.C.A.D. 27.
[24] The Appellant
submits that paragraphs 31 to 36 of the Island Telecom case and the cases
referred to therein confirm that merely bringing a good into the Province does
not automatically give rise to tax and that a transitory connection to the
Province of a tangible good is not consumption or use as contemplated by the
Act. The Appellant further submits that:
If the actual use of the
good in the province is minimal, i.e. transitory, then a tax will not be
payable.
(Appellant's
Closing Argument, p.14)
[25] The cases referred
to by the Prince Edward Island Court of Appeal in Island Telecom are a Nova
Scotia case, Re Risley v. The Minister of Finance (1991) 85
D.L.R. (4th) 509 and a Newfoundland case, ACE – Atlantic Container
Express Inc. v. The Queen (1992), 92 DLR (4th) 381.
[26] The Nova Scotia
case involved a resident of Nova Scotia who registered a sailing vessel in
Nova Scotia that he kept in Maine and the Caribbean and which was used for
charter purposes. The vessel was brought to Nova Scotia on two occasions for
races and entered Nova Scotia under a customs permit. The Nova Scotia Court
of Appeal upheld the decision of the Nova Scotia Tax Review Board, which held
that there was not sufficient presence of the yacht in the Province of Nova
Scotia to justify the tax. In reaching this conclusion, the Court appeared to
rely on two previous Supreme Court of Canada cases in which the Provinces of
Manitoba and British Columbia sought to tax airlines for flights over their
provinces and on aircraft engines and parts consumed and services, meals and
liquor consumed in or supplied to aircraft. The Supreme Court stated that, in
the case of aircraft operations, there must be a substantial, or at least more
than a nominal, presence to provide a basis for imposing tax.
[27] The Newfoundland
Court of Appeal in the ACE – Atlantic Container case dealt with
a similar argument. In that case, a Quebec corporation that shipped products
from Ontario and Quebec to Newfoundland argued that its containers were
brought in on a transitory, and not on a permanent, basis and thus tax did not
apply. The Court decided that there was consumption or use in Newfoundland,
as the containers were brought into the Province to be used for transporting goods and were thus distinguishable from aircraft that had no substantial
connection within the jurisdiction seeking to impose tax. The court
determined that it is consumption or use in the province, perhaps more than
any other factor that attracts tax. In the Island Telecom case,
our Court of Appeal has concluded that a transitory connection to the province
of a tangible good is not consumption or use as contemplated by the Act. In
the words of the Court (at p.10):
In the instant case,
even accepting the argument that a service can be ‘brought into' the
province, the actual use made of this service or the information from it, in
Prince Edward Island, was minimal, i.e. transitory in the sense referred to
in Ace-Atlantic. The president and the Board of Island Tel would find
out the results of economic analyses done from the accounting services
rendered. Customers would receive the bills generated in Nova Scotia through
systems developed and carried out in Nova Scotia. Financial reports were
prepared in Nova Scotia and sent from there to the required regulatory and
taxing authorities. These ‘connections' with the province do not give any
substantial presence to the professional services actually carried out in
Nova Scotia.
[28] The Appellant thus
argues that the connection of the goods in question with Prince Edward Island
was transitory. The customary meaning of the word transitory is fleeting
or brief. In our view, transitory might not be the best descriptive
phrase to use in the case of construction equipment that had been stored in
the province for three years. Further, in his closing argument, Counsel for
the Tax Commissioner points out that the Island Telecom case
deals with the consumption of services delivered outside the
province rather than goods.
[29] However, for the
reasons that follow on the second issue, it is not necessary for us to make a
decision on whether the Appellant's storage of construction equipment in
Prince Edward Island was merely a transitory connection with Prince Edward
Island.
[30] The second issue
is whether, as a matter of fact, there was use, or consumption, of these goods
in Prince Edward Island. Mr. Chapman's prefiled evidence indicates that the
equipment in question was not used for the purposes of providing services in
Prince Edward Island, and was used only for test purposes. In his oral
testimony, Mr. Chapman expanded upon this and indicated that the equipment was
not used more than 10% of the time and that it was tried out to see how it
performed. He further stated that it was used for only one-half day or one
day at a time. Based upon Mr. Chapman's own admissions, we believe that there
was consumption of these goods in Prince Edward Island and that tax is
therefore owing in regard to their use.
[31] Other than as
stated above, neither the Appellant nor the Respondent introduced any evidence
of temporary use of these goods in Prince Edward Island. Had such evidence
been introduced, we believe that Section 37 of Revenue Tax Act
Regulations might have been applied to lessen the application of the
taxation burden on the Appellant. However, as we have no basis on which to
reach such a conclusion, we are unable to deal with this matter.
[32] Based on the above
comments, and having fully considered the evidence adduced and the submissions
of the parties on the applicable law, the Commission finds that consumption of
the goods in question occurred in Prince Edward Island and that the decision
of the Tax Commissioner should be affirmed.
4. Disposition
[33]
An order affirming the decision of the Tax Commissioner
and dismissing the appeal will
therefore be issued.
Order
UPON the appeal by Chapman
Brothers Construction Ltd. against a decision of the Provincial Tax
Commissioner;
NOW
THEREFORE, for the reasons given in the
annexed Reasons for Order;
IT IS
ORDERED THAT
1.
the decision of the Provincial Tax Commissioner, dated February 19, 2002, is
affirmed; and
2. the appeal is dismissed.
DATED
at Charlottetown, Prince Edward Island, this 25th day of July, 2003.
BY THE COMMISSION:
Maurice Rodgerson, Vice-Chair
James Carragher, Commissioner
Norman Gallant, Commissioner
NOTICE
Section 12 of the
Island
Regulatory and Appeals Commission Act
reads as follows
:
12.
The Commission may, in its absolute discretion, review, rescind or vary any order or
decision made by it or rehear any application before deciding it.
Parties to this proceeding seeking
a review of the Commission's decision or order in this matter may do so by filing with the
Commission, at the earliest date, a written Request for Review, which clearly
states the reasons for the review and the nature of the relief sought.
Sections 13.(1) and 13(2) of the
Act provide as follows:
13.(1)
An appeal lies from a decision or order of the Commission to the Appeal Division of the
Supreme Court upon a question of law or jurisdiction.
(2) The appeal shall be made by filing a notice of appeal in the Supreme
Court within twenty days after the decision or order appealed from and the Civil Procedure
Rules respecting appeals apply with the necessary changes.
