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Tax dispute erupts over sale of 'coloured fuel' at Prince George gas station

Business owner assessed nearly $200,000 in allegedly uncollected taxes; claims province's tax on fuel unconstitutional
KG CornerStore - Hart Highway
Sales of "coloured fuel" at the KG CornerStore gas station at 8087 is at centre of a dispute between the business's owner, Bruce Kidd, and the provincial government.

A Prince George business owner is fighting back after the provincial government ordered him to pay nearly $200,000 in tax he allegedly failed to collect from the sale of "coloured fuel" at one of his gas stations.

According to a petition filed June 18 at the Prince George courthouse Bruce Kidd is seeking a court order to overturn the assessment and claims the provincial government went outside its authority in imposing the assessment and that the method used to determine how much was owed was unfair.

Also called dyed or marked fuel, coloured fuel is reserved for farmers and recreational boaters and for purposes related to logging, mining, oil and gas and road building.  A tax of three-cents per litre is levied by the provincial government on the fuel compared to 7.75 cents per litre for regular gas. 

In November 2018, the B.C. Ministry of Finance issued a notice of assessment claiming Kidd Ventures Ltd. owed $221,495.88 - made up of $192,918.88 in uncollected tax, $27,730.80 in interest and a $846.07 penalty - from the sale of the fuel at the KG CornerStore at 8087 Hart Highway.

The station "is located within a farming community and in close proximity to a marine recreational area," and many of the outlet's customers are farmers and recreational boaters, according to the petition. 

According to the Motor Fuel Tax Act, anyone who buys fuel through a card lock or purchase more than 45 litres must pay a differential between the taxes unless the dealer has obtained a declaration stating the fuel will be for the purposes listed in the legislation.

However, if the purchaser is a farmer or the fuel is marine diesel, a declaration is not needed.

According to the petition, declarations were obtained from customers who paid in store but not from those who paid at the pump and that sales at the pump are not visible to the cashier but rather credited to the station's fuel supplier, Husky Oil.

Kidd paid the assessment but is disputing the finding through lawyer Dan Marcotte. 

In part, Marcotte claims in the petition that the tax violates the separation of powers between the federal and provincial government as set out in the constitution. 

Specifically, he says the tax in question is "indirect" and so, can only be imposed by the federal government. He says provinces are limited to imposing "direct" taxes defined as those "demanded from the very person who, it is intended or desired, should pay it." Conversely, an indirect tax is "demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another." 

Additionally, Marcotte claims the process for determining the amount owed was unfair. The assessment was based on an audit by the ministry's consumer taxation branch in which three month-long "test periods" were used to derive an assessment for a 25-month period.

While the branch asserts in a notice of assessment that the months represented a "high, low and average sales month," Marcotte and Kidd contend two - May 2016 and July 2017 - were actually "nice weather months" when sales volumes are at their highest while the third - November 2015 - was "during hunting season and because of that, it is not a low sales month."

They also claim the Act provides no legislative authority to impose a penalty based on an estimate.

The allegations have not been tested in court and a response from the defendant has not yet been filed.