A new provision in the harmonized sales tax law has created turmoil for Quebec RV dealers, with the federal government demanding $50 million in payments. Dealers, such as the Camping Center of Amos, face substantial bills that jeopardize their operations and could lead to layoffs. The issue stems from discrepancies in tax regulations between provinces, affecting only Quebec dealers despite the law’s broader application. Concerns over cash flow and administrative errors are prevalent as dealers await potential reimbursements from the government.
Federal Demands Create Chaos for Quebec RV Dealers
A new provision in the harmonized sales tax (HST) law is causing significant turmoil for recreational vehicle dealers in Quebec, as the federal government is requesting a staggering $50 million from them. This unexpected demand is jeopardizing their business operations.
The Camping Center of Amos, for instance, has been asked to pay $683,000 for the years spanning from 2012 to 2019. Lynda Tremblay, the sales manager at the center, expressed her concern, stating, “We have 17 employees and an annual payroll of one million. We do not have $683,000 in cash. We will have to make layoffs. And we are given three months to pay it back.”
She further elaborated, “Moreover, the impact will be zero. The government will reimburse the Canada Revenue Agency (CRA), which will, in turn, reimburse us. But when? In three months, six months? Meanwhile, we are incurring costs for lawyers, accountants, and consultants. It takes resources for nothing.” Ms. Tremblay also anticipates receiving another bill for the period from 2020 to 2023.
Understanding the Taxation Issue
The situation arises from differences in tax regulations between provinces. While Quebec and the provinces in Western Canada do not apply the HST, Ontario utilizes it, which incorporates the 5% GST along with an 8% provincial tax. American RV manufacturers impose GST on Quebec dealers, who subsequently claim it back from the federal government. When these RVs are sold in Quebec, dealers collect GST and QST from the buyers and remit those amounts to the respective governments.
However, under the HST regulations, which have not been enforced until now, manufacturers are expected to charge buyers (in this case, the dealers) the 13% HST when products transit through Ontario. It is this omitted 8% that tax authorities are now pursuing, even though they acknowledge it will eventually be reimbursed.
Steve Lapierre, the general director of the Quebec Recreational Vehicle Dealers Association (ACVRQ), commented, “It’s a hell of a mess. A Toronto firm has been working on the problem for two years, which is so simple to resolve. It’s an oversight; they should simply amend section 178.8 of the HST law. The federal government tells us that we may be right, but they do not have the time to fix the problem.”
Interestingly, only Quebec RV dealers are currently facing these demands, although the law is applicable to all provinces and products. Mr. Lapierre speculates, “We think the government is starting with us because it represents significant amounts. If it ever goes to court and they win, other goods passing through Ontario will also be affected.”
Roulottes Lévesque, which operates seven dealerships, faces a bill nearing two million dollars. André Lévesque, the company’s owner, remarked, “It looks like an administrative error. It’s completely ridiculous to pay taxes in Ontario for a product sold in Quebec just because it passed customs in Sarnia instead of Lacolle. It seems we will be able to claim it back, but it will create a hole in cash flow, and it’s obvious that we won’t receive the reimbursement tomorrow morning. Will it take six months? Two years? Banks will not finance a tax debt. They will wonder if the CRA will pull a rabbit out of its hat to avoid reimbursing. Aside from bogging down the system, do we gain anything? The answer is no. It causes headaches for everyone, and the CRA insists on claiming this amount.”