In this article, find out the position of the Ontario Superior Court of Justice on the situation of a taxpayer who pays back the taxes he collected to the wrong tax administration.
The Ontario Superior Court of Justice issued a judgment on September 8, 2020 in respect of the obligation to pay Ontario’s Retail Sales Tax (RST) on the sale of insurance premiums in connection with vehicle rental business.
Rent-a-Car Canada collected an 8% tax from its customers on insurance premiums from August 2011 to July 2015. It handed the tax over to the Canada Revenue Agency, arguing that it collected and paid the Harmonized Sales Tax (HST) in this way. Following an audit of the aforementioned period, the Minister of Finance is seeking payment of approximately 1.5 million CAD for the taxpayer’s breach of his tax obligation to collect and pay off the retail sales tax to his benefit.
The taxpayer defends himself by denying that he received the RST, explaining that the 8% collected corresponded to the HST and that he could not, therefore, be required to pay the tax to the Province.
There are several lessons to be learned from the solution of this judgment
First, the Court refused to rule on the issue of the tax that actually should have been collected and returned by the taxpayer. Moreover, the Court considers that the taxpayer did receive RST and not the HST and then failed in its obligation to return the tax to the Province.
Finally, the Court refuses and even declares itself incompetent to remove or modulate the amount requested by the Minister of Finances to the company when the latter points out that its payments, although erroneous in the choice of recipient, have been made and are subsequently reallocate later by the CRA to the Province. The judge found that there are ways of action in the case of taxpayers’ error in the payment of a tax and that these should be used.
An error of recipient in the payment of a collected tax can be corrected and should result in a tax credit for your business. At Leyton, our team of sales tax professionals can help you detect and, above all, correct these errors before it’s too late. For assistance or advice, you can contact our experts at Leyton.
Pauline Pacosi – Sales Tax consultant
September 8th 2020 (ONSC) Enterprise Rent-A-Car Canada Company v MoF (Docket: CV-19-612874, CV-19-612876, CV-19-612877, CV-19-612879
