Constitution Act, 1867

In appealing a revocation of its charitable registration, the taxpayer argued that the registration of charities was ultra vires Parliament, as it fell within s. 92(7). Rejecting the taxpayer's appeal, Sexton J.A. stated for the Court at para. 8:

We have not been persuaded that there is any merit to the Appellant's argument that the provisions of the ITA dealing with the registration and deregistration of charities are an unconstitutional infringement on provincial legislative authority. In our view, these provisions relate, in their pith and substance, to federal taxation, and accordingly they are intra vires the Parliament of Canada under subsection 91(3) of the Constitution Act, 1867. Both the advantages of registration and the drawbacks of revocation relate solely to the tax treatment of charities and their donors. They do not impermissibly affect the affairs of charities in any other way, nor do they impede provinces from otherwise regulating charities.

At a time a construction company ("Mid-Plains") abandoned work on a contract for a Crown agency ("TransGas"), TransGas, in addition to holding "holdback" funds as required under the Builders' Lien Act (which were not at issue in the action), held additional contract funds payable to Mid-Plains for the work done under the abandoned contracts. In finding that the federal Crown had a priority under s. 224(1.2) over builders' lien claimants of Mid-Plains with respect to the additional contract funds, Tallis, J.A. found that s. 224(1.2) had as its purpose the expedient collection of withheld tax monies and, therefore, was intra vires the powers of the federal Crown under s. 91(3) of the Constitution Act, 1967.

In finding that s. 224(1.2) of the Act was not ultra vires, Scott C.J.M. stated (p. 6177):

"The purpose of the Act is not only to levy tax, but to collect it ... The machinery for collection and enforcement under the Act is part of the very subject matter of sec. 91(3) of the Constitution Act and not merely incidental to the raising of revenue".

The prohibition in the Tax Rebate Discounting Act against the acquisition by a discounter of a right to a tax refund for cosideration equal to less than 85% of the refund, is in pith and substance an exercise of the criminal law power.

The Nisga'a Tribal Council negotiated a treaty which was ratified by Parliament and the BC Legislature. The treaty authorized the Nisga'a government to "make laws in respect of direct taxation of Nisga'a citizens on Nisga'a Lands in order to raise revenue for Nisga'a Nation or Nisga'a Village purposes." In rejecting arguments that these powers were inconsistent with ss. 53, 54 and 90 and the exclusive allocation of taxing authority under ss. 91 and 92 of the Constitution Act. 1867, Harris JA stated (at para. 127):

[O]nly Parliament (or the Legislature) may impose a tax ab initio, but that taxing authority may be delegated if Parliament or the Legislature does so clearly and unambiguously. Once that condition is met, the delegate may establish the details and mechanisms of the taxation. All that has occurred here.

Provisions of the Taxation Act (Quebec) which subjected the taxpayer to Quebec income tax on retiring allowances received by him from a professional partnership of which he had been a member and which carried on business in Quebec were intra vires given that the partnership agreement itself established that the amounts received by him represented a share of profits of the partnership. Accordingly, the assessment was not based on a legal fiction and the deeming provisions operated to determine the portion of the taxpayer's income that could be allocated to the partnership's Quebec activities.

Probate fees imposed by Ontario constituted taxes rather than fees given that they were enforceable by law (there being a practical and legal necessity for executors in most instances to obtain letters of probate), levied by a public body (the Ontario Court (General Division)), intended for public purposes (the defraying of costs of court administration in general, and not simply the costs of granting probate) and no nexus existed between the amount of the levy (which was calculated on an ad valorem basis) and the cost of the service for granting letters probate. Moreover, a probate fee was a direct tax because payment of the tax by executors was only made in their representative capacity with the intention that the estate would bear in the burden of the tax. However, the fees were ultra vires under s. 53 of the Constitution Act given that they were not imposed pursuant to a bill that originated in the Ontario legislator and, instead, had only been authorized by the Lieutenant Governor in Council.

The appellant, which was an Ontario resident corporation with an Ontario head office and an Ontario permanent establishment and no permanent establishment in the United States paid the remuneration of U.S. employees who provided services to it exclusively in the United States. LaForme J. found that the position of employee health tax on the remuneration paid to the U.S. employees qualified as a tax imposed within the province given that the tax was assessed against an employer "found" in the province as measured by the total amount of remuneration paid to its employees (i.e., the economic activity of an employment contract), and that it was irrelevant that the work was not carried out within the province because that was not the subject matter of the tax. The subject matter was the contract of employment and the obligations that flowed from it, including the payment of remuneration.

The main object of the Income Tax Act is not to raise money by direct taxation for provincial purposes, but to raise money by taxation, and Parliament is not prohibited from raising money in order to make payments to the provinces for provincial purposes.

The Gasoline Tax Act (B.C.), which levied a per-gallon tax on "any person who, within the Province, purchases or receives delivery of gasoline for his own use or consumption" was intra vires, and it was irrelevant that the purchasing airlines consumed 99% of the fuel during interprovincial or international flights. "Since the tax is imposed in the province in respect of the purchase of gasoline, it does not matter where the gasoline is consumed, whether it is in the airspace or in another province."

An amendment to the Gasoline (Coloured) Tax Act (B.C.), which subjected to tax net bunker fuel which was imported into B.C. from the U.S. by the petitioner as agent for the operators of foreign ships, then delivered by it by barge to the ships in Vancouver, was held to be intra vires. The tax imposed by this amendment was direct because it was intended to be borne by the ship operator taking delivery of the fuel (notwithstanding that the ship operators would pay the world market price for the fuel regardless of the level of the tax). Furthermore the subject matter of the tax - bunker fuel taken by barge to the Port of Vancouver - was "within the Province."

In finding that a tax on the net royalty income from the grant of rights to engage in mining operations was an income tax, Martland J. stated (p. 591):

"[T]he tax ... is demanded from the very person who is intended should pay it. It was not imposed in the expectation or with the intention that it should be passed on to another."

In finding that New Brunswick legislation imposing retail sales tax on a retail merchandising company with respect to the value of catalogues distributed by it free to customers and potential customers was intra vires, Laskin C.J. stated (p. 399):

"Where, as in the present case, the tax imposed in respect of the free distribution of catalogues takes no account of what ultimately happens to the catalogues, whether they are used or discarded, and is unrelated to any purchases made from the catalogues, it is manifest to me that the tax is so diffused in its impact that it cannot be said that there is any clearly traceable way in which the tax can be passed on. Moreover ... the tax in the present case is not 'related or relateable' to any unit of a commodity or its price, indeed, no commodity is involved."

S.6A of the Succession Duty Act (BC), which provided that "where property of a deceased was situated outside the Province at the time of the death of the deceased, and the beneficiary of any of the property of the deceased was a resident at the time of the death of the deceased, duty under this Act shall be paid by the beneficiary in respect of that property of which he is the beneficiary", was intra vires the Province in that it imposed a tax on persons within the Province (i.e., resident beneficiaries), rather than being a tax on property or on the transmission of property (notwithstanding that s. 6A did not expressly state that the beneficiary is "subject to duty"). Dickson J. stated (at p. 352):

"I read the wording 'duty under this Act shall be paid by the beneficiary' in s. 6A as designating the beneficiary as the subject-matter, as well as the payer, of the tax, and the words 'in respect of that property' in the sense of 'as related to', or 'on the basis of', the property of which he is the beneficiary."

The taxpayer, which had offices and maintenance and service facilities in Manitoba and whose aircraft landed and took off from Manitoba, was assessed under The Retail Sales Tax Act (Manitoba) in respect of depreciation on its aircraft, the use of parts and in respect of liquor service to passengers on through-flights in the air space over Manitoba, and also in respect of flights that landed in Manitoba.

Merely going through the air space over Manitoba did not give the aircraft a situs that would support a tax which constitutionally must be "within the Province", nor did temporarily landing in Manitoba. A substantial, or at least more than a nominal, presence in the Province was required to provide a basis for imposing tax in respect of the entry of aircraft into the Province. Respecting an argument that a tax on Air Canada in respect of its airplanes, parts and services on over flights was validated by regarding these facilities as merely the means of measuring a tax in personam, Laskin C.J. first noted that this was not the way the tax was imposed (it was exacted upon the bringing of tangible personal property to the Province, and this had not been shown to occur), and second, the principle expressed in Bank of Toronto v. Lamb could not be extended to make inter provincial and trans national aircraft operations as measuring standards to determine the amount of tax imposed upon an air carrier which had a business office in the taxing province.

In order to divert to itself the increase in the price of oil that occurred after 1973, the Legislature of Saskatchewan enacted a "mineral income tax" approximately equal to 100% of the difference between the price received at the well-head and the price formerly received by the producers. Virtually all the oil produced in Saskatchewan was exported to other parts of Canada or the United States.

Martland J. found (p. 461) that "the tax under consideration is essentially an export tax imposed upon oil production" and therefore was in substance an indirect tax which was beyond the competence of the Saskatchewan Legislature.

The taxpayers, who were trustees (principally foreign trustees) of foreign trusts, submirrws that the Logging Tax Act (BC), which levied a tax on income derived from logging operations carried on within the province, was a tax on persons, so that the appellants, who were not within the province could not be subject to tax under that Act. In rejecting this submission, Laskin C.J. found (at p. 101) that "it is the income derived from those operations, which themselves are limited to the Province, that, in my view, carries the burden of the tax", so that the tax was intra vires

The taxpayer submitted that the tax imposed by the Income Tax Act (Alberta) was a tax on income rather than a tax on persons, so that the Province was precluded from imposing tax on the taxpayer's foreign source income. Kerwin J. stated (at p. 444) that he was of the opinion "that the Act, taken as a whole, imposes a tax on a person such as the appellant who was found in the province with respect to his income, including that derived from sources outside the province".

Bonds of two Canadian railway companies that were guaranteed by the government of Canada were specialties. Furthermore, the situs of intangible property, for purposes of the constitutional requirement that the province of Quebec could only impose a tax upon property transmitted owing to death in respect of subjects having a situs within the province, was to be determined on common law principles. Accordingly, a provision of the Quebec Succession Duties Act that purported to impose succession duties in respect of the bonds on the basis that the debtors were domiciled within Quebec were, to that extent, ultra vires the Province given that the instruments constituting those specialities were, at the time of the testator's death in New York City, physically situate in Toronto. Duff C.J. noted (at p. 673) that:

"A provincial legislator is not competent to prescribe the conditions fixing the situs of intangible property for the purpose of defining the subjects [of taxation] in respect of which its powers of taxation under s. 92(2) may be put into effect."

The Succession Duties Act (Alberta) made the executors of the respondent estate of an Alberta domiciled executor personally liable for the duties, with the consequence that the tax was ultra vires as an indirect tax. In addition, respecting the question whether the tax was "within the province" with respect to property of the testator which was situate outside the province of Alberta, the Court, in applying the principle (stated at p. 718) that:

"the Province, on the death of a person domiciled within the Province, is not entitled to impose taxation in respect of personal property locally situate outside the Province but ... is entitled to impose taxation on persons domiciled or resident within the Province in respect of the transmission to them under the Provincial law of personal property locally situate outside the Province"

found that under the terms of the statute "the subject-matter of the taxation is the property and not the transmission of the property", with the result that the "within the Province" requirement was not satisfied.

At the time of the death of the testator, who was domiciled in Nova Scotia, he held in Nova Scotia shares of the Royal Bank of Canada whose constating statute provided that the Bank could maintain in any province in which it had branches a share registry office at which shares could be validly transferred. There was such an office in Nova Scotia. In finding that those shares were situate within Nova Scotia rather than Quebec, so that they were not subject to Quebec succession duty, the Court stated that the true test was "where could the shares be effectively dealt with?" and went on (at p. 376) to say that "the answer in the case of these shares is in Nova Scotia only, and that answer solves the question."

The deceased, before his death while domiciled in Ontario, transferred in New York securities including U.S. municipal debentures to his sons. His estate was assessed for succession duty, apparently on the basis that the transfers had occurred with intent that they take effect after his death. The Court held (at p. 513) that "any attempt to levy a tax on property locally situate outside the province is beyond their competence."

A capital tax imposed by Quebec on the appellant bank, which was incorporated in Canada, had its principal place of business in Toronto but had an agency in Montreal, was intra vires given that the tax was a direct tax under the definition of that term by John Stuart Mill and given that the appellant was found within the province (it carried on business there).

The fact that the Natural Gas and Liquids Tax and the Petroleum and Gas Revenue Tax may have inhibited the City of Medicine Hat to some extent in exercising the powers granted to it did not support the conclusion that those taxes were aimed at that result, i.e., the impairment of an instrumentality of the Province.

The Federal Court had no jurisdiction to entertain a claim against Department officials for collecting taxes in a fashion not authorized by the Income Tax Act, because such an action was in tort, which was a matter of provincial law, rather than being an action for damages provided for by federal law. On the other hand, an action against the Crown for vicarious liability in tort for the acts of its servants is founded on federal law, namely, s. 3(a) of the Crown Liability Act, and thus can be entertained.

In producing and distributing natural gas the City of Medicine Hat was acting at its own discretion rather than carrying out duties imposed by the Provincial Crown, and the revenues which it earned accrued to it rather than the Province. The City in acting as it did accordingly was not acting as an agent of the Provincial Crown and the Natural Gas and Liquids Tax and the Petroleum and Gas Revenue Tax were not ultra vires in their application to the City.