Environment Tax Exemptions
This section provides important information for Environment Tax vendors and taxpayers on Environment Tax exemptions.
What Environment Tax exemptions should vendors be aware of?
For the convenience of vendors and taxpayers, common exemptions have been summarized:
Environment Tax does not apply when the new tires are purchased and shipped by the vendor to the purchaser at a location outside of the province. The vendor is required to maintain documentation relating to out of province delivery to substantiate the non-collection of the tax on that sale.
However, non-residents of Prince Edward Island who purchase and take delivery of a new tire in the province are required to pay the tax even if the new tire will later be removed from the province. The environment tax paid by non-residents is not refundable.
Lessees are not required to pay the environment tax on new tires included with the motor vehicle being leased. However, persons who lease motor vehicles as lessors are required to pay the environment tax on new tires acquired for use on their leased motor vehicles.
- Vendors including Motor Vehicle Dealers
New tires acquired by a registered vendor for the sole purpose of resale are not subject to the tax provided the vendor quotes his or her vendor registration account number to the supplier. However, if the new tire is subsequently taken out of inventory and used for any business or personal use, the vendor is required to report and remit the applicable tax on the next Environment Tax return.
Motor vehicle dealers are required to pay the Environment Tax on the tires included with motor vehicles taken out of inventory for the dealer`s own use, such as parts delivery vehicles and courtesy cars.
The tax is not due on new motor vehicles that are used by dealers as demonstrators while held in inventory. The Environment Tax becomes due and payable by the purchaser when the vehicle is sold.
- Purchases for Wheelchairs or Three Wheeled Vehicles
Purchasers of new tires acquired for use on a wheelchair or a three wheeled device designed for the transportation of people with disabilities are not required to pay Environment Tax provided that the following information is recorded on the sales invoice:
- certification that the new tire is acquired for such use, and
- name, address, telephone number and signature of the purchaser.
The vendor must retain a copy of the signed invoice to substantiate the non-collection of the tax on that sale.
- Replacements, Exchanges, Warranties
Where a new tire is replaced under warranty at no charge to the customer, Environment Tax does not apply to the replacement tire.
If the customer is required to pay a portion of the cost of the replacement tire or if the customer chooses to pay the additional cost of a tire of a higher value than that which would be replaced at no charge under warranty, the tax applies.
- Sales to First Nation Individuals
Off Reserve Purchases
First Nation individuals who reside on a reserve in Prince Edward Island are entitled to an exemption from Environment Tax on off-reserve purchases of tires in Prince Edward Island.
In order to qualify for the exemption the First Nation individual must:
- reside on one of the four reserves on Prince Edward Island;
- be in possession of a Status Card issued by Aboriginal Affairs and Northern Development Canada bearing the name and photograph of the individual purchasing the tires; and
- be in possession of another piece of photo identification that provides evidence that the individual resides on a reserve in Prince Edward Island.
The four reserves located in Prince Edward Island are Lennox Island, Rocky Point, Scotchfort and Morell Rear. Vendors selling tires to First Nation individuals must record the name, Indigenous and Northern Affairs Canada (INAC) status card registry number and Prince Edward Island reserve address of the purchaser in their records. Failure to record this information will make the vendor liable for the uncollected tax.
On Reserve Purchases
First Nation individuals are exempt from Environment Tax on purchases of tires that are delivered to a reserve, regardless of where the individual resides.
In order to qualify for the exemption the following conditions must apply:
- the tires must be delivered to one of the four reserves on Prince Edward Island;
- the vendor or an agent of the vendor must deliver the tires to the reserve; and
- the purchaser must be in possession of a Status Card issued by Aboriginal Affairs and Northern Development Canada bearing the name and photograph of the individual purchasing the tires.
Vendors making on-reserve sales of tires to First Nation individuals must record the name and Indigenous and Northern Affairs Canada (INAC) status card registry number registry number of the purchaser and include evidence of delivery to the reserve by the vendor in their records. Failure to record this information will make the vendor liable for the uncollected tax.
Information for vendors on the First Nations exemption is summarized in the Environment Tax Notice – General, ETN:106, First Nations Tax Exemption.
Disclaimer: This page is prepared for information purposes only, and should not be considered a substitute for the applicable statutes. Should there be any conflict between the contents of this page and the statutes, the statutes shall prevail.
July 7, 2017