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Tax dispute over sale of 'coloured gas' remains before the court

Kidd Ventures Ltd. on the hook for $221,495.85 in uncollected revenue, interest and penalty, the provincial government alleges

The B.C. government has not given up on its effort to collect more than $220,000 in allegedly foregone tax revenue, interest and penalty from the sale of "coloured fuel" at a Prince George gas station.

Nearly a year-and-a-half after a petition was filed in B.C. Supreme Court on behalf of Kidd Ventures Ltd., (KVL) seeking to have an assessment issued by the Ministry of Finance overturned, the province filed a response on December 9 seeking to dismiss the action.

At stake is $221,495.85, made up of $192,918.98 that the province claims KVL failed to collect from patrons at the KG CornerStore gas station on the Hart Highway, plus $27,730.80 in interest and a $846.07 penalty for allegedly failing to secure declarations until after sales of the fuel.

Also known as "marked" or "dyed" fuel, it 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. 

According to KVL's petition, 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. But the ministry asserts the business failed to follow proper procedure when it came to verifying that the fuel will not be used for travel on public roads.

According to the province, KVL has been authorized to sell the fuel since 2010 but, in July 2015, was required to use a new form to obtain declarations from purchasers. The month before, an information package was sent to KVL and, in turn, KVL president Bruce Kidd signed an agreement setting out the business' obligations as an authorized seller and sent it back to the Ministry of Finance.

Over the course of the next two years, an inspector selected three test months to determine compliance and concluded there was "pervasive non-compliance." The inspector estimated that KVL did not obtain the required declarations for 86 per cent of the 981,943 litres of coloured diesel sold, working out to $101,078.46 in unpaid tax, and for 72 per cent of the 1,110,378.75 litres of coloured premium sold, for a further $91,840.53 in uncollected tax.

Dealers are required to obtain declarations from customers who buy the fuel through a cardlock system or have purchased 45 litres or more from a retail pump. One of the pumps at KG CornerStore sold regular gas, coloured premium gas and coloured diesel and none of the pumps where the product was available was locked, according to the province. Declarations were obtained only if the customer paid in store, the government further alleges.

KVL has challenged the validity of the assessment, arguing that the penalties are estimates extrapolated from the sample periods and therefore are not permitted. In the alternative, KVL argues that methodology used to obtain the estimates was flawed. 

In reply, the government says KVL has not provided evidence of an alternate amount that would yield a lower total.

KVL did not provide sufficient records to allow a calculation on a "transaction by transaction basis and, in any case, it would be inefficient and disruptive to KVL's business to do so," the province also said and added KVL does not dispute that it failed to obtain the declarations and collect the tax and has "not disproven the assessment." 

None of the allegations have yet been tested in court.

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