This is an interesting case in terms of what happens when a mistake is made.

CRA does not have the authority to reallocate tax owing.

Dan White

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Federal tax collector can’t take money and run: Top court, Canwest News Service April 23, 2009 10:01 AM

The Supreme Court of Canada has ordered the federal tax collector to reimburse United Parcel Service $3 million that the courier company overpaid in GST. In a 9-0 ruling, the court concluded Thursday that the government is not entitled to a windfall simply because UPS mistakenly overpaid the tax in 1996-97.

OTTAWA — The Supreme Court of Canada has ordered the federal tax collector to reimburse United Parcel Service $3 million that the courier company overpaid in GST.

In a 9-0 ruling, the court concluded Thursday that the government is not entitled to a windfall simply because UPS mistakenly overpaid the tax in 1996-97.

“It cannot have been the intention of Parliament that persons who were not liable for GST but paid GST in error could not obtain a rebate,” wrote Justice Marshall Rothstein.

The ruling overturns a decision in the Federal Court of Appeal and restores a decision from the Tax Court of Canada.

The case arose from UPS mistakenly paying too much goods and services tax in its role as a customs broker for good entering Canada from a foreign country. UPS remits duties and taxes and them collects the amount from its customers.

The ruling noted that the GST overpayment arose from numerous errors in remitting the tax, arising from such things as mistakes made by the shipper on duty forms. UPS found itself out of pocket for the overpayments and did not seek reimbursement from its customers.

UPS sought a rebate by deducting the $3 million from taxes it owed the federal government.

The Supreme Court rejected the Federal Court of Appeal’s conclusion that it was the customers who actually owed the tax to Ottawa, so the courier company was not entitled to seek a rebate.
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