Purchaser Required to Collect the GST and Calculate or Collect the QST
The rules that apply to a purchaser that is not required to collect the GST or calculate or collect the QST do not apply in the following situations:
- The purchaser of the road vehicle is a registrant (partnership or individual) that trades in a vehicle that is part of the registrant's capital property and was used in the registrant's commercial activities in a proportion of at least 90%.
- The purchaser of the road vehicle is a registrant (other than an individual or a partnership) that trades in a road vehicle that is part of the registrant's capital assets and was used in the registrant's commercial activities in a proportion of at least 50%.
Trade-ins of motor vehicles
If the purchaser trades in a motor vehicle, both you and the purchaser must collect the GST on the sale price of the vehicle you are selling because you are each making a taxable sale of a road vehicle.
If the trade-in vehicle is a motor vehicle that you acquire for resale or a long-term lease, the purchaser is not required to collect the QST, as it is a zero-rated sale under the QST system. However, if the sale of the trade-in vehicle is a retail sale, the purchaser must calculate the amount of the QST to be collected by the Société de l'assurance automobile du Québec (SAAQ) on the vehicle's sale price.
Both parties can claim an input tax credit (ITC) and an input tax refund (ITR) in respect of the GST and QST they paid on the transaction, provided the conditions respecting ITCs and ITRs are met.
An individual who is required to collect the GST and QST purchases a new motor vehicle for $20,000. The dealer accepts the individual's used vehicle as a trade-in for the purposes of resale, crediting the individual $5,000. The individual, who operates a small business, used the vehicle exclusively (90% or more) for commercial activities.
| Purchase price | $20,000 | |
|---|---|---|
| GST ($20,000 × 5%) | + | $1,000 |
| QST ($20,000 × 9,975%) | + | $1,995 |
| Total payable by the individual | $22,995 | |
| Sale price | $5,000 | |
|---|---|---|
| GST ($5,000 × 5%) | + | $250 |
| QST (0 %) | + | $0 |
| Total payable by the dealer | $5,250 | |
- Since the individual is a registrant, he or she must collect the GST at the time the vehicle is sold to the dealer. However, the QST need not be collected, calculated or indicated because the dealer is purchasing the motor vehicle for resale purposes only (which is a zero-rated sale under the QST system). Both parties can claim an ITC in respect of the GST, and the individual may claim an ITR in respect of the QST paid, provided the conditions respecting ITCs and ITRs are met.
- The QST is calculated by the dealer, but paid by the purchaser to the SAAQ when the vehicle is registered.
Trade-in of a road vehicle other than a motor vehicle
If the purchaser is trading in a road vehicle other than a motor vehicle, both you and the purchaser must collect the GST and the QST on the sale price of the vehicle because you are each making a taxable sale of a road vehicle.
An individual purchases a new tractor semi-trailer weighing at least 4,000 kg for $100,000. The individual is registered and is required to collect the GST and the QST. The dealer accepts the individual's used tractor semi-trailer as a trade-in for the purposes of resale, crediting the individual $40,000 on the trade-in. The individual, who operates a small business, used the old vehicle exclusively (at least 90% of the time) for commercial activities.
| Purchase price | $100,000 | |
|---|---|---|
| GST ($100,000 × 5%) | + | $5,000 |
| QST ($100,000 × 9.975%) | + | $9,975 |
| Total payable by the individual | $114,975 | |
| Sale price | $40,000 | |
|---|---|---|
| GST ($40,000 × 5%) | + | $2,000 |
| QST ($40,000 × 9.975%) | + | $3,990 |
| Total payable by the dealer | $45,990 | |
- Since the individual is a registrant, he or she must collect the GST. The individual must also collect the QST at the time the trade-in vehicle is sold to the dealer because the individual uses the vehicle exclusively for commercial activities and the transaction does not constitute a zero-rated sale of a motor vehicle weighing less than 4,000 kg. However, both parties may claim an input tax credit (ITC) and an input tax refund (ITR) in respect of the GST and QST paid, provided the conditions respecting ITCs and ITRs are met.
- The QST is calculated and collected by the vendors that are parties to the transaction.