When cancelling a purchase and refunding the purchase price of a vehicle, the customer is entitled to their HST back as well. This can cause confusion for dealers, especially if the taxes have already been remitted.

A dealer refunding the purchase price of a vehicle is entitled to deduct the amount refunded from the dealer’s total sales for the remittance period shown on the HST filing form. The amount of HST refunded may be deducted from the amount of taxes remitted at the next filing date.

When refunding HST, a credit note should be given to the customer, with a copy for the dealer’s files. Either a separate document or the original bill of sale may be used as the credit note. The following information should be shown:

• the dealer’s name and HST number;
• the customer’s name;
• the vehicle the credit relates to (year, make, model and VIN)
• the date of the original sale;
• the date of the credit;
• the amount of the credit;
• the amount of HST being refunded.

Although the length of time would be very unlikely, dealers may make refunds to their customer anytime within 4 years of the original date of sale.

Partial Refunds

Where only a portion of the purchase price is refunded; where an amount is deducted for the customer’s usage, or where a partial refund is given to make up for defects in the vehicle, the dealer is entitled to deduct the amount of HST refunded to the customer.

For example, if a vehicle was sold for $5,000.00, $650.00 in HST was charged to the customer and remitted by the dealer. Four months later, because of problems with the vehicle, the dealer and purchaser agree to cancel the contract. It’s agreed that the dealer will deduct

$1,000.00 from the refund for the purchaser’s use of the vehicle.

The original contract or a separate credit note should indicate a refund in the amount of $4,000.00 and also show the applicable HST refund amounts. $4,000.00 should be deducted from the dealer’s taxable sales for the current or a future remittance period and $520.00, should be deducted from the amount of HST remitted.

If you have any questions, please call the UCDA legal department at 416-231-2600 or 1-800-268-2598 or email to info@ucda.org