Union of New Brunswick Indians v. New Brunswick (Minister of Finance)

Union of New Brunswick Indians v. New Brunswick (Minister of Finance)
Collection
Supreme Court Judgments
Date
1998-06-18
Report
[1998] 1 SCR 1161
Case number
25427
Judges
Lamer, Antonio; Gonthier, Charles Doherty; Cory, Peter deCarteret; McLachlin, Beverley; Iacobucci, Frank; Major, John C.; Binnie, William Ian Corneil
On appeal from
New Brunswick
Subjects
Aboriginal law
Notes
SCC Case Information: 25427
Decision Content
Union of New Brunswick Indians v. New Brunswick (Minister of Finance), [1998] 1 S.C.R. 1161
The Minister of Finance for the Province of New Brunswick and the Provincial Sales Tax Commissioner for the Province of New Brunswick Appellants
v.
Union of New Brunswick Indians and Paul David Leonard Tomah,
suing on his own behalf and on behalf of all New Brunswick Indian Bands
and their members Respondents
and
The Attorney General of Canada,
the Attorney General of Manitoba,
the Attorney General of British Columbia,
the Attorney General for Alberta,
the Grand Council of the Crees (Eeyou Estchee),
the Cree Regional Authority,
Matthew Coon Come, Violet Pachanos and Bill Namagoose Interveners
Indexed as: Union of New Brunswick Indians v. New Brunswick (Minister of Finance)
File No.: 25427.
1998: March 25; 1998: June 18.
Present: Lamer C.J. and Gonthier, Cory, McLachlin, Iacobucci, Major and Binnie JJ.
on appeal from the court of appeal for new brunswick
Indians ‑‑ Taxation ‑‑ Reserves ‑‑ Indian Act exempting goods on-reserve from taxation ‑‑ Whether goods purchased off‑reserve for use on‑reserve subject to provincial sales tax ‑‑ Indian Act, R.S.C., 1985, c. I‑5, s. 87 ‑‑ Social Services and Education Tax Act, R.S.N.B. 1973, c. S‑10, ss. 1 “consumer”, “purchaser”, “retail sale”, 4, 5, 8, 16.
New Brunswick’s Social Services and Education Tax Act levies a tax on items sold for consumption at the time of the sale. In 1993, a provision giving status Indians an exemption from paying provincial sales tax on goods purchased off‑reserve for on‑reserve use was repealed so that only goods and services purchased on reserve lands or delivered there by the vendor were sales tax exempt. The respondents brought a test case involving items for personal use and consumption which had been purchased by Indians off the reserve for use on the reserve. The trial judge concluded that s. 87 of the Indian Act , which exempts goods on reserves from taxation, applies only to property actually situated on a reserve. A majority of the Court of Appeal reversed this decision. At issue here is whether New Brunswick Indians were required to pay provincial sales tax on goods purchased off the reserve for consumption on the reserve. The constitutional question queried whether, if as a matter of statutory interpretation s. 87 of the Indian Act prohibits taxation of tangible personal property purchased off-reserve, New Brunswick’s Social Services and Education Tax Act was rendered inoperative to the extent of the inconsistency with s. 87 .
Held (Gonthier and Binnie JJ. dissenting): The appeal should be allowed. New Brunswick’s Social Services and Education Tax Act is not inconsistent with s. 87 of the Indian Act because that section does not prohibit taxation in respect of tangible personal property purchased off-reserve even if destined for use on-reserve.
Per Lamer C.J. and Cory, McLachlin, Iacobucci and Major JJ.: Section 87 of the Indian Act applies only to property physically located on a reserve at the time of taxation or property whose paramount location is on a reserve at the time of taxation. This comports with the purpose of s. 87 , which is to protect the property of Indians on reserves and prevent that property from being eroded. In determining the applicability of s. 87 , one must consider whether the property is located or has its paramount location on a reserve at the time and place that the tax would otherwise attach. In the context of retail sales taxes, this can be called the “point of sale” test.
Provincial sales taxes when imposed on retail sales are sales taxes and not taxes on consumption, notwithstanding references to “consumer” and “consumption”. This sort of language is used to define the taxpayer and so avoid the charge of indirect taxation. It has been repeatedly held to impose a sales tax, not a consumption tax. Sections 1, 4 and 5 of the Social Services and Education Tax Act, when read together, impose a direct retail sales tax that fixes on the transaction of sale and is calculated on the fair value of the goods. In the case of a retail sale, the act of purchase, not the act of consumption, triggers liability for the sales tax. For the purposes of these sections, it is largely irrelevant how, why, where, when, and by whom they are consumed once they have been purchased at a retail sale within the province. If there is a sale but no consumption, the sales tax is still payable. If the sales tax were a true consumption tax, each use of taxable goods by the ultimate consumer would attract tax liability.
The “paramount location” test, which has been used to protect Indian property normally situated on the reserve from being taxed or seized while off‑reserve, should not be applied to sales taxes on tangible goods. Sales taxes attach at the moment of sale and the property at this point cannot have its paramount location elsewhere than the point of sale because no pattern of use and safekeeping has been established. The location of property after the sale and the imposition of sales tax is irrelevant. Goods purchased off‑reserve therefore attract tax, while goods purchased on‑reserve are exempt, regardless of where the purchaser may intend to use them. To make taxation dependent on the place of anticipated use would render the administration of the tax uncertain and unworkable. Where the location of the property at the time of taxation is readily apparent, the “paramount location” test need not be applied.
To apply s. 87 to sales tax levied off‑reserve on goods purchased by Indians for use on the reserve would take the purpose of s. 87 far beyond preventing the erosion of on-reserve Indian property which this Court articulated to be the purpose of s. 87 . Such an extension flies in the face of the wording of s. 87(1)(b), which confines the protection from taxation to property situated on a reserve. The history of s. 87 also belies the conclusion that Parliament intended it to provide general tax protection for property intended for on-reserve use. Finally, providing a tax exemption to Indians for property purchased off‑reserve will not necessarily benefit Indians uniformly. Adopting the “paramount location” test would have adverse consequences for Indians who live off the reserve because they would presumably have to pay tax on goods purchased on-reserve for use off the reserve.
The “point of sale” test is beneficial to on‑reserve Indians in many parts of Canada. First, it provides an incentive for Indians to establish their own retail outlets on reserves and gives a competitive edge to reserve businesses, thereby increasing economic activity and employment. Second, the “point of sale” approach to the tax exemption permits reserves to impose their own taxes on reserve sales, thus creating a tax base for aboriginal governments. These considerations belie the conclusion that s. 87 , by its object and purpose, must be read as intending to exempt Indians from all sales taxes, whether on or off a reserve, on property used on reserves.
Per Gonthier and Binnie JJ. (dissenting): The expression “situated on a reserve” bears the same interpretation in s. 87(1) of the Indian Act as it does elsewhere in that statute and should not be extended in an artificial or conceptual way to cover personal property that is not physically situated on a reserve at the critical time. Indian people cannot be expected to live reasonably on the reserve without making purchases. If the goods are not available locally, then purchases will have to be made off-reserve to enable the Indians to enjoy a reasonable standard of life on the reserve. Exemption of such goods from taxation in these circumstances is consistent with the purpose of s. 87(1) .
New Brunswick, having levied a tax explicitly “in respect of consumption” to finesse any constitutional challenge to its constitutional validity based on the tax being construed as an indirect tax beyond provincial competence, should not be relieved of the consequences of that design feature when the statute is subjected to scrutiny under s. 87 of the Indian Act . If in fact the New Brunswick tax had been charged in respect of the transaction of purchase and sale, then the tax (subject to any constitutional infirmities) would be an exigible as neither the purchaser nor the goods were situated on a reserve at the time of the transaction. However, s. 4 of the Social Services and Education Tax Act imposes the tax in “respect of consumption”, and the critical time is therefore the time of consumption, not the time when the goods were purchased. At the time of consumption, the goods are “primarily located” on the reserve. While the legislation identifies a retail sale as a condition precedent to taxation where goods are purchased in the province, such a condition precedent cannot reasonably be characterized as the subject matter of the tax.
In any event, given that some of the key provisions of the Act are ambiguous in their meaning and effect and since any ambiguities should be resolved in favour of the Indian taxpayers, s. 87 applies. The assurance, expressed in earlier cases, that s. 87 is designed to give status Indian people a meaningful tax choice in the location of their personal property should not be defeated.
The “pattern of use and safekeeping” which controls the tax treatment under s. 87(1) is not necessarily the situs of the personal property at the moment of acquisition. Even if some importance is to be attached to situs at that moment, the issue here is not unidimensional, and the circumstances of acquisition should be placed in the larger “pattern” or context of the realities of life on a New Brunswick reserve. The “paramount location” approach reflects a purposive approach to s. 87(1) (b), and confirms the appropriateness of a tax exemption in this case.
The purpose of s. 87 was not to allow merchants on reserves to compete on a tax-free basis with off-reserve merchants for business in the broader community. In terms of financing Indian self-government, the present wording of s. 87 is not immutable. The s. 87 exemption is the creature of an ordinary federal statute and can be expanded or redefined as Parliament sees fit. Thus neither of these objectives offers a valid policy justification for interpreting the tax as exigible here.
Cases Cited
By McLachlin J.
Considered: Williams v. Canada, [1992] 1 S.C.R. 877; Simpsons‑Sears Ltd. v. Provincial Secretary (N.B.), [1978] 2 S.C.R. 869; distinguished: Leighton v. British Columbia (1989), 57 D.L.R. (4th) 657; Attorney‑General for British Columbia v. Kingcome Navigation Co., [1934] A.C. 45; referred to: Nowegijick v. The Queen, [1983] 1 S.C.R. 29; Francis v. The Queen, [1956] S.C.R. 618; Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85; Leonard v. R. in Right of British Columbia (1984), 52 B.C.L.R. 389; R. v. Lewis, [1996] 1 S.C.R. 921; Brown v. The Queen in right of British Columbia (1979), 107 D.L.R. (3d) 705; Danes v. The Queen in right of British Columbia (1985), 18 D.L.R. (4th) 253; Attorney‑General for British Columbia v. Canadian Pacific Railway Co., [1927] A.C. 934; Atlantic Smoke Shops, Ltd. v. Conlon, [1943] A.C. 550; Air Canada v. British Columbia, [1989] 1 S.C.R. 1161; Miawpukek Indian Band v. Newfoundland (Minister of Finance) (1995), 130 Nfld. & P.E.I.R. 164; Brooks (J.E.) and Associates Ltd. v. Kingsclear Indian Band (1991), 118 N.B.R. (2d) 290.
By Binnie J. (dissenting)
Williams v. Canada, [1992] 1 S.C.R. 877; Nowegijick v. The Queen, [1983] 1 S.C.R. 29; Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85; Francis v. The Queen, [1956] S.C.R. 618; Simpsons‑Sears Ltd. v. Provincial Secretary (N.B.), [1978] 2 S.C.R. 869; Attorney‑General for British Columbia v. Canadian Pacific Railway Co., [1927] A.C. 934; Attorney‑General for British Columbia v. Kingcome Navigation Co., [1934] A.C. 45; Air Canada v. British Columbia, [1989] 1 S.C.R. 1161; Miawpukek Indian Band v. Newfoundland (Minister of Finance) (1995), 130 Nfld. & P.E.I.R. 164.
Statutes and Regulations Cited
Budget Implementation Act, 1997, S.C. 1997, c. 26 .
Constitution Act, 1867, s. 92(2) .
Indian Act, R.S.C., 1985, c. I‑5, ss. 87 , 88 , 89(1) [rep. & sub. c. 17 (4th Supp.), s. 12 ], (2).
Social Services and Education Tax Act, R.S.N.B. 1973, c. S‑10, ss. 1 “consumer”, “purchaser” [rep. & sub. S.N.B. 1983, c. 86, s. 1(b)], “retail sale” [idem, s. 1(c)], 4 [idem, s. 2; am. 1985, c. 68, s. 2(a)], 5(1) [rep. & sub. 1979, c. 67, s. 2; am. 1983, c. 86, s. 3; am. 1993, c. 66, s. 1(a)], (2) [ad. 1993, c. 66, s. 1(b)], 8(1) [rep. & sub. 1979, c. 67, s. 3(a); am. 1983, c. 85, s. 1], 16 [rep. & sub. 1979, c. 67, s. 6].
Authors Cited
Bartlett, Richard H. Indians and Taxation in Canada, 3rd ed. Saskatoon: Native Law Centre, University of Saskatchewan, 1992.
Hogg, Peter W. and Mary Ellen Turpel. “Implementing Aboriginal Self‑Government: Constitutional and Jurisdictional Issues” (1995), 74 Can. Bar Rev. 187.
Maritimes Tax Reporter (loose‑leaf). Don Mills, Ont.: CCH Canadian Ltd., 1993.
Reiter, Robert Alan. Tax Manual for Canadian Indians. Edmonton: First Nations Resource Council, 1990.
APPEAL from a judgment of the New Brunswick Court of Appeal (1996), 178 N.B.R. (2d) 1, 454 A.P.R. 1, 135 D.L.R. (4th) 193, [1997] 1 C.N.L.R. 213, [1996] N.B.J. No. 258 (QL), allowing an appeal from a judgment of Savoie J. (1994), 148 N.B.R. (2d) 351, 378 A.P.R. 351, 115 D.L.R. (4th) 292, 2 G.T.C. 7178, [1995] 1 C.N.L.R. 210, [1994] N.B.J. No. 212 (QL). Appeal allowed, Gonthier and Binnie JJ. dissenting.
Bruce Judah, Q.C., for the appellants.
P. John Landry and Lewis F. Harvey, for the respondents.
John R. Power, Q.C., and Sandra Phillips, for the intervener the Attorney General of Canada.
Kenneth J. Tyler and Stewart J. Pierce, for the intervener the Attorney General of Manitoba.
Patrick G. Foy, Q.C., and Hunter W. Gordon, for the intervener the Attorney General of British Columbia.
Robert J. Normey, for the intervener the Attorney General for Alberta.
John Hurley, for the interveners the Grand Council of the Crees (Eeyou Estchee), the Cree Regional Authority, Matthew Coon Come, Violet Pachanos and Bill Namagoose.
The judgment of Lamer C.J. and Cory, McLachlin, Iacobucci and Major JJ. was delivered by
McLachlin J. --
I. Introduction
1 This case requires the Court to rule whether Indians living in New Brunswick were required to pay provincial sales tax on goods purchased off the reserve for consumption on the reserve.
2 Prior to April 1, 1993, Indians in New Brunswick were generally exempt from paying provincial sales tax under the Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10. The exemption was repealed in 1993 and the New Brunswick Sales Tax Commissioner issued sales tax notices that status Indians were only exempt from sales tax on goods and services purchased on or delivered by the vendor to reserve lands. The respondent Indians bring a test case challenging this. They argue that s. 87 of the Indian Act, R.S.C., 1985, c. I-5 , which exempts Indians from taxation on “property . . . situated on a reserve”, prohibits taxation on off-reserve sales where the property is intended to be used on a reserve.
II. Judgments Below
3 At trial ((1994), 148 N.B.R. (2d) 351), Savoie J. concluded that s. 87 applies only to property actually situated on a reserve. The sales tax is charged and collected at the point of sale. At this point, the property is not on a reserve. It follows that the tax is not prohibited by s. 87 of the Indian Act .
4 The majority of the New Brunswick Court of Appeal ((1996), 178 N.B.R. (2d) 1), per Bastarache J.A. (as he then was) rejected Savoie J.’s conclusion that s. 87 applies only to property located on a reserve. It held that s. 87 confers on Indians the right to use or consume personal property on the reserve without taxation. Since most property consumed or used on-reserve in New Brunswick is purchased off-reserve, the right would be meaningless without the right to purchase goods off-reserve tax-free. Therefore, s. 87 must extend to purchases off the reserve. Hoyt C.J. (Turnbull J.A. concurring) dissented, holding that the only purpose of s. 87 was to protect Indians from being dispossessed of their on-reserve personal property by taxation.
III. Statutory Provisions
5 Indian Act, R.S.C., 1985, c. I-5
87. (1) Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to s. 83, the following property is exempt from taxation, namely,
(a) the interest of an Indian or a band in reserve lands or surrendered lands; and
(b) the personal property of an Indian or a band situated on a reserve.
(2) No Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (1)(a) or (b) or is otherwise subject to taxation in respect of any such property.
. . .
88. Subject to the terms of any treaty and any other Act of Parliament, all laws of general application from time to time in force in any province are applicable to and in respect of Indians in the province, except to the extent that those laws are inconsistent with this Act or any order, rule, regulation or by-law made thereunder, and except to the extent that those laws make provision for any matter for which provision is made by or under this Act.
89. (1) Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian or a band.
. . .
(2) A person who sells to a band or a member of a band a chattel under an agreement whereby the right of property or right of possession thereto remains wholly or in part in the seller may exercise his rights under the agreement notwithstanding that the chattel is situated on a reserve.
Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10
1 . . .
“consumer” means a person who
(a) utilizes or intends to utilize within the Province goods for his own consumption, or for the consumption of any other person at his expense, or
(b) utilizes or intends to utilize within the Province goods on behalf of or as the agent for a principal, who desired or desires to so utilize such goods for consumption by the principal or by any other person at the expense of the principal;
. . .
“purchaser” means a consumer who acquires goods at a retail sale within the Province and includes also
. . .
(b) a person who purchases services;
“retail sale” means a sale to a consumer for the purpose of consumption and not for resale and includes a sale of services to a purchaser;
. . .
4 Every consumer of goods consumed within the Province and every purchaser of services purchased within the Province shall pay to the Minister for the raising of revenue for Provincial purposes a tax in respect of the consumption of such goods or purchase of such services, computed at the rate of eleven per cent of the fair value of such goods or services. . . .
5(1) In the case of a retail sale within the Province, the tax shall be payable by the purchaser at the time of purchase on the fair value of the goods or services.
5(2) Notwithstanding subsection (1), in the case of a retail sale within the Province of goods that are used or consumed within the Province and are used or consumed frequently or substantially outside the Province, the purchaser shall report the matter to the Commissioner in accordance with the regulations and shall pay the tax on such goods at such time and in such manner as the Commissioner requires.
. . .
8(1) Every person who consumes within the Province goods acquired by him for resale, or who consumes within the Province goods manufactured, processed, produced or purchased by him within or without the Province, shall for the purposes of this Act, be deemed to have purchased the goods at a retail sale in the Province on the day that he begins to consume the goods within the Province.
IV. Analysis
6 This appeal requires us to decide whether s. 87 of the Indian Act applies to tax levied under the former New Brunswick Social Services and Education Tax Act. The provisions of both statutes must be interpreted and analyzed to determine whether the s. 87(1) (b) exemption applies to the sales tax on the property in question: see Williams v. Canada, [1992] 1 S.C.R. 877. In the event of ambiguity, the interpretation that most favours the Indians is to be preferred: see Nowegijick v. The Queen, [1983] 1 S.C.R. 29.
A. The Application of Section 87 of the Indian Act
7 Section 87(1) of the Indian Act exempts certain property of Indians from taxation. This includes “the personal property of an Indian or a band situated on a reserve”: see s. 87(1) (b). Section 87(2) describes the types, or modalities, of taxation on the exempted property that are prohibited: taxation “in respect of the ownership, occupation, possession or use of” the property mentioned in s. 87(1) .
8 The purpose of the s. 87 exemption was to “preserve the entitlements of Indians to their reserve lands and to ensure that the use of their property on their reserve lands was not eroded by the ability of governments to tax, or creditors to seize”. It “was not to confer a general economic benefit upon the Indians”: see Williams, supra, at p. 885.
9 In the past, s. 87(1) (b) has been confined to property physically situated on a reserve or property whose “paramount location” is on a reserve.
10 In Francis v. The Queen, [1956] S.C.R. 618, the Court, per Kellock J., stated at p. 631:
It is quite plain from this section that the actual situation of the personal property on a reserve is contemplated by s. 86 [now s. 87 ] and that any argument suggesting a notional situation is not within the intendment of that section.
11 In Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85, at p. 132, La Forest J. approved and quoted the comments of Macfarlane J.A. in Leonard v. R. in Right of British Columbia (1984), 52 B.C.L.R. 389 (C.A.), at p. 395:
It is a reasonable interpretation of the section to say that a tax exemption on the personal property of an Indian will be confined to the place where the holder of such property is expected to have it, namely on the lands which an Indian occupies as an Indian, the reserve. [Emphasis in original.]
In response to the argument that Parliament intended the privileges of ss. 87 and 89 to protect all property, regardless of where that property is situated, La Forest J. continued at p. 144:
. . . such an interpretation takes one beyond the liberal and the generous and subverts the very character of the commitments that the Crown has historically undertaken vis-à-vis the protection of native property.
12 Again, in Williams, supra, the Court, per Gonthier J. confirmed the approach in Mitchell in determining whether the situs of unemployment insurance benefits was on or off the reserve for the purposes of taxation. As the benefits, intangible personal property, were effectively on the reserve at the time of taxation, they were exempt from taxation pursuant to s. 87 .
13 In R. v. Lewis, [1996] 1 S.C.R. 921, at p. 959, this Court, per Iacobucci J., held that the phrase “on the reserve” in s. 81(1) (o) of the Indian Act should be given its ordinary and common sense meaning, namely “within the reserve”, “inside the reserve”, or “located upon or within the boundaries of the reserve”. The Court had earlier stated at p. 955 that the phrase should be given the same construction wherever it is used throughout the Indian Act . The phrase “situated on a reserve” should be interpreted in the same way. The addition of the word “situated” does not significantly alter the meaning of the phrase in the circumstances of this case: see also Brown v. The Queen in right of British Columbia (1979), 107 D.L.R. (3d) 705 (B.C.C.A.), at p. 713, and Danes v. The Queen in right of British Columbia (1985), 18 D.L.R. (4th) 253 (B.C.C.A.), at p. 257.
14 The only qualification the case law admits to the rule that s. 87 catches only property physically located on a reserve is the rule that where property which was on a reserve moves off the reserve temporarily, the court will ask whether its “paramount location” is on the reserve. If it is, s. 87 will apply to prevent taxes being levied on property while it is off the reserve: see Leighton v. British Columbia (1989), 57 D.L.R. (4th) 657 (B.C.C.A.).
15 These authorities suggest that s. 87 applies only to property physically located on a reserve at the time of taxation or property whose paramount location is on a reserve at the time of taxation. This comports with the purpose of s. 87 to protect the property of Indians on reserves and prevent that property from being eroded: see Williams, supra. In determining the applicability of s. 87 , one must consider whether the property is located or has its paramount location on a reserve at the time and place that the tax would otherwise attach. In the context of retail sales taxes, this can be called the “point of sale” test.
16 The remaining question, therefore, is whether the sales tax here at issue is levied on property while it is situated, or has its paramount location on a reserve. The property described in the stated case consists of items for personal use and consumption like clothing and toiletries, purchased by Indians off the reserve for use on the reserve. The Social Services and Education Tax Act levies the tax on these items at the time of the off-reserve sale. At the point of sale, the property is not, and has never been located on a reserve. This, without more, suggests that the tax is not levied on goods situated on a reserve or whose paramount location is on a reserve. This would accord with the general view expressed by Richard H. Bartlett, Indians and Taxation in Canada (3rd ed. 1992), at p. 92:
The reasoning employed by the Supreme Court of Canada [in Francis] appears applicable to the imposition of sales tax at the point of sale off a reserve. In the vast majority of sales transactions involving Indian purchases in Canada the sales take place off the reserve, and according to Francis are not subject to the exemption conferred by section 87 .
17 This, however, does not conclude the matter. The respondents raise a number of arguments in support of their position that s. 87 applies to the tax at issue in this case: (1) that the tax is not a sales tax but a consumption tax collected at the time of purchase but levied in respect of the on-reserve consumption of personal property by Indians; (2) that property purchased for use on-reserve has its paramount location on a reserve; and (3) that s. 87 must be applied to off-reserve purchases by Indians in New Brunswick in order to fulfill its purpose. I will address each of these arguments in turn.
B. The Consumption Tax Argument
18 The respondents argue that the sales tax is a consumption tax collected out of convenience at the time of purchase but levied in respect of the consumption or use of property which occurs on the reserve.
19 To this, we must look at the language used by the Legislature, the history and purpose of the Social Services and Education Tax Act and the case law. As stated earlier, if ambiguity exists, it must be resolved in favour of the Indians. In this case, this process leads to but one conclusion: when imposed on a retail sale, the tax is a sales tax, not a tax on consumption.
20 The tax at issue is one in a long series of taxing statutes adopted to tax sales in New Brunswick. It conforms generally to a pattern of sales taxes found all across Canada. The pattern combines provisions imposing tax on “sale[s]” with wording suggesting that the tax is paid by “consumer[s]” of the goods taxed. Despite their references to “consumer[s]” and “consumption”, these taxes have long and uniformly been held by the courts to be, in essence, sales taxes, not consumption taxes. Indeed, this Court has ruled that the predecessor of the very statute here at issue, using a similar combination of provisions regarding sale and consumption, was a sales tax and not a tax on consumption: see Simpsons-Sears Ltd. v. Provincial Secretary (N.B.), [1978] 2 S.C.R. 869, per Ritchie J.
21 The peculiar wording of modern Canadian sales tax statutes stems from the constitutional prohibition on indirect taxation by the provinces. The provinces are limited to direct taxes -- taxes whose incidence falls primarily on the person who pays them. They cannot impose taxes which may be passed on to another person: see Constitution Act, 1867, s. 92(2) .
22 A tax imposed on sales simpliciter runs afoul of this rule, since the purchaser may resell the goods to another and pass the tax along in the resale price. Early sales taxes were struck down on this basis: see Attorney-General for British Columbia v. Canadian Pacific Railway Co., [1927] A.C. 934 (P.C.). In response to Canadian Pacific, British Columbia passed a true consumption tax, which was upheld in Attorney-General for British Columbia v. Kingcome Navigation Co., [1934] A.C. 45 (P.C.). However, as consumption taxes proved difficult to compute and collect, the provinces eventually came up with a new scheme -- a sales tax which avoided the problem of indirect taxation by identifying the person liable to pay the tax as the consumer, or ultimate user of the property: see Laskin C.J. in Simpsons-Sears, supra, at p. 872. This sort of tax was upheld as direct in Atlantic Smoke Shops, Ltd. v. Conlon, [1943] A.C. 550 (P.C.).
23 The new tax raised a fundamental question -- the very question before us on this appeal. What was the new tax? Was it a tax on consumption? Or was it a sales tax? The Privy Council in Atlantic Smoke Shops, per Viscount Simon, upheld the tax on the basis that sales taxes could be direct (at p. 564). Implicit in this reasoning is acceptance that the tax was a sales tax.
24 The next case to consider the problem was Simpsons-Sears, supra, involving the New Brunswick statute at issue on this appeal. At that time, the statute also combined the language of sales tax with the language of consumer and consumption. Section 4, the charging section, imposed a tax on the consumer: “Every consumer of goods consumed in the Province shall pay to the Minister for the raising of a revenue for Provincial purposes, a tax in respect of the consumption of such goods. . . .” Section 5 went on to provide that the tax was payable at the time of purchase. Like the present statute, the act also defined “consumption” and “consumer” and made provisions for variation of the tax where, for example, goods were purchased for consumption outside the province. In describing the nature of the tax imposed by the act, Ritchie J., for the majority, stated, at p. 888: “I have referred to the last cited sections . . . to show that the original concept of a sales tax payable by the consumer purchaser is maintained in the present statute. . . .” To the argument that the tax was a tax on consumption, Ritchie J. pointed out, at p. 887, that “the ‘consumption’ . . . referred to is to be construed as meaning a consumption after sale. . . .” (emphasis in original) and found that “[f]or these purposes ‘a sale’ is an essential component of the taxable consumption. . . .” In short, the tax was held to retain its character as a sales tax, despite its references to consumption. It followed that the use or “consumption” of catalogues without a sale was not taxable.
25 This Court’s most recent pronouncement on the character of a tax on sales for consumers came in Air Canada v. British Columbia, [1989] 1 S.C.R. 1161. At issue was the validity of a provincial tax imposed under the Gasoline Tax Act, s. 25 (quoted at p. 1175), on “any person who, within the Province, . . . purchased or received delivery of gasoline for his own use or consumption. . . .” In response to the argument that the tax was a consumption tax, La Forest J. stated, at p. 1187, that “[t]he Act clearly does not impose a consumption tax. The references in the definition to consumption or use merely define the taxpayer, i.e., a purchaser who buys gasoline for his own use.”
26 These cases have settled the law: provincial sales taxes, when they are levied on retail sales, are just that — sales taxes — notwithstanding their references to “consumer[s]” and “consumption” to avoid the charge of indirect taxation. In Miawpukek Indian Band v. Newfoundland (Minister of Finance) (1995), 130 Nfld. & P.E.I.R. 164 (Nfld. S.C.T.D.), at p. 170, Roberts J. stated, in dealing with a similar provision in Newfoundland’s Retail Sales Tax Act, R.S.N. 1990, c. R-15:
That the tax provided for by the said s. 3 is “in respect of the consumption or use of that property”, in my opinion, changes nothing. These words are intended to identify the tax as a direct tax on the consumer, not one to be passed on, and thus within the jurisdiction of the province to impose. The important point for the purpose of the present analysis is that the tax is levied “at the time of sale”.
See also the Maritimes Tax Reporter (1993 (loose-leaf)), at ¶ 60-004:
In New Brunswick sales tax is imposed on the purchase of goods and services at fair value within the province.
Sales tax is designed to be one of single incidence upon the ultimate consumer or user of taxable property in New Brunswick.
27 The language of the statutory provisions at issue does not negate this view. It is the same sort of language that has been repeatedly held to impose a sales tax, not a consumption tax. Section 4 imposes a tax on “[e]very consumer of goods consumed within the Province” a tax “in respect of” consumption. “Consumer” is defined by the Social Services and Education Tax Act as a person who “utilizes or intends to utilize within the Province goods for his own consumption, or for the consumption of any other person at his expense. . . .” Section 5, on the other hand, imposes a tax on sale, providing that “[i]n the case of a retail sale within the Province, the tax shall be payable by the purchaser at the time of purchase on the fair value of the goods or services.” Section 1 defines “retail sale”, in part, as “a sale to a consumer for the purposes of consumption. . . .” “Sale”, in turn, is defined as including “exchange, barter . . . and any other contract whereby for a consideration a person delivers goods or services to another”. Finally, “purchaser” is defined as “a consumer who acquires goods at a retail sale within the Province. . . .”
28 These sections, apart from minor changes in wording, mirror the sections found in the statute’s predecessor, which this Court ruled in Simpsons-Sears did not impose a tax on consumption. To borrow the language of La Forest J. in Air Canada, the references to “consumption” merely define the taxpayer for the purpose of ensuring that the person taxed cannot pass the tax on to another, thereby making the tax indirect and unconstitutional.
29 Section 4 does not operate in isolation. Rather, it operates in tandem with s. 5 and is given meaning by the definitions in s. 1. When read together in light of the definitions, it is evident that these sections impose a direct retail sales tax that fixes on the transaction of sale and is calculated on the fair value of the goods. In the case of a retail sale, the act of purchase, not the act of consumption, triggers liability for the sales tax. For the purposes of these sections of the Social Services and Education Tax Act, it is largely irrelevant how, why, where, when, and by whom they are consumed once they have been purchased at a retail sale within the province. If there is a sale but no consumption, the sales tax is still payable. If the sales tax were a true consumption tax, each use of taxable goods by the ultimate consumer would attract tax liability.
30 Certain provisions in the Social Services and Education Tax Act impose a tax on consumption. For example, s. 8(1) stipulates that “[e]very person who consumes within the Province goods acquired . . . for resale, or . . . goods manufactured, processed, produced or purchased by him . . . [is] deemed to have purchased the goods at a retail sale” and, as such, is liable to pay the tax. Under s. 8(1), the use or consumption of the goods triggers tax liability. However, the fact that the Act taxes consumption in certain specific circumstances does not determine the overall scheme of the Act or influence the nature of the tax imposed by ss. 4 and 5. Indeed, it is implicit in s. 8(1) that the consumption of goods in such circumstances would, absent express statutory provision to the contrary, not attract the sales tax. In the present case, the Court is concerned with the tax levied on goods purchased at a retail sale. In these circumstances, ss. 4 and 5 impose tax liability on the transaction of sale. Section 8(1) and any others that impose a tax on consumption are not at issue.
31 The sales tax here may be contrasted with the pure consumption tax at issue in Kingcome Navigation, supra. It may also be contrasted with the consumption or “use” tax provisions at issue in Leighton, supra, where the provincial government sought to tax the off-reserve use of goods that had been purchased tax-free on the reserve. The Social Service Tax Act, R.S.B.C. 1979, c. 388, was amended to impose a tax on “tangible personal property . . . purchased by an Indian or a band” that is otherwise exempt under s. 87 of the Indian Act , when “that tangible personal property is, while owned by that Indian or band, used at a place where the exemption would not have applied. . . .” (pp. 659-60). The use of the property attracted the tax rather than the purchase of the property for use or consumption. The British Columbia Court of Appeal, per Lambert J.A., struck down the tax on the ground that it taxed property that had its paramount location on the reserve.
32 I conclude that the law is clear: statutory provisions like the ones here at issue impose a sales tax, not a consumption tax. The law has long been settled and there is no ambiguity. In the present case, the tax is imposed at the time of sale on property off the reserve.
C. The “Paramount Location” Argument
33 The respondents submit that tangible personal property which is intended to be consumed primarily on the reserve is “situated on a reserve” for the purposes of s. 87 . In doing so, they seek to extend the “paramount location” doctrine to property which has never been on a reserve.
34 As discussed earlier, the “paramount location” test has been used to protect Indian property normally situated on the reserve from being taxed or seized while off-reserve. In Leighton, supra, the B.C. Court of Appeal, per Lambert J.A., held that neither a motor vehicle nor its Indian owner could be taxed with respect to the use of a vehicle off the reserve if the paramount location of the property remained on the reserve. Similarly, the New Brunswick Court of Appeal, per Stratton C.J., in Brooks (J.E.) and Associates Ltd. v. Kingsclear Indian Band (1991), 118 N.B.R. (2d) 290, held that a school bus which had been used for years to transport children from the reserve to an off-reserve school could not be seized by creditors while off-reserve pursuant to s. 89(1) of the Indian Act because its paramount location was on the reserve.
35 The concept of “paramount location” finds no application to sales taxes on tangible goods. Sales taxes attach at the moment of sale. At this point, the property has but one location — the place of sal