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Case shows possible limits of First Nations business tax exemption

Although First Nations people living on reserves are eligible for a number of tax exemptions, a recent case shows that in the eyes of the taxman, this rule does not necessarily apply to a business on a reserve whose customers are non-Aboriginal, Canadian tax lawyer David J. Rotfleisch tells

As the Canadian Press reports, the Canada Revenue Agency (CRA) recently filed a charge of tax evasion under the Excise Tax Act against a member of a Nova Scotia First Nation, alleging that the individual operated a store that failed to collect or remit more than $2.2 million in GST/HST related to the sale of tobacco products to non-Aboriginals.

The CRA notes that registrants who fail to remit the tax “are liable not only for payment of the full amount of GST/HST owing, but also to penalties and interest.”

If convicted of tax evasion, the court can fine an individual up to 200 per cent of the tax evaded and impose a jail term of up to five years, according to the CRA.

“In this case, the CRA is alleging that the First Nations business owner had a duty to collect and remit HST,” says Rotfleisch, founding tax lawyer with Rotfleisch & Samulovitch Professional Corporation.

“While First Nations people living on reserves are generally exempt from taxation, that does not apply to a business on a reserve which deals with non-Aboriginal people, in the view of CRA,” he adds.

In this case, he explains, “It is very possible that the taxpayer will raise a defence based on the exemption from taxation of First Nations people.”

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