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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
- buses
- trailers
- motor homes
- motorcycles
- mopeds
- motor vehicles with a
model year 1979 and older
- off road vehicles
- original registrations of
new vehicles
- snowmobiles
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.
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,
or
(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 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).
EXEMPTIONS:
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 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.
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