Dealers facing tax charges need experienced legal counsel
By Dave Gordon, AdvocateDaily.com Contributor
Car dealerships could face revocation of their license, or steep fines, if they’re not meticulous with paying taxes, keeping financial books in order and maintaining financial responsibility, Toronto licensing and compliance lawyer Anar Dewshi tells AdvocateDaily.com.
There’s no shortage of examples where the government has litigated tax evasion by dealerships, says Dewshi, principal of Dewshi Law.
Various examples of dealership tax evasions in Ontario have been reported in recent years, she says.
More than $1.8 million in combined fines were given to two Mississauga co-workers in 2011, relating to 22 charges of tax evasion, according to the Minister of Finance. They faced additional penalties of more than $200,000 apiece, to pay for the Victims’ Justice Fund.
Meanwhile, a Mississauga-based used car dealership pleaded guilty to four counts of tax evasion and 16 counts of GST evasion and was fined more than $128,000. Mississauga News reports the company failed to report $326,039 in business income between 2003 and 2006, a Canada Revenue Agency (CRA) investigation found.
The government isn’t the only institution watching for financial impropriety. There is a first line of defence — a regulatory body for the industry, the Ontario Motor Vehicle Industry Council (OMVIC), which requires dealers to conduct business in a financially responsible manner and demonstrate financial stability, says Dewshi, who frequently advises automobile dealerships on issues involving compliance and regulations.
"To ensure that dealers are financially responsible, inspections are periodically carried out by OMVIC," she says. During routine inspections, OMVIC will review the dealership's bills of sale and/or lease agreements, worksheets, invoices, safety certificates, financing documents, ads, history reports and reconditioning records.
"Dealers must ensure that they are remitting HST/GST to CRA and retail sales tax to Ministry of Finance. If a dealer is found in default of the retail sales tax, for example, their registration might be revoked, or not renewed," Dewshi says.
When a dealer applies for an OMVIC licence there is a list of “must-see” financials reviewed during the application process, she says: bank statements — personal as well as if they own another business — personal notices of assessment, corporate notices of assessment, and GST/HST statements.
“One of the questions asked on the application is, ‘Have you ever been in default of the retail sales tax?’ And if you have, you have to resolve it before you even attempt to register,” Dewshi says. If the issue has been resolved, proof is required to show the money has been paid or that a schedule of payment has been approved.
Where it is determined that an applicant (corporation or individual) cannot reasonably be expected to be financially responsible in the conduct of business, OMVIC can refuse, revoke or suspend registration, she says.
Dewshi Law assists those who want to obtain, or renew, their OMVIC salesperson or dealer license and also acts as an advocate in front of the Licence Appeal Tribunal for those who wish to appeal revocation or refusal to renew a registration of their license.
“It’s good for consumers to know OMVIC oversees auto dealerships, and that the regulatory body insists on a thorough financial investigation before obtaining a dealer or salesperson licence,” she says.