S.C.A. No. 02434 IN THE SUPREME COURT OF NOVA SCOTIA APPEAL DIVISION Clarke, C.J.N.S., Hart and Jones, JJ.A. BETWEEN: THE MINISTER OF FINANCE and JOHN RISLEY Respondent John D. Wood for the appellant Harvey L. Morrison for the respondent Appeal Heard: November 12, 1991 Judgment Delivered: November 12, 1991 THE COURT: Appeal dismissed without costs per oral reasons for judgment of Jones, J.A.; Clarke, C.J.N.S. and Hart, J.A. concurring The reasons for judgment were delivered orally by: JONES, J.A.: This is an appeal by the Minister of Finance under the Health Services Tax Act. The Sarah Kate, sailing vessel, was purchased by the respondent, John Risley in Finland in 1988. The vessel sailed to the Carribean where it remained until May of 1989. From May to October, 1989, the vessel was based in Camden, Maine. In July, 1989, the vessel was in Halifax at the end of the Marblehead race. In August of that same year the vessel participated in the Chester races. On both occasions the vessel was allowed into Canada under customs permit. No customs or excise tax was paid. The vessel returned to Maine after the races. In the fall it went to the Carribean for the winter. The boat has been used as charter vessel in Maine and the Carribean. The vessel is registered in Lunenburg, Nova Scotia. Mr. Risley has home in Chester, Nova Scotia and is resident of Nova Scotia. On July 23, 1990, an assessment of $195,785.90 was made against Mr. Risley because the vessel was registered in Nova Scotia and had been used in the province. Notice of objection to the assessment was filed and eventually the matter came before the N.S. Tax Review Board. On January 14, 1991, after reviewing the provisions of the Health Services Tax Act, board member, W.J. Skinner concluded that the vessel did not have a sufficient presence in the province to attract tax under s. 7(1) of the Act. The Minister has now appealed from that decision. The only issue on the appeal is: "Whether the Nova Scotia Tax Review Board erred in law in its interpretation of s. 7(1) of the Health Services Tax Act, R.S.N.S. 1989, c. 198, by holding that there was not sufficient presence of the yacht 'Sarah Kate' in the Province of Nova Scotia for the application of s. 7(1)." Under s. 21(1) of the Health Services Tax Act an appeal lies from decision of the Board on any point of law raised upon the hearing of the appeal. Section 7(1) of the Health Services Tax Act, R.S.N.S. 1989, c. 198, provides as follows: "7(1) Every person who brings into the Province or who receives delivery in the Province of tangible personal property acquired by him for value for his own consumption or use in the Province, or for the consumption or use in the Province of other persons at his expense, or on behalf of, or as agent for, principal, who desires to acquire such property for the consumption or use in the Province by such principal or other persons at his expense, shall immediately report the matter in writing to the Commissioner and supply to him the invoice and all other pertinent information as required by him in respect of the consumption or use of such property, and at the same time shall pay to Her Majesty in right of the Province the same tax in respect of the consumption or sue of such property as would have been payable if the property had been purchased at retail sale in the Province." The appellant contends that as the vessel was brought into Nova Scotia and used in the Province it immediately became subject to the Health Services Tax Act. The respondent argues that the Province can only impose "direct taxation within the Province" and that temporary presence is not sufficient to raise an assessment under the Act. He relies on the decisions of the Supreme Court of Canada in R. v. Air Canada, 1980 CanLII 16 (SCC), [1980] S.C.R. 303 and Canadian Pacific Airlines v. British Columbia (1989), 1989 CanLII 94 (SCC), 59 D.L.R. (4th) 218. In the Air Canada case the issue concerned the application of The Retail Sales Tax Act, R.S.M. c.R.150 to Air Canada operations and services in through flights which did not touch down in Manitoba and in flights which landed or took off in that province. The assessment was with respect to aircraft, aircraft engines and parts consumed and services, meals and liquor, consumed or supplied in the company's aircraft. Section 3(1) of the Act provided that every purchaser of tangible personal property was required to pay tax to the province Chief Justice Laskin in delivering the judgment of the Court stated at p. 316: "I am prepared, on this view, to assume that the Province has some legislative jurisdiction in the air space above it so that the pivotal question is whether Air Canada aircraft, engaged in overflights are 'within the Province', as this quoted phrase is used in s. 92(2) which empowers Province to impose 'direct taxation within the Province in order to the raising of revenue for provincial purposes'. Merely going through the air space over Manitoba does not give the aircraft situs there to support tax which constitutionally must be 'within the Province'. In the case of aircraft operations, there must be substantial, at least more than nominal, presence in the Province to provide basis for imposing tax in respect of the entry of aircraft into the Province." In Canadian Pacific Airlines Ltd. v. British Columbia, 1989 CanLII 94 (SCC), 59 D.L.R. (4th) 218 the Supreme Court of Canada had to consider whether the Social Services Tax Act, R.S.B.C. 1979, c. 388 applied: "(a) to the respondent airlines' aircraft, engines, components, parts, equipment and rotable spares (hereafter compendiously referred to as 'aircraft and parts') when used on flights that originate from, terminate in or connect two points in the province, and (b) to sales by the airlines of alcoholic beverages which are served to passengers on such flights after the aircraft is airborne and has achieved cruising speed." Mr. Justice La Forest stated at p. 222: "In general terms, the Social Service Tax Act of which counterpart exists in most of the provinces) imposes tax on person who purchases tangible personal property at retail sale in the province for his own consumption or use. The tax is based on percentage of the purchase price. similar tax is imposed on person who brings such property in the province for his consumption or use. In the case of the airline's aircraft and parts brought into the province, the tax, by virtue of administrative formulae not provided by statute, is applied only in respect of flights originating from, terminating in, or connecting two points in the province. According to the formulae, the tax is calculated on the percentage of miles travelled by the aircraft in provincial airspace to the total miles travelled. More specifically, s. 2(1) imposes the tax in the usual case to which the Act applies, purchase in the province. 2(1) purchaser shall pay to Her Majesty in right of the Province at the time of making the purchase tax at the rate of 4% of the purchase price of the property purchased. Section defines 'purchaser' and 'retail sale' in manner that makes it clear that the taxpayer is (minor additions apart) purchaser who purchases tangible personal property at retail sale in the province for his own use or consumption. These provisions read: 'purchaser' means person who acquires tangible personal property at sale in the Province for his own consumption or use, or for the consumption or use by other persons at his expense, or on behalf of, or as the agent for, principal who desires to acquire such property for consumption or use by that principal or other persons at his expense, and includes promotional distributor to the extent that the purchase price of the tangible personal property provided by way of promotional distribution exceeds the amount of the payment specifically made for it by the person to whom the tangible personal property is so provided; 'retail sale' means sale to purchaser for purposes of consumption or use and not for resale; Section makes provision for collecting the tax through the seller, who is deemed to be an agent of the Minister for the purpose. Rounding out the scheme is s. 2(4) which imposes similar tax on persons who reside or carry on business in the province who acquire tangible personal property outside the province. Section 2(4) imposes the tax on any such person who brings into, or receives in the province, any such property acquired by him for value for his own consumption or use. It reads as follows: 2(4) person residing or ordinarily resident or carrying on business in the Province who brings or sends into the Province or who receives delivery in the Province of tangible personal property for his own consumption or use, or for the consumption or use of other persons at his expense, or on behalf of, or as the agent for, principal who desires to acquire such property for the consumption or use by that principal or other persons at his expense, shall immediately report the matter in writing to the commissioner and supply to him all pertinent information as required by him in respect of the consumption or use of the property, and furthermore, at the same time, shall pay to Her Majesty in right of the Province tax at the rate of 4% of the purchase price of the tangible personal property." In applying these provisions the British Columbia Court of Appeal held that if an aircraft lands, loads and unloads and performs maintenance, the airline is using aircraft in the Province and was subject to the tax under the Act. Mr. Justice La Forest stated at p. 230: "The first issue to be determined is whether on its true construction the Act applies to the aircraft and parts. The province claims it does by virtue of s. 2(4) of the Act, which have already cited in full. That provision applies to residents, and more pertinently, to any person 'carrying on business in the Province who brings or sends into the Province or who receives delivery in the Province of tangible personal property for his own consumption or use...' [emphasis added]. Section 2(4), like other provisions in statute, must be read both in its specific context and in its context as whole. That consideration must be firmly kept in mind in considering whether the entry into the province of the aircraft and parts in the course of the operations of the airlines previously described constitutes 'bringing' or 'sending' them into province or 'receiving delivery' of them there. While would not, in the absence of detailed examination, wish to categorize the Act as being solely intended to impose retail tax payable by the ultimate consumer of the goods, there can be no doubt, as mentioned before, that this is its predominant purpose. The Act, in its general structure and intent, closely resembles the type of enactment originally approved by the courts in Atlantic Smoke Shops Ltd. v. Conlon, 1943 CanLII 372 (UK JCPC), [1943] D.L.R. 81, [1943] A.C. 550, [1943] W.W.R. 113 (P.C.), and later generalized to include all tangible personal property: see Cairns Construction Ltd. v. Government of Saskatchewan (1960), 1960 CanLII 59 (SCC), 24 D.L.R. (2d) 1, (1960] S.C.R. 619, 35 W.W.R. 241, (S.C.C.). This predominant purpose, in my view, is of considerable assistance in understanding the import of s. 2(4). Indeed, Viscount Simon L.C. in the Conlon case (p. 91) observed of similar provision that it was manifest that it was enacted merely as supplementary provision. The nature of this particular provision also argues for its interpretation in the light of the overall scheme. It is provision which, if it stood alone, might well be construed as infringing upon s. 121 of the Constitution Act, 1867 which provides that 121. All Articles of Growth, Produce, or Manufacture of any one of the Provinces shall...be admitted free into each of the other Provinces. Viscount Simon in Conlon, it is true, rather underplayed that possibility, but subsequent cases have indicated that the courts would closely scrutinize tax that in Rand J.'s words 'in its essence and purpose is related to provincial boundary': see Murphy v. C.P.R. Co. (1958), 1958 CanLII (SCC), 15 D.L.R. (2d) 145, [1958] S.C.R. 626, 77 C.R.T.C. 322 (S.C.C.), per Rand and Cartwright, JJ.; see also Comment by F.R. Scott, 12 Can. Bar. Rev. 303 (1934), at p. 308. This context, it seems to me, strongly supports the view that the general purpose of s. 2(4) is to serve as supplementary provision 'to guard against the methods of avoidance of' the purchase tax: see Viscount Simon in Conlon, at p. 91. If that view is correct, what the provision was intended to do was to prevent the evasion of the tax and consequent loss of revenue by the simple expedient of consumer purchasing goods outside the province. The provision equalizes the burden by taxing out‑of‑province purchases by provincial residents at the same rates as if the purchases had taken place in the province. The out‑of‑province purchaser pays the tax when he 'brings or sends the goods' in the province or 'receives delivery' for his use or consumption. This is confirmed, think by the words used in the provision, and especially if one considers them in connection with the purported application of the provision to the facts of this case. What think is contemplated is the bringing of purchased item into the province on permanent basis, at which time it is taxable once and for all at stated percentage of the purchase price as the provision clearly provides." The Court concluded that the statute did not apply to the airlines aircraft and parts. We see no substantial difference between the provisions of the B.C. statute and the Nova Scotia Health Services Tax Act. In our view the reasoning in Canadian Pacific Airlines Ltd. applies to the present case. We see no error on the part of the Tax Review Board in concluding that the vessel was not subject to tax in this case. The appeal is dismissed without costs. J.A. Concurred in: Clarke, C.J.N.S. Hart, J.A. 1990 HST 035 of EVIDENCE and PROCEEDINGS THE NOVA SCOTIA TAX REVIEW BOARD IN THE MATTER OF: The Health Services Tax Act, R.S.N.S. 1989, c.198 AND IN THE MATTER OF: Art Appeal from decision of the Provincial Tax Commissioner respecting Notice of Objection to the Notice of Assessment 40868 BETWEEN: JOHN RISLEY and THE PROVINCIAL TAX COMMISSION, Health Services Tax Division, Department of Finance BEFORE: Mr. Bill Skinner, Board Member AT: Halifax, Nova Scotia ON: December 17, 1990 Mr. Harvey L. Morrison, Esq. Solicitor for Appellant Mr. J. Wood, Esq. Solicitor for Respondent S.C.A. No. 02434 IN THE SUPREME COURT OF NOVA SCOTIA APPEAL DIVISION BETWEEN: THE MINISTER OF FINANCE and JOHN RISLEY Respondent REASONS FOR JUDGMENT BY: JONES, J.A.
A sailboat, which was owned by a resident in Nova Scotia and registered in the province, but which was purchased in Finland and kept in the United States and the Carribean, and which was twice in Nova Scotia under customs permits to participate in races, did not have a sufficient presence in the province to be subject to an assessment under the Health Services Tax Act.