Can a GST/HST Registrant File a Notice of Objection On-line?

The Canada Revenue Agency has started to "go electronic" and developed an e-filing system for GST/HST registrants to file GST/HST returns on-line and other documents.  However, it is important to note that as of March 1, 2013, the "My Account" and "My Business Account" does not permit notices of objection to be filed on-line.  To be more correct, the Excise Tax Act does not allow registrants to file notices of objection on-line. However, there are many other things that you can do using the electronic system and a list is available on-line.

Section 301 of the Excise Tax Act requires that notices of objection be filed in "the prescribed form and manner".  The prescribed form is a GST Form 159. The prescribed manner is by mail and the CRA location depends upon the postal code of the registrant.

What this means is that a notice of objection may be considered to be invalid if filed on-line. The CRA has discretion to accept or not accept the notice of objection if it is not filed in the prescribed form and in the prescribed manner.  It is better to anticipate the CRA will take advantage of a registrant's error.

Deadlines for Filing Canadian Sales Tax Objections and Appeals

After writing my July 26, 2011 post, I decided that a chart setting out statutory limitation periods for filing notices of objection (in some provinces called a notice of appeal) and notices of appeal (to a Court) may be helpful.  A statutory limitation period is a deadline that taxpayers must meet for their objection or appeal to be considered to be filed on time and valid.  If a notice of objection or notice of appeal is not filed on or before the deadline, the lawyers for the government may not acknowledge it.

Which Sales Tax? Notice of Objection Deadline Extension Deadline After Max. Extension Notice of Appeal Deadline Extension Deadline After Max. Extension
GST/HST 90 days after notice of assessment Possible if ask 1 year of deadline Minister has discretion to set new deadline 90 days after notice of confirmation of assessment by CRA Possible if ask TCC within 1 year of deadline TCC has discretion to set new deadline
ORST 180 days after notice of assessment Possible if ask within 180 days Minister has discretion to set new deadline 90 days after decision of Ministry Possible if requested before expiry of time limit to file appeal Minister has discretion to set new deadline
B.C. SST 90 days after notice of assessment No statutory extension  N/A  90 days after notice of confirmation of assessment No statutory extension  N/A
Manitoba RST 90 days after notice of assessment  N/A N/A 90 days after Commission's decision  N/A  N/A
Saskatchewan RST  One month after the date of service of notice of estimate Possible  Board has discretion to set new deadline One month after the date of Board decision  Possible Granting extensions is at discretion of Court
Quebec Sales Tax 90 days after notice of assessment Possible if ask 1 year of deadline  Minister has discretion to set new deadline 90 days after notice of confirmation of assessment by Minister Possible if ask Court of Quebec within 1 year of deadline Court of Quebec has discretion to set new deadline

It is important to note that some of the filing deadlines require that the document be sent to a relevant governmental authority within the statutory limitation period.  This means that filing may not be sufficient to meet the deadline.  Sometimes you must file the document with the court and send it to the government body who issued the assessment (called "service") within the statutory limitation period.

Note that I have not forgotten Prince Edward Island.  Their process is different than the other provinces and there is a two step informal (not involving a court) appeal process.  The deadlines did not fit within the structure of the chart.

Extreme Case Shows 90 Day Time Limit For Filing GST/HST Notice of Appeal

The Federal Court of Appeal recently put an end to a case where the taxpayer filed a GST/HST notice of objection filed 11 years after the confirmation of the assessment.  In 2786885 Canada Inc. v. The Queen, the Federal Court of Appeal heard an appeal from a Tax Court of Canada decision dismissing an appeal on the basis that the notice of objection was not filed in time.

The Federal Court of Appeal wrote:

Pursuant to section 306 of the ETA, the appellant had a period of 90 days from the date of the confirmation (i.e. January 21, 1998) to file his notice of appeal. While the appellant could have sought an extension of time, subsection 306(5) of the ETA provides that no such order can be made unless the application is brought “within one year after the expiration of the time otherwise limited … for appealing;”. It follows that the Tax Court Judge had no authority to extend the time and that he properly dismissed the appeal.

[Note: I found this quote to be helpful and confusing.  Subsection 306(5) of the ETA does not exist.  The relevant provision is subsection 305(5) of the ETA.]

The Tax Court of Canada decision is not available.  As a result, the facts are not known.  The context of this case may shed light on why the notice of appeal was filed after a 11 year time lapse.

If the appellant merely waited 11 years and filed an appeal after an assessment against a director, it is understandable that the Tax Court of Canada and Federal Court of Appeal rejected the late-filed notice of appeal.  If the appellant waited 11 years and filed an appeal after the collections department started various collections proceedings, it is also clear why the notice of appeal was rejected.

However, if the appellant never received the notice of confirmation of the assessment, then it may be that the appellant recently learned of Canada Revenue Agency's (CRA) position that there is an outstanding tax debt.  In this circumstance, I could understand why the appellant attempted to file an appeal after what appears to be a long time delay.

The over-riding issue is that there are statutory limitation periods in tax legislation.  These statutory limitation periods are used by the CRA to stop further discussion.  Taxpayers must play by the rules when they have a disagreement with the CRA.  One of the key rules is that a taxpayer must adhere to deadlines. 

Canada Post Strike Makes Filing Ontario Retail Sales Tax Objections/Appeals Difficult

Subsection 24(3) of the Retail Sales Tax Act (Ontario) (ORSTA) requires that a notice of objection be served on the Minister by sending the notice of objection by registered mail.  Subsection 25(3) of the ORSTA  requires that a notice of appeal be served on the Minister by sending the notice of appeal by registered mail.  However, Canada Post is on strike and is locked out.  An assessed person cannot serve the Minister by registered mail even if they tried.

What should an assessed person do seeing that it is impossible to comply with the ORSTA provisions?  If there is a statutory deadline that must be met during the strike/lockout, the assessed person should send a fax to the auditor or appeals officer informing that Ontario Ministry of Revenue official that they intend to file a notice of objection or appeal.  This step will take away the argument that the Minister did not know the assessed person's intention. 

In that fax, the assessed person should ask for an extension time to serve the Minister by registered mail until after the Canada Post labour disruption has ended.  The assessed person should inform the auditor or appeals officer that he/she will be sending the notice of objection or notice of appeal by courier.   The assessed person should serve the Minister by courier even though that method of service is not technically correct. The assessed person should ask whether additional service by registered mail will be required when the Canada Post labour disruption has ended.  If the auditor or appeals officer says nothing, then the assessed person should send the notice of objection or notice of appeal by registered mail after the Canada Post labour disruption has ended.  If the auditor/appeals officer indicates that the Ministry of Revenue considers the actions taken to be in compliance with the statutory provisions even though the notice was not sent by registered mail, then further action may not be required.

The most important thing is to comply as best you can and document everything. Have paper evidence that you can provide at a later point in time to a Court if necessary.  Take reasonable steps to communicate and comply.  Do not miss the deadline because it will be difficult to distinguish between those assessed persons who forgot about their deadline and those who were impacted by the strike.

I would expect that the Ministry of Revenue will act reasonably - stop laughing!

This Audit Comes With A Warning

Recently, I was called in to assist a vendor who had a visit from an Ontario retail sales tax ("ORST") auditor on a Tuesday and the auditor indicated that the assessment would be issued on Wednesday.  What was different about this audit was that the issues were complex and it was so very quick. A year ago, this audit would have taken months to complete.  A year ago, the auditor would give the vendor time to review an audit assessment before pushing the "issue assessment" button.  A year ago, the auditor would have allowed the complex issues to be debated and possibly would have requested guidance from tax advisory on the complex issues.  Not this year ....

What was different is that this auditor had arrived with the conclusions already formed.  This meant two things: (1) the auditor was targeting a specific type of business and had seen the issue before, and (2) the auditor was rushing quickly through a list of targets.

What is different is that ORST auditors move to the Canada Revenue Agency in March 2012 and have to complete all remaining audits before they move jobs.  Auditors do not have the luxury of time because the clock is ticking.

Ontario businesses need to prepare for audits and call in specialists earlier - procrastination is no longer an option.  Vendors may not have time to find an ORST specialist and canvass the issues in the period between the auditor's initial visit and the auditor pressing the "issue assessment" button.  Specialists may not be able to run to a vendor's aid on short notice.

Once an assessment is issued, the assessed person must file a notice of objection in order to dispute the amount assessed.  More importantly, the assessed person must pay 100% of the assessment immediately or according to a payment schedule arranged with the Ministry of Revenue.  Even more importantly, it takes over 2 years for an appeals officer to review an ORST notice of assessment and even longer to make a decision.  I have a notice of assessment filed in 2007 that has not been dealt with yet by the Ministry.  If the issues are complex, the assessment may be confirmed at the appeals stage and the assessed person must go to court to get the money back.

ORST audits are different in this final rush to close the books.  Vendors who do not realize that things have changed may be surprised.  Vendors who have not yet been audited, should expect a visit from an auditor.  They should also plan ahead if they want to limit the negative effects of the audit.

The Taxman Cometh - Ontario Retail Sales Tax Audits Are On the Increase

I am seeing more Ontario retail sales tax (ORST) audits (and large proposed and actual assessments).  I am seeing rushed audits.  I am seeing quick analysis without the auditor referring questions to Tax Advisory.  The reason is that we are in the final 13 months of ORST auditors working for the Ministry of Revenue before moving to the Canada Revenue Agency.  Almost all ORST auditors will change jobs in Match 2012 and, therefore, all their audits need to be complete and assessments issued.  This is why we are seeing so much activity, because there isn't much time left to visit all vendors who were registered for ORST purposes.

A range of businesses are being targeted - restaurants & bars, graphic designers, interior designers, cabinet makers and other installers, software manufacturers, manufacturers, printers, telecommunications companies, builders, accountants, etc.

If you are assessed, you may wish to file a notice of objection.

Under the Retail Sales Tax Act, the notice of objection must be filed within 180 days of the date of mailing  of the statements of notice of assessment (look at the notice of assessment and/or the envelop).

Would you like to file a Notice of Objection?

Have you been audited and assessed an amount of GST/HST?  Do you disagree with the auditor's position or calculation or or methodology or assessment of interest and/or penalties?  Would you like to file a notice of objection, but cannot find the form?

Here is the notice of objection form.  Please note that the form can change in the future (after this posting) and you may want to search to see if this is the most up-to-date version. 

Please note that the relevant provision of the Excise Tax Act for the filing of a notice of objection is section 301.  Please review section 301 to understand what is required under the law.

The notice of objection must be filed within 90 days after the notice of the assessment is sent to the assessed person (look at the date on the notice of assessment AND the date on the envelope).  In the notice of objection, the person objecting must describe each issue to be decided (cannot add new issues later at the time of the appeal), the facts on which they plan to rely, the reasons for the objection, and the relief sought (e.g., refund of the penalty in the amount of $1000).

I would recommend that if you wish to file a notice of  objection, you work with a commodity tax specialist who knows about filing notices of objection.  Please do not wait to find a commodity tax specialist as no one can help you protect your legal rights if there is insufficient time.

Please Do Not Throw Your Notice of Assessment in a Drawer & Forget About It

It is bad enough to receive a notice of assessment from the Canada Revenue Agency (CRA) or the Ontario Ministry of Revenue or the Canada Border Services Agency (CBSA) or some other tax authority.  You clearly did not want to be in a position that you have to pay an amount of money (especially large assessments) to the government.  However, ignoring the notice of assessment is not the right option to choose concerning what to do next. 

If you do not agree with the amount stated on the notice of assessment as the amount (or the imposition of a penalty amount or the interest calculation) or the basis for the assessment or do not know why you received the assessment and want to have the taxing authority make a correction, you usually must file a notice of objection/notice of appeal/request for redetermination or take a positive step to request further consideration of the matter.  In almost every taxing statute, there are statutory time periods (also called "limitation periods") which are often 30 or 90 or 180 days depending on the tax at issue and the legal route to resolve the dispute.  If you throw the notice of assessment in a drawer, you may miss the filing deadline and lose your opportunity to file a notice of objection, appeal or request for a redetermination. This would be bad for you.

Some tax statutes allow for you to ask the head of the taxing authority or a court or tribunal for an extension of time to file the notice of objection, appeal or request for a redetermination.  However, usually you must make the request within the statutory time period for the objection/appeal/redetermination.  For example, if you have a 90 day period to file a notice of objection, you must ask for your extension of time before the 90 day period expires.  You must explain the reason for needing an extension of time - and saying that you forgot about the notice of assessment is not a good excuse.  You must also demonstrate that you intended to file an objection/appeal/redetermination - and saying that you threw the notice of assessment in a drawer shows that you planned to ignore it.

Pulling the notice of assessment out of the drawer one week or one day before the statutory objection/appeal/redetermination deadline is problematic as you will have to find someone to help you file your objection/appeal/redetermination under extreme stress and you will forget important facts and potentially winning arguments.  You will reduce your likelihood of success when you do not leave yourself and your advisors enough time to do a good job.

Finally, I hear from many clients who pull the notice of objection out of the drawer years after the limitation period for filing an objection/appeal/redetermination has expired.  At that point in time, they are being pursued by the collections department of the taxing authority and the amount of interest after time can double the liability.  At some time, it will catch up with you.  When you are pursued by collections officers or receive a director's liability assessment for the original assessment amount plus interest compounded daily at 6% or more, you will wish that you did not thrown the original assessment in a drawer.  At that stage, there is even less a professional can do to correct any mistakes made by the auditor.

The Canada Revenue Agency Wants To Be Paid ASAP

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.