The appellants challenged the constitutional validity of Newfoundland's Mining and Mineral Rights Tax Act, 1975, arguing that the tax imposed on royalties received for granting mining rights was an indirect tax and therefore ultra vires the province.
The Supreme Court of Canada held that the tax was a direct tax on income, not a tax on gross revenue or a commodity tax intended to be passed on to consumers.
The Court also held that the tax applied to the appellants, despite the royalties being received outside the province, because the income was derived from mining rights within Newfoundland.
The appeal was dismissed.
