Canada’s Tax Court ruled that American recreational vehicle manufacturer Jayco Inc. doesn’t have to pay a portion of the $11.4 million assessed in value-added taxes on its exports of RVs and parts.

Mondaq reported that the ruling confirms that suppliers who provide or arrange freight services for goods they ship to Canada risk being liable for federal goods and services tax or federal-provincial harmonized sales tax, Toronto tax lawyer Bobby B. Solhi told Bloomberg Tax.

Jayco’s exports of vehicles to Canada weren’t taxable under the Excise Tax Act because the supply of recreational vehicles was deemed to be made outside Canada,  Justice Johanne D’Auray said in the ruling, dated Feb. 16 and released March 5.

The evidence showed agreement between Jayco and its Canadian dealers for delivery of RVs at the company’s U.S. factory, and that Jayco arranged for transportation of the vehicles to Canada on the dealers’ behalf, D’Auray said. The court rejected the Canada Revenue Agency’s argument that Jayco was liable for tax on the RVs because it used a related entity, Jayco Enterprise Transportation Inc., to deliver them to Canada.

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