Canadian Consumers File Lawsuit Against Car Makers Over False Tax Claims

by Mike Godfrey, Tax-News.com, Washington

04 September 2008

A class action lawsuit has been filed against auto manufacturers Ford Motor Company of Canada, Limited, Chrysler Canada Inc., Honda Canada Inc., Toyota Canada Inc. and Nissan Canada Inc, which alleges that the auto manufacturers have misrepresented extra charges tacked on to the sale price of new vehicles as a federal tax.

When a person buys or leases a new vehicle, the dealer adds on several charges to the purchase or lease price. These additional charges include delivery, inspection and administration fees. The lawsuit alleges that these charges exist only to boost and disguise the true sale price of a vehicle. The lawsuit objects to one of these fees in particular - the CAD100 federal excise tax on air conditioners.

Manufacturers and dealers collect a CAD100 excise tax on every new vehicle sold and leased in Canada with air conditioning. However, there is no such tax applicable on the sale of new vehicles by dealers to consumers. The manufacturers have to pay a CAD100 excise tax when they produce or import a vehicle, but this tax is not payable by consumers.

The lawsuit alleges that the CAD100 charge collected from consumers is really just part of the sale price and is not actually an obligatory tax payment. The lawsuit claims manufacturers and dealers have misrepresented these charges and deceived vehicle buyers into believing that this is actually a tax that they are obliged to pay on their purchase.

The lawsuit was filed by several people who purchased or leased a new vehicle directly from a manufacturer's authorized dealer. The vehicle buyers are represented by lawyers Brian Osler, Glyn Hotz and Darrel Hotz.

"They put down that it's a tax right on the face of the sales contract," says Mr. Hotz. "They also call it an applicable tax. However, it's not something the consumer even has to pay."

The lawsuit alleges that the defendants have similar advertising, websites and sales practices that deceive people into believing they have to pay a CAD100 tax. The plaintiffs are seeking restitution of the charges they paid that were represented as an excise tax.

"The manufacturers and dealers tell you that there is an excise tax," says Mr. Osler. "The reality is there is no CAD100 excise tax on a retail sale and they know it. They don't hand the money over to the government. It just ends up in their own pocket."

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