Understanding Canada's Temporary GST/HST Relief on Certain Goods 2024

The Federal government has proposed a temporary removal of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) on certain qualifying goods at checkout, effective from December 14, 2024 to February 15, 2025.

‍Confusion Surrounding the Definition of "Children's Clothing"

‍One area of potential confusion is the detailed definition of "children's clothing." A possible reference point is the Ontario Regulation R.R.O. 1990, Reg. 1013, s. 1(1), which defines "children's clothing" as:

1. 1. Children's dresses, suits, coats, blouses, sweaters, undershirts, pyjamas,  combinations, snowsuits, overalls, and other children's garments that fit the upper half of or the whole body up to and including girl's "Canada Standard Size" 16 or boy's "Canada Standard Size" 20, or sweaters designated as girls' or boys' and sized small, medium, or large.
   2. ‍Children's trousers, slacks, jeans, slims, undershorts, briefs, outer  shorts, and other children's garments that fit at or below the waist up to and including girl's "Canada Standard Size" 16 or boy's "Canada Standard Size" 20.
   3. ‍Dress and sport shirts designated for boys up to and including size 37 neck.
   4. ‍Children's hosiery or stretchy socks, hats, and gloves in styles designated for children.

This definition leaves some parents dissatisfied, as these sizes may not align with the actual sizes of many children. Additionally, ambiguity exists around garments used "exclusively in sports or recreational activities," raising questions about the interpretation of "exclusive use."

‍Interpreting "Exclusive Use" Through Legal Precedents

‍To understand what "exclusive use" entails, we can look to legal definitions and case law for guidance.
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The Encyclopedic Dictionary of Canadian Law, Kevin P. McGuinness defines "exclusive" as "Excluding or not admitting other things; to the exclusion of everything else" and the meaning of "exclusive" can come from the Excise Tax Act, RSC 1985, c E-15, Section 123:

1. 1. In respect of the consumption, use, or supply of property or a service by a person that is not a financial institution, all or substantially all of the consumption, use, or supply of the property or service.
   2. In respect of the consumption, use, or supply of property or a service by a financial institution, all of the consumption, use, or supply of the property or service.

The Dual Elements of "Use" Sevy v Canada, 2004 TCC 634 at para 20, further elaborates on the concept of "use":

• 20 "Use" is defined in the Canadian Oxford Dictionary as follows: "to employ something for a particular purpose." This denotes two elements: an actual employment of something and a purpose. ... Though this "use" may seem minimal, there was no other use, and consequently even a modicum of use constitutes actual employment of the land.
• 21 I turn to the second element of "use"—purpose. What was the purpose of the Penticton property? The Respondent suggests the answer is that it was to operate a feedlot. There was a broader way of defining the purpose, and certainly one which Mr. Sevy emphasized; that is, to make the ranch financially viable. If that is what the property is intended for, lack of success in achieving financial viability does not negate that intention.

‍‍Application to Children's Clothing

Applying the interpretation from Sevy, if clothing is employed by a child wearing it for a given purpose, its use is evident. However, the interpretation of "exclusive" introduces the need to assess how much the primary and secondary purposes contribute to the employment of the garment. This may depend on the percentage that the trier of fact chooses when rendering judgment. For instance, a pair of children's leggings might be used for both casual wear and sports activities. Determining whether such an item is excluded due to "exclusive use" in sports could become a point of contention.

The Hospitality Industry

A significant question is how bars and restaurants will handle the tax changes, particularly concerning mixed beverages. Taking the classic rum and coke as an example, traditionally, a pre-mixed rum and coke is taxed at 13%. However, bars might consider selling the rum and coke separately, allowing customers to mix them themselves.

Other Ambiguities and Considerations

There are additional areas of ambiguity that warrant attention. One such area is the vagueness surrounding which toys would qualify under the new policy. It's unclear how suppliers might adjust the labeling oft heir products to fit the qualifying criteria

THE INFORMATION PROVIDED IN THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE. FISZMAN TAX LAW RECOMMENDS CONSULTING A QUALIFIED LAWYER FOR ADVICE PERTAINING TO YOUR SPECIFIC SITUATION.