Enterprise collected tax on insurance premiums but mistakenly sent it to CRA as HST. Ontario assessed Enterprise for failing to remit the tax, which Ontario said was RST collected on the premiums. Enterprise sought summary judgment on the basis that, however wrongly, the tax it collected was collected as HST, not RST, so it had not failed to remit to Ontario what it had not collected.
As a side issue, Ontario tried to argue that it was entitled to an alternative remedy of liability based on failure to collect the tax. Fred Myers J. rejected that position because it was raised after the four-year limitation period for assessing failures to collect.
Another side issue was this: Enterprise said that, if it was liable for failing to remit, then it should be given credit for 8/13 of the amount remitted to CRA because that amount would have been sent to Ontario under the HST, by Canada. Justice Myers rejected that also. The reasons are interesting:
“[10] There is no firsthand evidence of what the CRA does when it receives payments that are properly due to a province or what, if anything, happened in this case. There is no admissible evidence before me as to how much, if any, of the RST remitted by Enterprise has been paid to Ontario. Moreover, the taxing statutes have remedies for customers and tax collectors like Enterprise who mistakenly pay the wrong tax. There is no evidence of any such remedies being sought if available in this case. There is no basis in evidence to moderate Enterprise’s liability (assuming I have authority to do so) based on what Ontario might have already received from the CRA.”
Should Enterprise have sought a rebate. Was one available? Even if the CRA had not assessed net tax, was the amount remitted in error? Presumably, that also would turn on whether CRA, like the Court here, would accept that the amount was collected as RST, not HST.
The parties urged, and the Court accepted, relying on a GST FCA case, Canada v. Gastown Actors’ Studio Ltd., 2000 CanLII 16656 (FCA), that which tax was collected was a question of fact. Both statutes require the remittance of tax collected, regardless of whether it is collectible. [13-15]
In summary, Myers J. concluded that “[Enterprise] did not charge the wrong tax. It charged the correct tax, but it was confused as to how harmonization was supposed to work and it remitted the RST it collected to the wrong tax collector.” [22]
What emerges is the confusion that existed in this industry and others, no doubt, over transition to harmonized sales tax and how to deal with it. In its initial dealings with the RST auditor, Enterprise had admitted having wrongly sent RST to CRA and sought advice from the auditor on ways to fix the error, given that the auditor had said such errors were common and corrigible.
A driving factor in the Court’s conclusion on the facts and rejection of the credibility of Enterprise’s witness was the repeated interruption by Enterprise’s counsel during cross-examination on the witness’s affidavit at points where contradictions were being explored. Myers J. also concluded that the story presented in the affidavit was concocted by counsel and did not make “sense compared to the alternative.” [58]