For information about Ontario Sales Tax in Special cases click here.
PAYMENT OF ONTARIO RETAIL SALE TAX ON VEHICLES
Effective October 1, 1992, purchasers of all used motor vehicles purchased through private sales will be required to pay Retail Sales Tax on the Fair Market Value.
Fair market value is the higher of declared purchase price or Average Wholesale Value when the Average Wholesale value is $1,000 or greater.
When the Average Wholesale Value is less than $1,000, then tax will be payable on the purchase price.
In situations where the purchase price of the motor vehicle is below Average Wholesale Value as a result of excessive wear or severe damage, and the transferee provides a completed appraisal, then tax is payable on the greater of the purchase price or the appraised value as indicated on the appraisal.
Average wholesale value is based on the Canadian Red Book.
Tax on the fair market value of a used motor vehicle will apply to passenger cars, light trucks or vans listed in the Canadian Red Book for which a permit is required under the Highway Traffic Act. The term "used" is interpreted to mean a sale/registration that is not the first sale/registration of the motor vehicle in Ontario.
All other vehicles and motor vehicles are excluded from this method of determining fair market value, including the following:
* Imported vehicles if registered in Ontario for the FIRST TIME :
trucks with a vehicle empty weight of more than 2,200 kilograms
motor vehicles with a model year 1979 and older
off road vehicles
original registrations of new vehicles
On the transfer or registration of these vehicles, the purchaser will be required to pay tax on the purchase price, or if imported, on the value assessed by Canada Customs
Although the Retail Sales Tax Act will require that tax be applied to the fair market value of motorcycles tax will be collected by the Licensing Agent on the purchase price of motorcycles. The Retail Sales Tax Branch of the Ministry of Finance will determine if any additional sales tax is payable.
The vehicle empty weight is the determining factor of the 2,200 kg threshold, not the weight it is licensed to transport.
Any change in the name other than those due to changes in marital status, legal name change, etc., indicated on the vehicle registration should be treated as a taxable sale.
When errors occur in the registration of a vehicle :
(1) Tax must be paid on any subsequent changes and the transferee (the person receiving the vehicle) may apply for a refund,
(2) Taxpayer may provide all supporting documentation with respect to the error and proof tax was paid to the Ministry of Finance who may issue authorization to process the transfer exempt of tax.
Should a dealer/vendor register a vehicle in the wrong name, the dealer may correct the registration by changing it back to the dealer name and then to the correct owner's name.
Occasionally, an R.S.T.. vendor who is in the business of selling other merchandise and who does not hold a dealers licence under the Motor Vehicles Dealers Act will sell a motor vehicle and collect retail sales tax. Should this occur, the following procedures apply:
1. If Vehicle sold is a passenger car, light truck or van, listed in Canadian Red Book and is subject to "fair market value" rules, tax is payable on the "fair market value" of the vehicle or purchase price whichever is higher. The taxpayer may apply to Ministry of Finance for a refund of the amounts paid in excess..
2. Vehicle sold is not a passenger car, light truck or van listed in the Canadian Red Book and is not subject to "fair market value" tax calculation. In this case:
A. Purchaser presents invoice/bill of sale and retail sales tax has not been charged.
Tax must be calculated and paid based on the purchase price of the vehicle.
B. Purchaser presents invoice/bill of sale indicating that retail sales tax has been charged. Purchaser does not have to pay taxes again but must be prepare to identify by name and address the business which collected the taxes and possibly the "vendors permit" of the seller.
Following are general rules applicable to different taxable situations for vehicle transfers.
RED BOOK WHOLESALE VALUES LESS THAN $1,000
Purchasers of used motor vehicles with an average Red Book wholesale value of less than
$1,000 will pay tax on the declared purchase price of the vehicle.
The following three examples illustrate this policy:
A. Purchaser transferring a 1985 Ford Escort S-LFS
- Purchaser declares price of $850.
- Red Book value is $975.
- TAX IS PAYABLE ON $850.
B Purchaser transferring a 1985 Ford Escort L, Wagon.
- Purchaser declares price of $950.
- Red Book value is $1,475.
- TAX IS PAYABLE ON $1,475.
C. Purchaser transferring a 1985 Ford Escort OL.
- Purchaser declares price of $1,200.
- Red Book value is $875.
- TAX IS PAYABLE ON $1,200.
NB: If a vehicle can not be located on the electronic Red Book file or the value is shown as 0, in the UVIP tax is collected on the purchase price.
The dollar amounts shown on the Used Vehicle Information Package (UVIP) represent a range of values, as guidelines for calculating retail sales tax. These values are based on the Canadian Red book, which is an accepted industry standard. The amounts represent average prices paid for vehicles of the same year, make and model, and do not take into account optional equipment, mileage or vehicle condition. Values may change from the date this package is issued to the date of transfer.
The buyer of the vehicle must pay retail sales tax on the purchase price or Red Book wholesale value, whichever is HIGHER.
NOTE: If the buyer paid less than the Red Book value and an appraisal supports a lower price because of the condition of the vehicle, tax is paid on the declared price (real purchase price) or appraised value, whichever is higher. Any reduction in tax is available only when a completed appraisal is given to a Licence Issuer prior to changing ownership. If the transfer has been completed and tax has been paid on the average wholesale value, an appraisal must be sent in with an application for a refund to the Ministry of Finance.
Appraisal forms are available from motor vehicle dealers who conduct appraisals and independent appraisers authorized by the Ministry of Finance to conduct appraisals.
Red Book values may not apply to some vehicles. In these cases, retail sales tax will be based on the purchase price only (fair market value).
Tax is not paid if a vehicle is a gift and is being transferred between the following defined family members - father, mother, step-father, step-mother, spouse, grandfather, grandmother, son, daughter, son-in-law, step-daughter, grandson granddaughter, son-in-law, mother-in-law, father-in-law, daughter-in-law.
A sworn statement before a Commissioner of Oaths (affidavit) will be required for certain transfers, such as gifts between defined family members or estate bequests, settlers effects and transfers for insurance or commercial licensing.
Diplomats who produce their identification card issued by the federal government will be able to complete a transfer without paying tax. Status Indians living on reserves are exempted from tax when a motor vehicle is registered to a reserve address and they show their federal identification cards.
For information about Ontario Sales Tax in Special cases click here.