Canada News: New Tax Targets Used-Car Sellers

The British Columbia Provincial Government has hiked the sales tax of used motor vehicles from seven to 12 percent. The Historic Vehicle Association’s Canadian correspondent, Nigel Matthews, reports.

In July of 2010, the British Columbia Government introduced the Harmonized Sales Tax, a compounded, lump sum tax that combined the federal Goods and Services Tax and the regional Provincial Sales Tax. Five of the 10 Canadian provinces signed onto the plan—Ontario, New Brunswick, Newfoundland/Labrador, British Columbia, and Nova Scotia.

Like American state sales tax, the HST rate may differ across these five provinces. For example, the Provincial Sales Tax rate in British Columbia is seven percent. Among other things, this tax applied to the private sale of used motor vehicles in the province. But with the adoption of the HST in 2010, this long standing tax suddenly shot skyward.

As soon as the HST was introduced, a huge list of items and services saw a federal price hike thanks to the new tax. Everything from a “gentleman’s haircut” at a barber shop to the sale of a used car suddenly had a 12-percent tax added to the service.

Let the Public Decide—Not!

When the government allowed for a public vote to decide the fate of the new, combined tax, it was no surprise that 55 percent of British Columbians who cast a ballot in the mail-in referendum voted to scrap the 12-percent HST.

Everyone in the classic car community thought that the tax on private, used vehicles would revert back to a flat seven percent provincial sales tax. But that was not the case. A few weeks ago, it was announced that the tax on the private sale of used motor vehicles would remain at 12 percent.

What Gives?

Faced with a barrage of angry letters and emails from members of the National Association of Automobile Clubs of Canada (NAACC) and the Specialty Vehicle Association of British Columbia (SVABC), the BC government has responded with an insistence that the 12-percent tax will remain in place because it was not related to the HST. In a written response to the NAACC, the Chair of the BC Treasury Board, Colin Hansen, explained:

“The application of the 12-percent tax on the private sale of used vehicles is not the HST and, therefore, the elimination of the HST will not trigger any change. The problem that government faced was that there was an inconsistency in the application of taxes on the sale of used vehicles depending on where the transaction took place. Used vehicles on dealership lots were taxed at 12 percent (and they will continue to do so). This led to a considerable problem with “curbers,” which are essentially unregulated car dealers. Applying a 12-percent [tax] to all used vehicle had brought consistency and, to the best of my knowledge, no changes are contemplated.”

The rub, of course, is that now a private individual selling an old car in the paper or along the side of the road will be taxed the same as a professional dealer with dozens of cars on a lot.

Fighting Back

The NAACC has since kicked off an organized campaign to fight the increase in tax on private, used vehicle sales. “I, along with my fellow car club members in BC, am extremely upset by this NEW tax on the private sale of used collector vehicles,” says John Carlson President of the NAACC. “I have been told that this additional tax—five percent on top of the provincial sales tax of seven percent—was added at the request of the car dealers who want ‘to level the playing field’ with ‘curbers’ who sell cars privately. The NAACC does not agree with this logic and, furthermore, believes this tax increase has come about simply as a result of the introduction of the HST.”

According to the NAACC, “curbers” do not operate in the collector car sales world, which is why they are proposing that all vehicles 20 years old and older sold privately should remain at the seven-percent tax level. These cars, according to Carlson, have already generated many thousands of dollars in taxes as they have been sold and resold many times.

In the end, the British Columbia collector car clubs and their members are only asking for what they had—a 7-percent tax—before the HST came to the province. For more information, check out the websites of National Association of Automobile Clubs of Canada and the Specialty Vehicle Association of British Columbia.  Also, stay tuned to future issues of the HVA eNews to find out if this situation will have a happy ending for the BC hobbyist vehicle community.