`Tax on tax' issue explained

Eric Lai

SPECIAL TO THE STAR

Q: Is it correct for the dealer to charge GST and PST on the "air conditioner tax" and "gas guzzler tax" amounts when purchasing a new car? This would clearly be tax on tax.

A: Regarding the GST, Peter Delis, a media information officer for the Canada Revenue Agency, replies: "The tax is charged on the (air con) excise tax and the gas guzzler tax. It is tax on tax but the GST/HST legislation only exempts tax on PST (retail sales tax)."

Regarding the PST, Scott Blodgett, a media relations officer for the Ontario Ministry of Finance and Ministry of Revenue, replies: "Under the Ontario Retail Sales Tax Act, every purchaser of taxable goods, including vehicles, must pay retail sales tax (RST) at the applicable rate (generally 8 per cent) on the fair value of those goods."The act defines `fair value' to include the purchase price, freight, the tax for fuel conservation (TFFC), and any other charges, including excise taxes, that are imposed to obtain possession and use of the item."The federal Goods and Services Tax (GST) is specifically excluded from the definition of fair value.

"Both the TFFC ('gas guzzler' tax) and the federal air conditioning tax are included in the fair value and therefore form part of the cost of the vehicle to the purchaser.

As such, these amounts must be included in the base amount on which RST is calculated."

In other words, both are saying: Yes, the air con tax and gas guzzler tax amounts are indeed subject to GST and PST. However, the GST amount itself is not subject to PST, and vice-versa.

Q: Are aftermarket back-up camera systems (and DVD players) legal? Aren't video screens visible to the driver, and operating when the vehicle is in motion, against the law?

A: Under section 78 of the provincial Highway Traffic Act, there's a $110 fine for driving a motor vehicle equipped with a television in the front seat or visible to the driver.

Note that while S. 78 HTA uses the term "television," any similar video entertainment or recreation device, such as DVD players or a laptop computer running a video clip, for example, may also be subject to charges. These gadgets could be classified as closed-circuit television equipment and fall within the definition of "television" for legal purposes.

Devices rearward of the driver's seat back, with screen not visible to the driver, are permitted. This would include factory-installed DVD players or rearward-facing aftermarket units clipped to the back of the front seats.

Factory dashboard video units that operate only when parked are also allowed, as these automatically shut down when the vehicle is started.

And, no, you won't be charged if just moving a household TV from one residence to another in the vehicle front seat – provided there isn't a power inverter at hand and it can't otherwise be activated.

Dedicated back-up camera systems are exempted from charges by S. 9 of Ontario Regulation 587, as they're considered "an aid for the safe and efficient operation of a motor vehicle."

That regulation further allows that charges do not apply "where a television is used only in carrying out a service or conducting a business where the use does not involve recreation or entertainment, and does not affect the safe operation of the motor vehicle."

The provincial government is in the process of drafting new legislation pertaining to "driver distraction devices."

If enacted, these laws should come into effect by early 2009.

Email your non-mechanical questions

to Eric Lai at wheels@thestar.ca.

Please include year, make, model and

kilometres of autos cited, plus your name, address and telephone number.

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