DATE: 20061109

DOCKET: C44581

COURT OF APPEAL FOR ONTARIO

RE: THE BLUE HERON COMPANY LIMITED (Appellant) – and – THE MINISTER OF FINANCE (Respondent)

BEFORE: LASKIN, MacPHERSON AND LANG JJ.A.

COUNSEL: Douglas A. Grace for the appellant

Dona M.H. Salmon for the respondent

HEARD: November 3, 2006

On appeal from the judgment of Justice Michael H. Tulloch of the Superior Court of Justice, dated November 15, 2005.

E N D O R S E M E N T

[1] This is an appeal from the decision of Tulloch J. affirming the assessment of the Minister of Finance, who assessed retail sales tax against the appellant.

[2] The appellant would be exempt from retail sales tax under the Retail Sales Tax Act, R.S.O. 1990, c. R. 31, s. 7(1) 61 if its boats, which are less than 1400 cubic metres, were operating for “commercial purposes.” The definition of “commercial purposes” in R.R.O. 1990, Reg. 1012 includes “the use of a vessel for regularly scheduled public transportation services for profit or with a view to profit”. The definition specifically excludes from the exemption “the operation of boats for tourists” and “the operation of boats for charter or tour services that may or may not make scheduled stops incidental to the service”.

[3] The trial judge defined the issue as “whether the use of the vessels is exclusively for the legislative purpose”; that is, for public transportation because, in his view, “the Act intends to exempt transportation services but not tourist services.”

[4] In concluding that the appellant was providing “a tourist opportunity” rather than a transportation service, the trial judge acknowledged that the boats transported the public on a regular, published schedule. Further, the trial judge recognized that the appellant would not be disentitled to the exemption simply because some passengers on board were also tourists. However, although the boats occasionally transported passengers from Tobermory to Flower Pot Island for scientific purposes or for purposes related to the lighthouse, he concluded that the boats operated primarily for the purpose of providing scenic tours. That conclusion was based on the trial judge’s factual findings, including that the principal boat was equipped with a glass bottom to permit passengers to view the 19th century shipwrecks en route to the uninhabited Flower Pot Island, which is a National Park.

[5] Importantly, to view the shipwrecks, that boat routinely took a scenic route through a restricted area, a route that was longer than would be necessary for the purposes of transportation. The trial judge also considered the appellant’s own brochures promoting the boats for the purpose of a “Flower Pot Island Cruise.” Those brochures described the service as a glass bottom boat tour of shipwrecks, Cove Island Harbour and the lighthouse. They also advertised the option of a shorter tour that did not involve disembarkation. Finally, the trial judge noted that the boats’ owner is engaged generally in the tourist business in the area.

[6] For these reasons, the trial judge made a clear factual finding that the primary purpose of the boats was for tourist rather than transportation purposes.

[7] We see no basis to interfere with the trial judge’s findings or the conclusion that follows that, even if the boats were used “exclusively” for regularly scheduled public transportation purposes, in pith and substance their purpose was for the “operation of boats for tourists.”

[8] In addition, the appellant argues that the trial judge erred in failing to address its position that the expenses incurred in refitting the boats were not operating but capital costs and, for that reason, were exempt from retail sales tax. This argument is based on the wording of the act that excludes from the retail sales tax exemption “the operation” of boats. However, s. 2(1) of the Act levies the tax on “tangible personal property” purchased for use or consumption. It is irrelevant that the purchase of the property is for capital purposes.

[9] Accordingly, the appeal is dismissed. As the issue raised is a novel one, there will be no order for costs.

“John Laskin J.A.”

“J.C. MacPherson J.A.”

“S.E. Lang J.A.”