Some Ontario dealers who regularly make out-of-province sales may actually benefit from a new tax law, according to the Used Car Dealers Association of Ontario.

UCDA pointed out in its latest Front Line report that the new HST rule can allow eastern and northwestern Ontario dealers to apply lower tax rates when they sell to buyers living in Quebec or Manitoba.

The HST in Ontario is 13 percent, versus the 5-percent GST rates for both Quebec and Manitoba.

While emphasizing that Ontario dealers who aren’t close to these respective provincial borders should exercise caution in taking advantage of this rule, UCDA explained that dealers can benefit from this tax law.

“The new rule deems delivery to take place in the other province if the vehicle is registered in the buyer’s name in the other province within seven days of the sale date. It doesn’t matter if the buyer actually takes delivery in Ontario or not,” the association noted.

“For example, if a dealer sells a vehicle to a Quebec resident, who takes delivery of the vehicle at the dealership and registers it in Quebec within seven days of the sale, delivery would be considered to have taken place in Quebec and only 5-percent GST would be applicable,” UCDA continued. “If a dealer is able to register a vehicle in the customer’s home province within seven days of the sale, only 5 percent GST needs to be charged.”

UCDA emphasized, though, that dealers must keep proof of registration in case of an audit. They must also consider the provincial sales taxes for Manitoba (7 percent) and Quebec (8.5 percent) if the vehicles are registered there.

“Unless absolutely certain that a vehicle will be registered in the other province within seven days and that the purchaser will provide a copy of the registration for proof, dealers should charge 13-percent HST, as they normally do,” the organization stressed.

“In these cases, after registering and paying applicable provincial tax in their home province, purchasers would be entitled to apply to Canada Revenue Agency for a rebate of Ontario’s 8-percent provincial portion of the HST,” it added.

Such a form can be found at www.ucda.org at the “HST … Selling out-of province” link.

UCDA also provided a list HST and GST tax rates throughout all areas of Canada.

The following includes the area the vehicle is delivered to along with the applicable tax rate:

Nova Scotia: 15 percent HST
New Brunswick: 13 percent HST
Newfoundland: 13 percent HST
Ontario: 13 percent HST
British Columbia: 12 percent HST
Alberta, Manitoba, North West Territories, Nunavut, Prince Edward Island, Quebec, Saskatchewan or Yukon: 5 percent GST

Drive Clean Adjustments

In another development for dealers to be mindful of, UCDA pointed out that on Thursday, the changes to the Drive Clean testing requirements officially started.

This impacts dealers offering leases.

“Leased vehicles being purchased by the lessee will no longer need to be tested,” officials noted.

“Owners of vehicles less than seven years old will not require a test when renewing their license plates. This extends the current five-year old exemption,” they added. “Aside from lease buyouts, models older than the current calendar year will continue to require a test when sold and plated to someone who lives in the Drive Clean testing area.”