Accommodation Sales of Road Vehicles
Where a person purchases a road vehicle from a dealer and asks the dealer to act as an intermediary in the sale of the person's old vehicle to a third party, the sale is known as an “accommodation sale.”
In an accommodation sale, the purchaser of the new vehicle is required to pay GST and QST on the difference between:
- the sale price of the new vehicle; and
- the amount credited for the sale of the old vehicle.
However, the purchaser of the new vehicle is required to pay GST and QST on the total price of the new vehicle if the purchaser does not conclude an accommodation sale.
A dealer sells a new vehicle, for $25,000, to an individual who is not required to collect the GST or QST (or to calculate the QST). The individual owns a used vehicle and sells it to another individual for $11,000. The transaction is carried out as an accommodation sale through the dealer. The estimated value of the used vehicle, for resale purposes, is $12,500 (that is, the average wholesale price of $13,000 minus $500).
|Sale of the new vehicle by the dealer|
|Credit for the trade-in||-||$10,000.00|
|GST ($15,000 x 5%)||+||$750.00|
|QST ($15,000 × 9.975%)||+||$1,496.25|
|Purchase of the used vehicle by the dealer|
|Sale of the used vehicle by the dealer|
|GST ($11,000 x 5%)||+||$550.00|
|Vehicle's estimated value (higher than the sale price) $12,500.00|
|QST ($12,500 × 9.975%)||+||$1,246.88|
- The QST is calculated by the vendor, but paid by the purchaser to the Société de l'assurance automobile du Québec (SAAQ) when the vehicle is registered.
- The GST does not apply on the purchase of a used vehicle by the dealer because the individual is not a registrant; the QST does not apply because the vehicle is not to be registered by the dealer.
The estimated value rule does not apply to a used vehicle accepted as a trade-in under this type of sale. In such cases, the exchange value agreed upon by the parties must be used. However, the estimated-value rule must be applied to the sale of a used road vehicle to a third party.