2018 QCCQ 5014, 2018 QCCQ 5014

Commerce à fortiori inc. c. 9257-1462 Québec inc. (Sapsan Transit) 2018 QCCQ 5014 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-700892-179 DATE: June 27, 2018 ______________________________________________________________________ BEFORE THE HONOURABLE ENRICO FORLINI, J.C.Q. ______________________________________________________________________ COMMERCE À FORTIORI INC. Plaintiff v. 9257-1462 QUÉBEC INC. d.b.a.

SAPSAN TRANSIT Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Commerce à Fortiori inc. (Fortiori) claims from 9257-1462 Québec inc., doing business as Sapsan Transit (“Sapsan”), $244.75 on the grounds that Sapsan was obliged to pay this amount as Goods and Services Tax (“GST”) and Québec Sales Tax (“QST”) since the service Fortiori provided to Sapsan was a taxable service. [ 2 ] Sapsan contests the claim and argues that no taxes were owed to Fortiori for the truck driving services it rendered.

Question in issue Were the freight transportation services provided by Fortiori to Sapsan subject to GST and QST? Context [ 3 ] Sapsan operates a truck transportation company. It owns a fleet of trucks and enters into transportation contracts with shippers. [ 4 ] Fortiori operates a business that provides truck driving services through its principal, Petar Kovachev. [ 5 ] In 2016, Fortiori and Sapsan entered into a contract for services whereby Fortiori, through Mr.

Kovachev, agreed to provide truck driving services to Sapsan (“Contract for Services”). [1] Fortiori is paid a fixed rate for every mile that it drives the trucks owned by Sapsan. [ 6 ] Between April 9 and June 12, 2016, Fortiori provided truck driving services to Sapsan for 7 distinct transports between points of origin in the province of Québec and destinations located in different places in the United States of America. [2] [ 7 ] For each of these transports, Sapsan paid Fortiori the service fee payable under the Contract for Services, in addition to GST and QST on this amount.

For the 7 transports, Sapsan paid GST/QST of $1,552.03 to Fortiori. [3] [ 8 ] For example, between April 9 and 15, 2016, Fortiori provided truck driving services to Sapsan for transporting cargo over 6,810 miles to a consignee in the U.S.A.

Sapsan paid Fortiori a service fee of $1,634.40, plus GST of $81.72 and QST of $163.03, for total taxes of $244.75. [4] [ 9 ] In June 2016, Sapsan took the position that the truck driving services provided by Fortiori over the 7 transports were not taxable services and thus that it had paid Fortiori GST/QST in error for these transports. [ 10 ] Hence, when Fortiori performed truck driving services for an 8 th move between June 20 and 27, 2016, Sapsan issued invoice # 6074980 to Fortiori on which it indicated the amount owed for this movement, but did not include GST/QST.

Moreover, it also included a debit of $1,552.03, which corresponds to GST and QST paid to Fortiori over the 7 previous invoices. [5] [ 11 ] By demand letter dated August 25, 2016, Fortiori wrote to Sapsan claiming that is was owed $1,795.77, which amount corresponds to the GST and QST on the 8 truck transportation services provided between April and June 2016.

Fortiori argues that Sapsan had the obligation to pay GST/QST on the 8 moves and thus, that it illegally debited the GST and QST it had paid in invoice # 6074980. [6] [ 12 ] In February 2017, Fortiori filed its lawsuit against Sapsan claiming $2,078.24, which corresponds to the taxes that Sapsan

withheld from Fortiori, plus interest of $282.47. [ 13 ] At trial, Fortiori admitted that it never remitted to the tax authorities the GST and QST on invoices P-3 to P-9. The only taxes it remitted to the tax authorities was the $244.75 in GST/QST for invoice # 727841, the first of the 8 moves. [7] Hence, Fortiori reduced the amount of its claim to $244.75.

Analysis and decision Were the freight transportation services provided by Fortiori to Sapsan subject to GST and QST? [ 14 ] Fortiori argues that it had an obligation to collect and remit GST and QST to the tax authorities for the truck driving services it provided to Sapsan. [ 15 ] Sapsan argues that these truck driving services are zero rated, in other words that they did not give rise to the obligation to collect and remit GST/QST. [ 16 ] For the reasons that follow, Sapsan’s contestation is well founded.

It had no obligation to pay GST/QST for invoice # 727841 and it was justified in issuing the debit note. [ 17 ] The obligation to collect and remit sales taxes is triggered by the Excise Tax Act (R.S.C 1985 c.

E-15) and Act Respecting the Québec Sales Tax (S.Q., T-0.1). [ 18 ] The evidence reveals that each of the freight movements for which Fortiori claims it had the obligation to collect and remit GST and QST originated in the province of Québec and their destination was a point outside Canada. [8] [ 19 ] Under the federal Excise Tax Act and the Act respecting the Québec Sales Tax , the freight movements for which Fortiori provided services to Sapsan are zero rated.

This is made clear in bulletins published by both the Canada Revenue Agency and Revenu Québec, excerpts of which are cited below: Canada Revenue Agency: Zero-rated supplies of freight transportation services … International freight transportation services 62. In addition to interlining, a supply of a freight transportation service may be zero-rated under other provisions of

Part VII of

Schedule VI. Generally, a freight transportation service will be zero-rated where the transportation of the tangible personal property is from: - a place in Canada to a place outside Canada where the freight charge is $5 or more; - a place outside Canada to a place in Canada; or - a place outside Canada to another place outside Canada, even if the property passes through Canada. Outbound freight movement From a place in Canada to a place outside Canada 63. A supply of a freight transportation service in respect of tangible personal property from a place in Canada to a place outside Canada is zero-rated under

section 6 of

Part VII of

Schedule VI where the value of the consideration for the supply is $5 or more. [9] Revenu Québec (in collaboration with Canada Revenue Agency: ZERO-RATED FREIGHT TRANSPORTATION SERVICES … International freight transportation services are zero-rated under both the GST and QST systems List of zero-rated freight transportation services Outbound services Under the GST system, a freight transportation service is zero-rated when supplied in respect of goods that are transported from a place in Canada to a place outside Canada, provided the value of the consideration for the supply is $5 or more.

Under the QST system, a freight transportation service is zero-rated when supplied in respect of property that is transported from a place in Québec to a place outside Canada, provided the value of the consideration for the supply is $5 or more. [10]

[ 20 ] Accordingly, the services provided by Fortiori to Sapsan under invoice #727841 did not trigger the obligation to pay or collect GST and QST. Sapsan paid in error taxes in the amount of $244.75 for this service and it was justified in issuing the debit note. FOR THESE REASONS, THE COURT: [ 21 ] DISMISSES Commerce à Fortiori inc.’s claim; [ 22 ] WITH LEGAL COSTS of $150. __________________________________ ENRICO FORLINI, J.C.Q. Date of hearing: February 19, 2018