The HST Blog : Canada Harmonized Sales Tax Lawyer Cyndee Todgham Cherniak for Assessments, PST & RST Issues in Ontario, British Columbia & Quebec

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If you have been assessed harmonized sales tax (HST) (or goods and services tax (GST)) and/or interest and penalties by a Canada Revenue Agency (CRA) auditor (that is, you have received a Notice of Assessment), you owe money to the Government of Canada and the CRA wants to collect that money as soon as possible.  The bad news is that the Excise Tax Act (Canada) does not suspend or delay collections actions when a taxpayer files a Notice of Objection within the 90 day limitation period or appeal (after a denial of the objection).  An assessed taxpayer (or supplier in the case of an assessment of a penalty for failure to collect tax) must still respond to the requests made by CRA Collections.  Collections will request (1) payment in full ASAP, (2) you enter into a collections/payment arrangement with the CRA, or (3) you post security satisfactory to the Minister of Revenue (actually the CRA Collections officer).

I have been asked many times in my career if there is anything that can be done to stop CRA Collections. The answer is 'Not Really".  I have discussed the payment obligations with many clients over the years.  The GST/HST laws are different from income tax laws and do not stop the Collections clock when the taxpayer disputes the CRA's assessment.  Sorry to be the one to tell you this.

CRA Collections has a number of mechanisms at their disposal to collect any GST/HST assessment.  They may garnish wages,  They may intercept monies owed by an assessed taxpayer by other persons (called garnishments).  They may place liens on real property and/or tangible personal property.  They may issue writs to the sheriff to seize and sell certain of your assets.  The authority for these actions are contained in the Excise Tax Act.

Even when you have a legitimate legal argument to dispute the GST/HST assessment, the debt is still due and owing.  Actually, the moment the Notice of Assessment is issued and sent to the assessed taxpayer, the CRA Collections department can start collections actions.

As a result, the assessed taxpayer must consider whether they can pay the amount in full.  The upside with this option is that CRA Collections does not take control over your cash flow and there can be no surprises.  The downside is that if the taxpayer has a legitimate legal argument to dispute the assessment and files a notice of objection/appeal, the dispute resolution process may be slower because the Government of Canada has the money and little incentive to give it back quickly (except that it must pay minimal interest when they are wrong).

Alternatively, the assessed taxpayer may enter into a payment arrangement with CRA Collections (usually the CRA wants their money within 18 months) or may post security (such as a irrevocable letter of credit).  When an assessed taxpayer wishes to engage in such discussions with the CRA, it may be helpful to work with a lawyer.  Often CRA Collections asks for information about the assessed taxpayer's ability to pay (and may request information about a spouse's ability to pay when the assessed taxpayer is an individual or the directors' and officers' ability to pay when the assessed taxpayer is a corporation or the partners' ability to pay when the assessed taxpayer is a partnership) before accepting any payment arrangement.  The CRA may go on a fishing expedition to get information in order to make directors' liability assessments or consider more serious tax evasion criminal charges. 

The arrangement often is put into contract form and the failure to make a payment may void the agreement and cause all amounts to be payable immediately.  As a result, it is important to negotiate an realistic arrangement.

Each situation is unique to the taxpayer and parties involved.  What is the same in all cases is that when the CRA issues an assessment of GST/HST (even when the auditor knows the assessment is incorrect), CRA Collections job is to collect the money ASAP.