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Car dealerships and added companies that are affairs or announcement allowance articles to their barter should conduct a abutting assay of their business align across-the-board of the Authorized Banker Agreement, sales practices, procedures, and behavior to ensure that the auction of allowance articles are GST/HST exempt.

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As the Applewood Holdings Inc. accommodation categorical beneath illustrates, the CRA has become more advancing and has confused its focus to GST/HST acquiescence of car dealers and others.


Applewood Holdings Inc. (Applewood) operated a car dealership area it awash cartage to barter who generally busy or financed their purchase.

Applewood was additionally a accumulation policyholder of an allowance action (the Policy) underwritten by Arch Allowance Aggregation (Arch). While the auction of cars was its capital business, Applewood becoming a cogent allocation of its all-embracing acquirement from up-selling allowance advantage to its customers.

Applewood awash its barter acceptance in the Action through an Authorized Banker Acceding (ARA) with Walkaway Canada Incorporated, a aggregation that administers and distributes allowance articles for Arch Allowance Company. The Action covered customers’ charter or banking acquittal obligations from risks such as accident of employment, analytical illness, affliction and adventitious afterlife and added perils.

Percentage of Continued Premiums Retained

Applewood provided barter with a commutual action to awning basal perils but, beneath the ARA, Applewood was advantaged to accumulate 55 per cent of allowance premiums that were paid by barter for the continued advantage policies. Applewood advisers were able and encouraged to upsell barter to the continued allowance coverage. Applewood’s allotment of those premiums represented a cogent antecedent of acquirement for the aggregation at about 12.5 per cent of all its revenues.


The CRA’s authoritative position in the allowance ambience is to absolute the “arranging for” banking casework absolution to accountant intermediaries like allowance agents and brokers. And in best circumstances, it would be an allowance agent, agent or added agent that would affirmation an absolution from GST/HST on the accouterment or alignment for the auction of banking articles to policyholders.

The CRA audited and ultimately reassessed Applewood on the base that it should accept answerable GST/HST on its revenues from the auction of the allowance products. Applewood did not allegation GST/HST on its auction of the allowance products, and instead advised those sales as absolved food of “agreeing to provide, or alignment for” a banking service.

Applewood objected to the reassessments which could not be bound at the CRA’s address date and eventually landed at the Tax Cloister of Canada and afore the Honourable Justice Pizzitelli.

The Decision

After a absolute and absolute assay of Applewood’s assorted contracts, agreements, practices, procedures and behavior at the dealership and affidavit from its CEO and the Business Manager as able-bodied as the CEO of Walkaway, Justice Pizzitelli assured that Applewood was not appropriate to allegation GST/HST on its auction of allowance products. He bent that based on the accumulation of the evidence, it was bright that Applewood either provided or abiding for an absolved banking account by affairs allowance articles to its barter and was not alone accouterment promotional or authoritative casework with account to those products. This was a acute award because if the activities amounted alone to promotional or authoritative activities, Applewood would accept been appropriate to allegation GST/HST on its allocation of the fees.

TCC Analysis

Differentiating the attributes of a account amid a promotional account against alignment services, for instance, requires the cloister to actuate its absolute element. This is able by advertence to the end aftereffect of the account beheld from the angle of the consumer. Justice Pizzitelli declared the afterward with account to the auction of allowance articles to Applewood customers:

[32] It is accordingly absolutely bright that the “purchaser” whose angle one charge considerately attending through is the chump of the end accumulation that is the accountable amount of the transaction. In our case, that is the car client who buys the allowance artefact and he would acutely and considerately apperceive he was affairs insurance, not the ability or training, or bartering ability or advantage of the Dealer or its agents as the absolute elements of the transaction, admitting that such services, if provided, may accept an accessory role to comedy in his accommodation authoritative process; if he was alike acquainted of their existence. There is artlessly no arete to the Respondent’s altercation that the casework or duties beneath the Dealer Acceding that may be said to be owed to Walkaway from the Appellant aggregate the absolute aspect of the casework to be provided beneath the Dealer Agreement, neither back analysing the acceding of such acceding nor back administering a anatomic analyses of the Appellant’s acts in assuming its Allowance Artefact banker duties.

In added words, the assay is whether the chump is accepting a promotional or authoritative account from Applewood or casework that are predominately to accommodate or align for an allowance product.

Important Advice from the TCC

The Tax Court’s assay provides important advice to non-licensed banking casework intermediaries (like car dealerships) that advertise allowance articles in adjustment to actuate whether they are accouterment an absolved or taxable supply. Based on the Applewood decision, the afterward added factors may announce whether an actionable agent may be “arranging for” banking casework instead of accouterment a taxable accumulation of promotional and authoritative services:

The Department of Justice may address the Applewood accommodation to the Federal Cloister of Address and has until December 15, 2018 to do so.

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