Luxury tax on new “subject” vehicles above the $100,000 price threshold has been in effect for several years now. By now, most dealers dealing with new vehicles will be familiar with the basics of calculating luxury tax, (e.g. luxury tax is equal to the lesser of 10% of the taxable amount of the subject vehicle and 20% of the amount above the price threshold). Dealers should also be familiar with the definition of “subject” vehicle.
A subject vehicle is a vehicle that:
- is designed or adapted primarily to carry individuals on highways and streets
- has a seating capacity of not more than 10 individuals
- has a gross vehicle weight rating that is 3,856 kg or less
- has a date of manufacture after 2018
- is designed to travel with four or more wheels in contact with the ground
Some examples of subject vehicles include sedans, SUVs, hatchbacks, coupes, convertibles, and light-duty pickup trucks.
However, some dealers are still confused about the details of calculating the luxury tax. Are certain add-ons included when calculating luxury tax? What about other fees? The Canada Revenue Agency (CRA) has a very clear guide located on their website explaining how to calculate luxury tax and what additional items need to be included when calculating it.
What to include
The following are examples of what to include in the value of consideration for calculating the luxury tax on the sale of a luxury item. The following are not exhaustive lists.
Improvements
- Motor and engine upgrades
- Engine block heaters
- Remote starter and keyless entry systems
- On-board audio, entertainment, navigation, communication and lighting systems
- Extra options including power windows, sunroof and Wi-Fi capabilities
- On-board solar panel systems
- Heating and air conditioning systems
- Exterior upgrades including cosmetic and equipment installations
- Interior upgrades including upgrades to upholsteries and cabins
- Upholstery treatments
- Exterior paints, vinyl wraps and window tints
- Protective films and coatings
- Undercoating and rustproofing
- All-season, winter and performance tires that are installed on vehicles at the time of sale
- Etchings, immobilizers and other anti-theft systems
Incidental goods and services
- Motor and engine fuel in the fuel tanks of luxury items
- Chargers for electric vehicles
- Floor liners, cargo organizers and other interior accessories
- Lifejackets, embarkation ladders, parachutes, signal flare kits and emergency roadside kits
- Splash guards, deflectors and other exterior accessories
- Key chains, key fob covers, waterproof tarps, sunshades and other miscellaneous accessories
- Detailing and delivery services that are supplied with the sale of luxury items
Fees
- Administration and documentation fees
- Regulatory fees (e.g. OMVIC fee and AMVIC fee for vehicles in Ontario and Alberta)
- Title and ownership transfer fees
- Licencing and registration fees
- Finance arrangement fees
- Fees for registering liens and other security interests against luxury items (e.g. PPSA fee)
- Transportation and freight fees
- Pre-delivery inspection (PDI) fees
Federal and provincial levies
- Import duties and taxes
- Federal green levy on fuel inefficient vehicles
- Federal excise tax on air conditioners in vehicles
- Federal and provincial levies on motor and engine fuel in the fuel tanks of luxury items
- Provincial battery levies
- Provincial tire levies
What not to include
The following are examples of what not to include in the value of consideration for calculating the luxury tax on the sale of a luxury item. This is not an exhaustive list.
- GST/HST
- PST in British Columbia and Saskatchewan (Note: the luxury vehicle tax in British Columbia is a form of PST)
- RST in Manitoba
- QST in Quebec
- Software upgrades that are performed remotely
- Extended warranties
- Repair, maintenance and service plans
- Emergency roadside assistance plans
- Road hazard protection plans
- Payment protection plans
- Insurance products
- Guaranteed asset protection coverages
- Seasonal storage services
- Paid subscription services that do not modify luxury items including navigation, media and internet subscription services
- Extra sets of tires that are not installed on vehicles at the time of sale
Members are encouraged to review the luxury tax calculation guide, which provides detailed examples, by following this link: Consideration and retail value – Canada.ca
Members that still have questions about luxury tax can reach out to the UCDA’s Legal Department by telephone at (416) 231-2600 or toll-free at 1-800-268-2598.
