A primary goal of every business owner is to maximize the profitability of their enterprise. While one way to do that is to increase revenue, another is to minimize costs whenever possible. For businesses that utilize machinery, trucks, and other equipment that use some form of gasoline, there are tax rebates available on the amounts paid each year. Even though gasoline costs less these days as a result of the pandemic, business owners should ensure they are applying for and receiving, the maximum allowable rebates on their gasoline expenses and usage.
Which Businesses are Eligible for Gasoline Tax Rebates?
There are taxes on all forms of gasoline at the time of purchase, however, a refund of the taxes paid may be claimed by any business, industry, or institution for gasoline used in equipment or vehicles that are not licensed or required to be licensed under the Highway Traffic Act.
Let’s take it a step further and give provide some examples of equipment that would qualify under the program:
- farming equipment, such as unlicensed tractors or combines;
- construction equipment, including unlicensed bulldozers and graders;
- forestry equipment, such as unlicensed skidders or slashers;
- commercial fishing vessels;
- construction workboats.
Situations which would not qualify for the rebate program include:
- gasoline used for licensed vehicles (see exception below for auxiliary equipment on licensed vehicles); and
- instances where gasoline is purchased in Ontario but is used outside of Ontario
Refunds for Power Take Off (PTO) Operations
A Power Take Off (PTO) operation refers to auxiliary functions of licensed motor vehicles, which allow for a partial tax rebate on vehicles that would otherwise not qualify under the program because they are licensed. Examples of these types of vehicles and equipment include:
- paper shredding trucks
- cement mixers
- power vacuums and blowers
- cranes and lifts
- refrigeration units
To qualify for the refund, the licensed vehicle cannot be principally used for the transportation of passengers or for pleasure or recreational uses.
In most of these cases, it is not possible to accurately measure the amount of gasoline used by the auxiliary equipment. As a result, refund allowances are based on the equipment manufacturer’s fuel consumption specifications as approved by the ministry. Refund allowances have been established for a number of PTO operations and are available on request from the ministry, though some are spelled out here.
General Eligibility Information
As a quick reference, the Ontario government has provided the chart below spelling out various taxable and refundable uses of fuel under the Gasoline Tax Act. Notably, propane is not taxed for most uses in a way that is similar to the tax levied on gasoline, and therefore, there is no tax refund available.
How to Claim a Gasoline Tax Refund for Your Business
An application for a refund must be completed and submitted to the Ministry within four years from the date the tax for which a refund is sought was paid. Any portion of a claim filed after this time period will be disallowed. Purchase invoices pertaining to the claim must be submitted with the refund application. Invoices will not be returned unless requested by the applicant at the time of filing. You can request to have your rebates deposited directly to your bank account.
A permanent reference number is assigned to each refund claimant, which should then be quoted when corresponding with the Ministry about future gasoline tax refunds.
Important: There are penalties for misrepresentation of any material facts on the refund application or on any document used to support the application. No refund will be paid if an applicant misrepresented a material fact on an invoice submitted in support of a refund claim.
If you want more information and advice on how to take advantage of this refund and other ways your business can save on expenses to maximize profits, our team can help. We regularly assist business owners with tax saving strategies to maximize their profitability. Please contact the experienced Chartered Professional Accountants at Edelkoort Smethurst Schein CPAs LLP by calling 905-517-2297 or reaching out online.