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The Carbon Tax and Road Carriers

08/01/2020


This pertains to commercial businesses hauling freight or passengers across more than one province. The purpose is to capture the federal fuel charge on the fuel being consumed to operate the commercial vehicles in the federally regulated provinces*.

Registration Required

Registration is required where an interjurisdictional road carrier has qualifying motive fuel being used in their commercial vehicles (e.g.; a semi truck) in a federally regulated province. They may be required to be registered as a distributor, a specified air carrier, an air carrier, a specified marine carrier, a specified rail carrier or a rail carrier in respect of that type of fuel.  As more than one type of registration is possible, a person may need to be registered for other reasons such as a distributor, importer, etc. 

For example, Trucking Transport Ltd is based in Saskatchewan and transports dry goods all throughout Canada and the U.S. It would be required to be registered as a road carrier. 

A specified commercial vehicle is a vehicle used to provide commercial transportation of individuals or goods by road from one province to another, or from a location in Canada to another location outside of Canada. The commercial vehicle has two or more axles with a gross weight greater than 11,797 kilograms or is any vehicle with three or more axles (no weight restriction), or when truck and trailer are combined exceed 11,797 kilograms. Recreational vehicles are not included in this definition. Common examples are a normal semi-truck with or without a trailer, a highway bus, a school bus, etc.

Note: A road carrier may have to be registered as an importer as well if they import fuel from a federally regulated province or bring fuel into a federal  regulated province from a place in Canada unless the fuel is imported or brought into a federally regulated province in a supply tank of a vehicle or the fuels is gasoline, kerosene, light fuel oil or propane in a quantity that does not exceed 200 litres annually.

For example, ABC Co is based in Alberta, where it refines fuel (kerosene) and packages the kerosene in four litre containers to be sold as cooking fuel. It has retail stores in Manitoba, with a fleet of 10 commercial trucks and trailers. It transports cooking fuel to its stores in Manitoba to be sold at the retail level. Its source for all its inventory is from Alberta. As it was importing more than 200 litres of kerosene, it is required to also be registered as an importer. ABC Co is required to remit the fuel charge on the kerosene in respect of the fuel imported into the federally regulated province (Manitoba). It would also be required to remit the fuel charge on any fuel used in Manitoba that did not already have the federal fuel charge incurred.

Road carriers are being set up for quarterly reporting. If they are registered other than as just a road carrier, they will be required to follow monthly reporting for all fuel charges. Registration was first available April 1, 2019.

Voluntary Registration

Voluntary registration is not yet available for road carriers.

Other Types of Registration

A person applying for registration as a road carrier may also qualify as:

  • A registered importer,
  • A registered emitter,
  • A registered user of fuel in a non-covered activity, or
  • A registered user of combustible waste

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

Fuel Charge

A registered road carrier would report the fuel charge on the fuel used in its supply tanks that it brings into a federally regulated province or is removed from a supply tank in the federally regulated province. This is like a self-assessment concept in sales tax.

The fuel charge for a reporting period is not payable until the end of the month following the reporting period. The return can result in a rebate if fuel purchased in a federally regulated province in the period exceeds the fuel used in a federally regulated province in the same period.

Example:  a registered road carrier transports goods between Quebec (non-federally regulated province) and Ontario (federally regulated province). For this trip, it picks up cargo in Ontario. Before leaving it fills up with 100 litres of diesel fuel. For the distance travelled from the Ontario origination to the Ontario / Quebec border, the truck consumes 30 litres of diesel. From the Ontario / Quebec border to the Quebec destination, it used 70 litres of diesel. The net quantity of fuel is determined below:

Fuel Charge Calculation

The fuel charge is A – B, where:

A = quantity of fuel used in the commercial vehicle or removed from the supply tank in the federally regulated province

B = total quantity of fuel that was transferred into the supply tank (e.g. fill up) at a location in a federally regulated province

Example:

A = 30 litres of fuel used

B = 100 litres of fuel obtained

The net quantity is 30 – 100 litres; therefore, there is -70 litres. A fuel charge rebate on this trip would be obtained.  NOTE: A separate calculation is needed for each federally regulated province.

Fuel Charge Amount

The net fuel quantity is multiplied by the fuel charge fuel rate for that specific type of fuel.  For light fuel oil, which includes diesel, is $0.0537 per litre.

In this example, the net fuel charge amount is -70 litres x $0.0537 per litre, or $(3.76). If this was the only amount reportable by the registered road carrier in the calendar quarter reporting period, it would be a refund of $3.76.

Note: The fuel charge works the same when filling up in a non-federally regulated province and entering a federal regulated province. The federal fuel charge will not have been paid when the fuel is obtained in a non-federally regulated province. The amount of fuel used in a federally regulated province will attract the federal fuel charge.

Other Considerations

  • If another person transports fuel into a federally regulated province on behalf of a registered road carrier, the registered road carrier 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 means the person transporting someone else’s fuel is not considered to be responsible for the road carrier’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 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.