Sales to Status Indians
Status Indians, with a Certificate of Indian Status issued by the Indigenous and Northern Affairs Canada, are exempt from HST where they purchase or lease a vehicle and take delivery of the vehicle on a Reserve. It does not matter whether they live on the Reserve. So, vehicles sold or leased to a Status Indian and delivered to the Status Indian on a Reserve are exempt from the full 13% HST.
Delivery off Reserve
Sales or leases to Status Indians with delivery off Reserve will be exempt at the point of sale from the 8% provincial portion of HST, meaning that dealers should charge only 5% GST if the Status Indian takes delivery off-Reserve.
The same rules as in Question 1 apply. Parts sold and delivered to a Status Indian on Reserve are fully exempt from HST.
Parts sold to a Status Indian will be exempt from the 8% provincial portion of HST and subject only to 5% GST.
Repairs performed for a Status Indian at a dealership are subject only to 5% GST.
The Indigenous and Northern Affairs Canada issues a Temporary Confirmation of Registration Document to individuals who have been newly registered as Status Indians. The document confirms that the individual named on the document is registered as a Status Indian under the Indian Act.
The document must be on Indigenous and Northern Affairs Canada letterhead with a red Canada logo and include a raised seal of the Indian Registrar at the bottom right. The document is not valid after the expiry date shown.
Dealers should only accept an original document from the individual…. not a photocopy. Dealers should make a copy of the document and the photo ID and keep them on file.
Other non-government cards, such as “Métis” cards, “First Nations” cards, or “Aboriginal Nation” cards do not entitle the cardholder to any tax exemption.
You can see what the different Certificate Indian Status Cards look like here.
If audited, you may be asked for documentation as evidence that the Status Indian took delivery on a Reserve. The UCDA recommends that you:
- Purchase something such as gas on a Reserve and get a dated receipt, showing the date and address
- Take a photo of the vehicle beside a recognizable landmark on the Reserve, such as a store, the band office or Reserve sign
- Log the distance driven between the dealership and the Reserve address
If you need help finding a Reserve, call the UCDA for assistance.
This often arises because the transaction involves financing or credit and the Status Indian has to have a co-signor (often his or her spouse who may not be a Status Indian) sign the contract and finance documents. If a Status Indian is a co-purchaser or co-lessee on the contract, the transaction might be exempt from HST (as long as all the other rules are followed).
It doesn’t matter whether the co-signer’s name is shown on the registration or not, but it is not enough to simply include the Status Indian as a co-signer on a bill of sale or lease. There needs to be evidence that the Status Indian is jointly and severally liable for payment with the non-Status Indian buyer.
What does “jointly and severally” liable for payment mean? This might be easier to prove on a financed deal with co-signors (where both are responsible for the loan or lease) than it will be on a cash sale. CRA have not offered much guidance here, but it might help to show that both parties are actually paying for the vehicle in addition to both signing the contract as purchasers.
Yes, these rules apply to any type of vehicle, equipment or machinery sold to a Status Indian.
In order to qualify for any tax exemption, the customer must have a Certificate of Indian Status Card, issued by the federal government. You should record the Status Indian’s Registry Number or Band Name, and keep a photocopy of the card on file.
Sales, leases, or repairs performed for Status Indians will be automatically exempt at the point of sale from the 8% provincial portion of HST, meaning that you should charge 5% tax if the Status Indian takes delivery off-Reserve.
Vehicles and parts delivered to a Status Indian purchaser on Reserve will be fully exempt from the 13% HST.
You can see what the different Certificate Indian Status Cards look like here.
Vehicles sold to Status Indian purchasers who take delivery at the dealer’s premises (“Off-Reserve”) are exempt from the 8% provincial portion of the HST … meaning the dealer should only collect and remit 5% tax on the sale.
However, dealers must report the full amount of HST that would normally be collected (13%) on Line 105 of their HST remittance form. The 8% provincial portion of the HST that was not charged to the Status Indian should be shown on Line 111 (the Rebates line) and this amount should then be subtracted from the Net Tax on Line 109 to show the balance owing on Line 113.
Here’s a simplified example of how this would show on a remittance form. For the purposes of this example, the sale of one vehicle for $10,000 is shown. For simplicity, no Input Tax Credits (ITCs) are shown in the example. Normally, ITCs would be deducted on Line 106 to get the Net Tax on Line 109.
Total GST/HST (Line 105) $1,300 (13% of $10,000, though only 5% was actually collected)
Net Tax (Line 109) $1,300
Rebates (Line 111) $800 (the amount of HST the Status Indian did not pay)
Balance Owing (Line 113) $500 (amount remitted to CRA)
Dealers who do not file electronically using NETFILE, must also complete the appropriate sections of CRA Form 189 (Rebate Form) to show the amount of the rebate from Line 111 and send this form in with their remittance.
Dealers should check off the box for Code 23 in Part B of the Form and complete Parts A, C (Section II only) and E.
It is important to note that dealers will remit only the amount of HST collected (5% of the sale price). CRA will not actually issue a rebate. However, CRA expects dealers to complete remittance forms this way. Failure to do so could lead to penalties being charged, to a maximum of 10% of the misreported amount.
This process does not apply to vehicles sold and delivered to a Status Indian on a Reserve. No HST is charged and none is reported in that case.
A purchase of a vehicle by an Indian band or band empowered entity may also be eligible for a point-of-sale tax exemption if the proper documentation, such as an original certificate which describes who the property is being purchased by and the reasons for the purchase, is presented to the dealer. More information regarding exemptions for band-empowered entities and the contents of these certificates can be found by following this link: GST/HST and First Nations peoples - Canada.ca