Kamloops First Nation Tax

GST/HST Notice 92a
August 1999

Kamloops ^{Footnote 1}

The First Nation Tax (FNT) is a tax on the sale of certain products on some First Nation reserves. Following recent legislation, certain Band councils have passed by-laws that impose FNT on listed products. A listed product refers to alcoholic beverages, fuel, and tobacco products that are specifically mentioned in the Band by-law. Revenue Canada is administering this tax on behalf of the Band councils.

The Budget Implementation Act, 1998, S.C. 1998, c.21, includes provisions enabling the Kamloops First Nation to impose sales taxes on alcoholic beverages, fuel and tobacco products. The purpose of this initiative is to help the Kamloops First Nation achieve a greater degree of self-reliance and self-government. The federal government expressed its willingness to enter into taxation arrangements with interested First Nations in the 1997 budget. While they are not self-government agreements, these arrangements are consistent with the federal government's policy approach to the implementation of the inherent right and the negotiation of Aboriginal self-government, as well as the shared goal of increasing Aboriginal self-sufficiency.

Part IV of the Budget Implementation Act, 1997, enabled the Westbank First Nation to enter into an agreement with the federal government to impose a value-added tax, within its reserves, on all sales of tobacco products.

The Notice of Ways and Means Motion tabled on October 27, 1998 proposed technical amendments to the legislation pertaining to the imposition of sales taxes by certain First Nations. The technical amendments correct the inconsistencies in the definitions of "alcoholic beverages" and "alcohol" and also ensure that persons who are small suppliers for the GST can retain this status for purposes of the FNT.

These technical amendments are effective as of June 18, 1998

Kamloops FNT: Questions and Answers

Q1. What is the Kamloops FNT?

A1. The Kamloops FNT is a tax at the rate of 7% on the sale of alcoholic beverages, fuel and tobacco products that are sold on the Kamloops reserves in British Columbia.

Q2. What is the effective date of the Kamloops FNT?

A2. The Kamloops FNT is effective September 1, 1998.

Q3. Which products are subject to the Kamloops FNT?

A3. The tax applies to the following products, referred to as "Listed Products":

Alcoholic beverage means:

• beer, ale, stout, porter or malt liquor containing more than 0.5% ethyl alcohol by volume;
• wine containing more than 0.5% ethyl alcohol by volume;
• any beverage containing more than 0.5% ethyl alcohol by volume that is obtained from the distillation of grains, fruit, or other agricultural products or from the distillation of beer or wine; and
• any beverage that is a combination of the above beverages that is suitable for human consumption containing more than 0.5% ethyl alcohol by volume.

Fuel means:

• diesel fuel, including any fuel oil that is suitable for use in internal combustion engines of the compression-ignition type, other than fuel oil that is intended for and is actually used as heating oil;
• gasoline type fuels for use in internal combustion engines; and
• propane gas.

Tobacco product means:

• every article made by a tobacco manufacturer from raw leaf tobacco, by any process whatever, and includes cigarettes, tobacco sticks, and snuff;
• the leaves and stems of the tobacco plant if they have been processed further than drying and sorting; and
• cigars.

Q4. Who pays the Kamloops FNT?

A4. Everyone who buys listed products on the Kamloops reserves must pay the Kamloops FNT. When the 7% FNT applies to the sale of listed products on the Kamloops reserves, the 7% GST does not apply.

In addition, if you buy listed products off reserve and these listed products are delivered to the Kamloops reserves by the GST/HST registered vendor or the vendor's agent, these listed products are subject to FNT.

For other sales made on the Kamloops reserves, the regular GST/HST rules continue to apply, e.g., non-Indians continue to pay GST/HST on taxable goods and services and Indians purchasing goods and services on reserve do not pay GST/HST (as explained in the GST Technical Information Bulletin B-039R, GST Administrative Policy - Application of GST to Indians).

Q5. Who collects the Kamloops FNT?

A5. All GST/HST registrants who sell listed products on the Kamloops reserves must collect the Kamloops FNT (including wholesalers who deliver listed products to the Kamloops reserves). They must account for and remit this tax to Revenue Canada at the same time as they file their GST/HST return.

Q6. Do I need a new registration number to collect and remit the Kamloops FNT?

A6. No, you do not need a new registration number. If you are already a GST/HST registrant, you are automatically registered for FNT.

Q7. How must the Kamloops FNT be reported?

A7. If you are required to collect the Kamloops FNT, you will report this tax to Revenue Canada. You do this at the same time as you report GST/HST. You will continue to complete your return, Goods and Services Tax/Harmonized Sales Tax Return. Your GST/HST return will include the combined amounts for both taxes (GST/HST and FNT).

Also, if you sell listed products from a location on the Kamloops reserves, in addition to your GST/HST return, you will also have to complete the new First Nation Tax (FNT) Schedule (GST499), for each reporting period.

This schedule must be filed with your GST/HST return to report the amounts you have collected or that are collectible for GST/HST and FNT separately. The reporting period of the FNT schedule and the due date will be the same as your GST/HST return, so you file them together.

Q8. As a GST/HST registrant who collects Kamloops FNT, can I claim input tax credits (ITCs)?

A8. As a registrant, you must charge GST/HST or FNT on your taxable sales and you are eligible to claim ITCs to recover the GST/HST or FNT you pay or owe on your purchase and operating expenses as they relate to your commercial activities. For more information on how to claim ITCs, please refer to the guide General Information for GST/HST Registrants).

Q9. I am a GST/HST registrant filing annually with instalment payments. Do I need to change the amount of my instalment payments as of September 1st?

A9. If you already make instalment payments, you do not need to increase your instalments immediately to account for FNT. When a new fiscal year starts, you must calculate your instalments in the usual manner. This calculation will take into account any FNT you charged over the past year.

If a small business is required to make quarterly instalments, the business would determine the lesser of the amount of the net tax for the previous year and net tax for the current year. Each instalment payment should be equal to one-quarter of that lesser amount. Any remaining net tax outstanding would then be remitted when the annual GST/HST return is filed.

Q10. Do registrants have to change the information on their invoices when they sell listed products on the Kamloops reserves?

A10. No. The disclosure requirements for FNT are the same as the ones for GST/HST. Basically, registrants indicate on their invoices that tax at the rate of 7 % was charged on the sale of listed products.

Q11. What about the Indian Act?

A11. The tax exemption provided by section 87 of the Indian Act does not prevent a First Nation from imposing a tax on its own reserves. The Kamloops FNT is a tax imposed by the Kamloops First Nation through the Band Council that enacted the by-law to do so. The federal government is acting on behalf of the Band Council and with its co-operation in administering this tax.

Q12. Why has the federal government entered into an agreement with the Kamloops First Nation?

A12. The federal government has previously indicated its willingness to implement taxation arrangements with First Nations interested in exercising taxation powers. The Kamloops First Nation is the second band to enter into a tax administration agreement with the federal government. Effective February 1, 1998, the Westbank First Nation imposed the 7% Westbank FNT on tobacco products sold on its reserves.

Q13. What power does Revenue Canada have to enforce the collection and reporting of FNT?

A13. Part IX of the Excise Tax Act (ETA) generally applies for purposes of a by-law made by the Kamloops First Nation as if tax was being imposed under section 165 of the ETA. Any proceedings that could be taken under any Act of Parliament in respect of the tax imposed under subsection 165(1) of the ETA may also be taken in respect of FNT. In other words, Revenue Canada has all of its usual GST/HST compliance powers.

Q14. What is there to prevent an Indian individual from purchasing a listed product such as cigarettes outside the reserve and having it delivered by the vendor to the reserve. Is such an arrangement subject to the FNT or the GST/HST?

A14. A delivery by a GST/HST registrant of a tobacco product to the reserve is considered to be a sale on the reserve for the purposes of FNT. The sale is therefore subject to the Kamloops FNT on the Kamloops reserves.

Q15. As a registered vendor on the Kamloops reserves, what do I do if a purchaser refuses to pay the Kamloops FNT on purchases of listed products?

A15. The Kamloops FNT is a tax imposed by the Kamloops First Nation. As mentioned above, this type of tax is not exempted by the provisions of the Indian Act. Consequently, all purchasers are obliged to pay it and the vendor is required to collect it. Just as for GST/HST, the supplier is liable for any amounts of FNT payable that have not been duly collected and remitted. If you sell a listed product without charging FNT, you are still required to account for it in your return and to remit the amount to Revenue Canada.

Q16. What information was sent to those affected by the Kamloops FNT?

A16. All affected GST/HST and FNT registrants received the FNT schedule and completion instructions. The publication First Nation Tax (FNT) was also made available. Suppliers of listed products were provided with information about the Kamloops FNT. In addition, an announcement was included in the 1998 fall edition of the GST/HST News that is mailed to all registrants.

Q17. What are the appeal rights of a registrant who is assessed for FNT?

A17. In the event that an assessment is disputed, the appeal rights are the same for FNT as they are for GST/HST. A Notice of Objection, stating the facts and reasons for the objection (please refer to the Assessment Notice number), can be filed with the Department within 90 days of the date of the Notice of Assessment.