The Province of Manitoba assessed Air Canada for retail sales tax on its aircraft, repair parts, and services used during overflights through Manitoba airspace and temporary stopovers, as well as on liquor served to passengers.
Air Canada successfully challenged the assessment in the Manitoba courts.
On appeal to the Supreme Court of Canada, the Court held that the mere entry of aircraft into the airspace over Manitoba does not give the aircraft a situs within the Province to support a tax under section 92(2) of the British North America Act.
The Court further found that the taxing statute itself did not capture overflights or temporary stopovers, as there was no bringing of property into the Province or consumption within it.
The appeal was dismissed.
