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The Carbon Tax and Importers

06/01/2020


This would pertain to commercial businesses who import or bring fuel into a federally regulated province from any other province. Certain exceptions are listed below.

Registration Required

Registration is required in the following cases:

  • Imports a type of fuel (there are 21 types of fuel) at a location in a federally regulated province, or
  • Brings (e.g. read as causes) that type of fuel into a federally regulated province

Registration in respect of that type of fuel would not cause registration as an importer if that type of fuel is brought into / imported into a federally regulated province in the form of:

  • Being in the supply (fuel) tank of a vehicle, or
  • In a quantity that does not exceed 200 litres (annually) on fuel that is gasoline, light fuel oil, kerosene, or propane.

Note: If a person is a retailer or a wholesaler and imports a quantity in excess of 200 litres of kerosene or propane, they are going to be treated as an importer and must register for carbon tax upon exceeding the threshold. They would then remit carbon tax to the Canada Revenue Agency. The charge to their customer would be a higher price, embedding the carbon tax into the price.

Note: Other fuel types do not have a minimum threshold. Fuels like Naphtha or butane are common examples of fuel that can be acquired in small quantities at retail outlets or imported into Canada. The importer of these products must be aware of the fuel charge and registration requirements. Registration was first available April 1, 2019.

Voluntary Registration

A person can register as an importer voluntarily if:

  • The person is an interjurisdictional rail carrier in respect of that type of fuel (not to be confused with a registered rail carrier, who may be registered to transport persons or goods other than a type of fuel);
  • A business regularly imports fuel of that type in a supply tank of a locomotive at a location in a federally-regulated province, brings fuel of that type into a federally-regulated province in a supply tank of a locomotive at a place in Canada or removes fuel of that type in a supply tank of a locomotive from a federally-regulated province; and
  • The person is not required to be registered in respect of that type of fuel as a specified air carrier, an air carrier, a specified marine carrier, a marine carrier, a specified rail carrier or a rail carrier.

Other Types of Registration

A person applying for registration as an importer may also qualify as:

  • A registered road carrier, or
  • A registered user of combustible waste

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

Fuel Charge

A registered importer that imports fuel at a location in a federally regulated province or that brings fuel into a federally regulated province pays a fuel charge. This is like a self-assessment concept in sales tax.

The fuel charge becomes payable at the time the fuel is imported or brought into the federally regulated province by the registered importer.

Exception: the fuel charge is not payable by the registered importer on the fuel imported in the supply tank of a vehicle and that fuel is for use in operating the vehicle or an auxiliary component of the vehicle, or of an attached vehicle.

Example: ABC Co imports 2,000 10-litre packaged kerosene fuel containers — 20,000 litres of kerosene — using their own commercial vehicle from Alberta to Saskatchewan, a federally regulated province). The diesel fuel it has acquired in operating the commercial vehicle is not required to have a fuel charge accounted for under the program. ABC would be considered a registered importer of the kerosene as it is more than the 200-litre limit. ABC Co would not be considered an interjurisdictional road carrier in this example.

NOTE: This exception above does not apply if the fuel is a qualifying motive fuel and is brought into or imported into a federally regulated province by the person in a supply tank of a specified commercial vehicle of the person and they are:

  • A registered emitter, registered importer or a registered user of that type of fuel, and is required to be registered as a road carrier in respect of that type of fuel; or
  • If the fuel is brought in or imported in a supply tank of a locomotive and the person is an interjurisdictional rail carrier in respect of that (same) type of fuel and is not, in respect of that (same) type of fuel, registered as an air, marine or rail carrier; or
  • To the extent that the fuel is brought in or imported in a supply tank of an aircraft of used in a covered air journey in respect of a federally-regulated province, if the person is an interjurisdictional air carrier in respect of that type of fuel and is not in respect of that type of fuel, registered as an air carrier, marine carrier or rail carrier; or
  • To the extent that the fuel is brought in or imported in a supply tank of a vessel for use in a covered marine journey in respect of that type of fuel and is not, in respect of that type of fuel, registered as an air carrier, marine carrier or rail carrier.

This would mean if the person meets one of these conditions, they would have to remit a fuel charge on the fuel being used in the supply tank to bring in or import in the other fuel into a federally regulated province.

Example: XYZ Co is a registered distributor of diesel. It uses its own fleet of commercial vehicles and trailers to import and deliver the fuel in a federally regulated province. It was already required to be registered as a road carrier because it travels interjurisdictionally between listed and non-federally regulated provinces. It could not avoid remitting a fuel charge on the diesel fuel used in its vehicle supply (fuel) tanks.

It is registered both as a distributor and a registered carrier. It has two types of fuel charges to remit. A fuel charge on the fuel it distributes (except on fuel covered under an exemption certificate they have property obtained), and on the fuel used in the fleet fuel trucks used in a federally regulated province.

Fuel Charge Calculation

The fuel charge is A x B, where:

A = quantity of fuel on which the fuel charge is to be applied

B = the rate for that fuel type at the time the charge becomes payable

20,000 litres of kerosene x $0.0516 / litre = $1,032

This amount could be reduced further by any eligible rebates.

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 importer, the registered importer and not the person transporting the fuel, is considered to have brought the fuel into the federally regulated province. Same concept when fuel is removed from a federally regulated province.

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

  • Fuel in transit through a federally-regulated province is not considered to have been brought into the federally-regulated 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 federally-regulated province in which they are travelling through).
  • The fuel charge is adjusted when we are dealing with biogasoline, biodiesel, and biomethane.
  • 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 accounted for 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).

*Federally regulated provinces refer to Manitoba, New Brunswick, Ontario, Saskatchewan, Yukon and Nunavut as they are provinces that fall under the federal carbon tax because they do not have a provincial carbon tax. Alberta will fall under this program beginning January 1, 2020.