By William Crooks

Local Journalism Initiative

A long-standing tax issue is raising concerns among Quebec’s recreational vehicle (RV) dealers and U.S. manufacturers, with some claiming it threatens businesses, jobs, and trade relationships. The Canada Revenue Agency’s (CRA) interpretation of the Excise Tax Act has led to retroactive tax bills amounting to millions of dollars, as RVs shipped to Quebec through Ontario are being subjected to Ontario’s harmonized sales tax (HST). Local businesses, including those in Sherbrooke, argue that the tax demands are unnecessary and place an undue financial burden on them, though this perspective has yet to result in a policy change.

Background of the issue

Daniel Brock, a lawyer with Fasken Martineau DuMoulin LLP who represents affected U.S. manufacturers, provided documents to The Record explaining the issue arises from Section 178.8 of the Excise Tax Act, which determines where sales tax is applied based on where goods are “released” into Canada. For RVs imported into Quebec from the United States, the point of entry is often Windsor, Ontario, before the vehicles are delivered to dealerships across Quebec. Since Ontario’s tax system harmonized in 2010, the CRA has been applying Ontario’s 13 per cent HST rather than the 5 per cent federal GST applicable in Quebec.

Brock explained in a recent interview that the CRA’s interpretation has caused confusion and unexpected financial demands. “For decades, this system worked without issue. Now, because these goods cross the border in Ontario, CRA is claiming Ontario tax applies, even though the vehicles are destined for Quebec.” Brock’s clients include U.S.-based RV manufacturers, who have been hit with significant retroactive tax bills. According to documents provided by Brock and the Canadian RV Coalition, the total retroactive assessments range between $48 and $52 million CAD, with no clear financial benefit for the Canadian government since the tax would ultimately be refunded as input tax credits.

A financial strain for local businesses

Local RV dealers are also feeling the impact. Samuel Hénault, who operates five dealerships across Quebec, including one in Sherbrooke, described receiving a tax bill for $3.8 million. “It’s a huge amount, and it’s putting enormous financial pressure on us,” he said in a Dec. 16 conversation. While Hénault acknowledged that the tax would eventually be reimbursed, he emphasized the immediate challenge of meeting such demands. “It’s not just a matter of paperwork. This would force us to borrow heavily, lay off employees, or delay investments we need to make here in Sherbrooke and elsewhere.”

Hénault’s concerns reflect a broader sentiment within the RV industry. According to the Canadian RV Coalition in a document provided by Brock, cash flow is critical for businesses operating in this sector, and retroactive tax bills place unnecessary strain on dealers who, they argue, have already paid the correct GST in Quebec. The coalition’s documents also state that this tax interpretation creates uncertainty for businesses and complicates cross-border trade arrangements, particularly for RVs manufactured in Indiana.

Impact beyond Quebec

The U.S. state of Indiana, where over 80 per cent of the world’s RVs are produced, has also raised concerns about the CRA’s approach. In a letter sent to Finance Minister Chrystia Freeland in August, members of the U.S. Congress noted that Canada is Indiana’s largest trading partner. The letter emphasized the economic importance of the RV sector, stating, “95 per cent of the 35,000 RVs sold in Canada are imported from the United States, and Indiana produces over 80 per cent of the world’s RVs. Any event that negatively impacts our RV companies, such as a major retroactive tax assessment, is concerning.”

Brock, speaking from the manufacturers’ perspective, added that the current situation risks setting a precedent that could affect other industries importing goods through Ontario for delivery elsewhere. “If this interpretation is upheld in court, it could open the door for similar disputes involving other products. That uncertainty is troubling for businesses on both sides of the border.”

A proposed solution

In response to these concerns, the Canadian RV Coalition has proposed a legislative amendment to Section 178.8 of the Excise Tax Act. The amendment would clarify that sales tax should be determined based on the destination of the goods, rather than the port of entry. According to documents submitted to the Department of Finance, this amendment aligns with the “destination principle” widely accepted in other areas of tax policy.

Brock described the proposal as a practical solution. “This would resolve the ambiguity in the law and ensure businesses are taxed appropriately without imposing unnecessary costs. It wouldn’t reduce government revenues because the tax is ultimately refunded.” The coalition has also called for the amendment to be applied retroactively to 2010, when Ontario harmonized its sales tax.

Mixed political response

Brock said while the coalition has received support from some political parties, including the Bloc Québécois and Conservatives, no action has been taken to date. Brock noted that discussions with Finance Canada and the CRA have yet to result in concrete changes. “There is acknowledgment that the situation doesn’t make sense, but no one has moved to fix it.”

Hénault, meanwhile, has taken steps to raise awareness among federal representatives and local media. “We need decision-makers to understand how this impacts businesses here in Sherbrooke and across Quebec,” he said. “It’s not just a technical issue; it’s a real financial strain that puts jobs at risk.”

Government response pending

The Record reached out to Marie-Claude Bibeau, MP for Compton-Stanstead and Minister of National Revenue, for comment on the matter. Her office indicated she was unavailable for an interview before this article went to print.

While the RV industry in Quebec and the U.S. awaits clarity, businesses and manufacturers continue to call for changes to the Excise Tax Act. The proposed amendments would address the ambiguity in the law and, they argue, eliminate unnecessary costs that threaten businesses and jobs. Hénault summarized the local impact, stating, “This isn’t just about taxes. It’s about businesses here in Sherbrooke and across the province. We need a solution sooner rather than later.”