Sale of a Business Vehicle – HST Obligations

If you own a business or corporation that is registered for HST, and your business or corporation
acquires a vehicle for use in the course of commercial activities, you should be entitled to claim back
some or all of the HST you paid on its purchase. You should also be aware of your obligations when you sell that vehicle.

Upon sale of that vehicle to another business or individual, you are required to charge 13% HST (in Ontario) on the sale price, and include the HST collected in your usual HST return for that time period.

When attending at the Ontario Ministry of Transportation office to change ownership, the purchaser will
need to bring evidence of having paid the HST on purchase (such as your sales invoice which clearly
indicates your business name, business number, details of the vehicle, selling price and HST charged) in
order to avoid paying the Ontario retail tax of 13%. Note that the 13% Ontario retail tax is not the same
tax as the 13% HST.

In summary, the buyer of the vehicle is exempt from paying the 13% Ontario retail tax when they
provide evidence of having paid the 13% HST to the seller. The seller is obligated to charge 13% HST on
the sale, and is liable for such amount if they do not.

 

This tax tip is a publication of DSK on developments in the area of taxation. The material is general in nature, is current as of published date, and should not be relied upon to replace the requirement for specific professional guidance. These posts should not be considered advice to be acted upon without further professional consultation, as each reader’s personal financial situation is unique.