Accommodation Sales of Road Vehicles
If you purchase or lease a new road vehicle from a dealer and you wish to sell your old vehicle to a third party, you can ask the dealer to act as an intermediary and carry out the transaction. This is called an accommodation sale.
An accommodation sale allows you to pay GST and QST on the difference between the following amounts:
- the price of the new vehicle;
- the credit obtained for the sale of the old vehicle.
If you do not make an accommodation sale, you will pay GST and QST on the full price of the new vehicle. The dealer must therefore calculate or collect the GST and QST, except where the vehicle purchased is a motor vehicle. In this case, the buyer must pay the QST to the Société de l'assurance automobile du Québec (SAAQ) when registering the vehicle.
Example
A dealer sells a new road 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 $10,000. The transaction carried out through the dealer is an accommodation sale. The amount given for the trade-in is $10,000. The estimated value of the used vehicle is $12,500 (that is, the average wholesale price of $13,000 minus $500).
| Sale of the new vehicle by the dealer | ||
|---|---|---|
| Sale price | $25,000.00 | |
| Credit for the trade-in | - $10,000.00 | |
| $15,000.00 | ||
| GST ($15,000 × 5%) | + $750.00 | |
| QST ($15,000 × 9.975%) | + $1,496.25 | |
| Total payable | $17,246.25 | |
| Purchase of the used vehicle by the dealer | ||
| Purchase price | $10,000.00 | |
| GST (does not apply because the individual is not a registrant) |
$0 | |
| QST (does not apply because the dealer does not have to register the vehicle) |
$0 | |
| Sale of the used vehicle by the dealer | ||
| Sale price | $10,000.00 | |
| GST ($10,000 × 5%) | + $500.00 | |
| QST calculated on the estimated value of the vehicle (greater than the sale price) [$12,500 × 9.975%] | + $1,246.88 | |
| Total payable | $11,746.88 | |
Estimated value
As shown in the preceding example, the estimated value rule must be applied to the sale of a used road vehicle involving a third party.
However, this rule does not apply to a used vehicle accepted as a trade-in by the dealer under this type of sale. In such cases, the exchange value agreed on by the parties must be used.