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The Carbon Tax and Distributors

The Carbon Tax and Distributors

5 Minute Read

Who qualifies as a distributor and what does the federal carbon tax mean for them?

Partner - Indirect Tax

This pertains to anyone that is considered a producer, distributor or a wholesaler of fuel. The main target of registration as a distributor is in respect of natural gas. However, many other fuels will fall into the distributor category.

Registration Required

Mandatory registration as a distributor is required in the following situations:

  • The person produces, imports or brings into a federally regulated province*, or delivers marketable natural gas or non-marketable gas into a listed province
  • Measures another person’s consumption or usage of marketable natural gas in a listed province (e.g.; a utility company) and the gas is delivered by way of a distribution system

A person is also required to register as a distributor if the person produces any other type of fuel in a listed province. 

Delivery must be understood carefully. If a person is delivering fuel on behalf of another person, the other person is responsible for the fuel charge. This may be the case with many road carriers that deliver another person’s fuel. The supply is between the distributor and the purchaser in that case.

Registration was first available April 1, 2019.

Voluntary Registration

Voluntary registration is available where a person is not required to be registered as a distributor of a fuel that is not meeting the requirements in respect of marketable / non-marketable natural gas. The person would need to be in the business of selling, delivering or distributing a type of fuel in the ordinary course of a business in or into a federally regulated province.

This may make sense where a person is selling, delivering or distributing fuel where the purchaser could issue an exemption certificate. Examples of such purchasers are farmers, a fisher, a greenhouse operator, a registered emitter, registered user, carriers such as specified air, marine, or rail carriers and a remote power plant operator generating electricity (exemption in this case is only on light fuel oil).

An example could be a gas station who, as part of their business, delivers diesel fuel to a farmer for use in their agricultural equipment. Without being a registered distributor, the fuel charge was remitted by the registered distributor who supplied the fuel to the gas station. The fuel sold to the farmer had an embedded amount of the fuel charge that cannot be relieved of the tax. The gas station could register as a distributor an issue an exemption certificate to their distributor specific to the diesel fuel. The exemption certificate is issued to their distributor. The gas station could now accept an exemption certificate from a farmer related to exempt supplies. The gas station, however, is now responsible to properly remit the fuel charge on all non-exempt fuel supplies.

Other Types of Registration

A person applying for registration as a distributor may also qualify as:

  • A registered emitter, or
  • A registered user of combustible waste

Review these registration types to see if they apply to you.

Exemption Certificate

A registered distributor can accept delivery of the fuel without a fuel charge being payable at the time where they provide an exemption certificate to the registered supplier that delivers the fuel to them. The fuel charge would apply at a point later in the hands of the registered distributor when they either use the fuel themselves in a listed province, transfer into a supply tank in a listed province, or deliver the fuel to a person that does not provide an exemption certificate.

If an exemption certificate is provided to the registered distributor, the fuel charge is not payable by the registered distributor in relation to that type of fuel being supplied. 

Note: There is only partial relief (80 percent) when the fuel is delivered to a qualifying greenhouse operator that provides an exemption certificate.

Fuel Charge

A registered user would pay the fuel charge on the use of the types of fuel in a federally regulated province where they have the obligation to pay the fuel charge (e.g.; acquire the type of fuel exempt by issuing an exemption certificate to the registered distributor).

Fuel Charge Calculation

The fuel charge is A x B, where:

A = quantity of fuel in respect of which the charge becomes payable

B = rate for the type of fuel for the listed province applicable at the time the charge becomes payable


A = 100,000 litres of gasoline acquired and delivered to their purchaser

B = rate for gasoline in a listed province $0.0442 per litre

Result: $4,420. Note: A separate calculation is needed for each federally regulated province.

Other Considerations

  • If another person transports fuel into a federally regulated province on behalf of a registered user, the registered user and not the person transporting the fuel, is considered to have brought the fuel into the listed province. The same concept applies when fuel is removed from a federally regulated province.

This is saying the person transporting someone else’s fuel is not considered to be responsible for the user’s fuel charge. The person transporting the fuel may only have to be worried about being a registered carrier themselves (road, rail, air or marine).

  • Fuel in transit through a federally regulated province is not considered to have been brought into the province provided it is not being stored in a federally regulated province (other than incidental to the transportation), and the person bringing in the fuel into the federally-regulated provinces is a registered emitter or is registered otherwise than only as a road carrier in respect of that type of fuel (e.g.; the road carrier has to account for a fuel charge on the fuel they are using their fuel tanks for what is consumed in the listed province in which they are travelling through).
  • The fuel charge is adjusted when dealing with biogasoline, biodiesel and biomethane.
  • Fuels in a mixture of two or more fuels is deemed to be the fuel of the type that has the higher proportion in the mixture.

Rebates are eligible for fuel being removed from a federally regulated province by a person that is a registered importer and they remove a quantity of fuel from a federally regulated province. The fuel charge on that fuel would have to be paid initially, then the rebate can be obtained for what is removed from the federally regulated province. The fuel charge is not to be reduced by the amount of the rebate. An amended return is to be filed in certain cases to affect this reduction (two-year time limit).


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