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PROVINCIAL AND TERRITORIAL TAXATION - Ontario - Sales tax - Persons liable for tax

Friday, June 01, 2018 @ 8:45 AM  


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Appeal by the Minister from an order allowing the respondent's appeal from a provincial sales tax assessment. The respondent provided extended health care insurance benefits that supplemented the provincial health care scheme. Contracts were entered into with employers, who determined the level of coverage. Employees who purchased the plan were typically unable to obtain extended coverage due to a pre-existing condition or other insurance impediment. When an employee incurred an expense thought to be covered by the plan, the employer submitted a claim and a cheque to the respondent for the expense and an administrative fee for the respondent and the respondent determined whether the expense was covered and, if so, reimbursed the employee for the expense. The respondent did not charge retail sales tax ("RST") on the amounts employers paid. The Minister considered that RST was exigible on those amounts and it assessed the respondent accordingly. It also imposed a penalty for the respondent's failure to collect and remit RST. The respondent's appeal from the assessment was allowed as the court found that the respondent's insurance product was akin to an unfunded benefits plan, but that those who enrolled in the plan would not be able to obtain insurance coverage and therefore they were not required to pay RST. The Minister appealed, arguing that the judge erred in his interpretation of the definition of "unfunded benefits plan" under the Retail Sales Tax Act. Alternatively, it was argued that the judge erred in his consideration of the evidence by shifting the burden of proof to the Minister.

HELD: Appeal allowed. The respondent was required to charge, collect and remit RST and was subject to a penalty for having failed to do so. The plan was an unfunded benefits plan as defined in s. 1(1) of the Retail Sales Tax Act and therefore was subject to RST. The legislative purpose for taxing benefits supported the interpretation put forward by the Minister. Benefit plans, whether funded or unfunded, were taxed because the legislature had determined that such plans were substitutes for insurance and therefore should receive similar tax treatment to contracts of insurance. Furthermore, the judge erred by prematurely shifting the onus of proof to the Minister in the absence of any evidence dislodging the initial obligation by the respondent to demolish the assumptions on which the Minister relied.

Capcorp Planning (2003) Inc. v. Ontario (Minister of Revenue), [2018] O.J. No. 2280, Ontario Court of Appeal, D. Watt, S.E. Pepall and B. Miller JJ.A., April 30, 2018. Digest No. TLD-May282018010