Union of New Brunswick Indians v. New Brunswick (Minister of Finance), 1998 CanLII 783 (SCC), [1998] 1 SCR 1161

Union of New Brunswick Indians v. New Brunswick (Minister of Finance), [1998] 1 S.C.R. 1161

The Minister of Finance for the Province of New Brunswick and the Provincial Sales Tax Commissioner for the Province of New Brunswick Appellants

v.

Union of New Brunswick Indians and Paul David Leonard Tomah,

suing on his own behalf and on behalf of all New Brunswick Indian Bands

and their members Respondents

and

The Attorney General of Canada,

the Attorney General of Manitoba,

the Attorney General of British Columbia,

the Attorney General for Alberta,

the Grand Council of the Crees (Eeyou Estchee),

the Cree Regional Authority,

Matthew Coon Come, Violet Pachanos and Bill Namagoose Interveners

Indexed as: Union of New Brunswick Indians v. New Brunswick (Minister of Finance)

File No.: 25427.

1998: March 25; 1998: June 18.

Present: Lamer C.J. and Gonthier, Cory, McLachlin, Iacobucci, Major and Binnie JJ.

on appeal from the court of appeal for new brunswick

Indians ‑‑ Taxation ‑‑ Reserves ‑‑ Indian Act exempting goods on-reserve from taxation ‑‑ Whether goods purchased off‑reserve for use on‑reserve subject to provincial sales tax ‑‑ Indian Act, R.S.C., 1985, c. I‑5, s. 87 ‑‑ Social Services and Education Tax Act, R.S.N.B. 1973, c. S‑10, ss. 1 “consumer”, “purchaser”, “retail sale”, 4, 5, 8, 16.

New Brunswick’s Social Services and Education Tax Act levies a tax on items sold for consumption at the time of the sale. In 1993, a provision giving status Indians an exemption from paying provincial sales tax on goods purchased off‑reserve for on‑reserve use was repealed so that only goods and services purchased on reserve lands or delivered there by the vendor were sales tax exempt. The respondents brought a test case involving items for personal use and consumption which had been purchased by Indians off the reserve for use on the reserve. The trial judge concluded that s. 87 of the Indian Act, which exempts goods on reserves from taxation, applies only to property actually situated on a reserve. A majority of the Court of Appeal reversed this decision. At issue here is whether New Brunswick Indians were required to pay provincial sales tax on goods purchased off the reserve for consumption on the reserve. The constitutional question queried whether, if as a matter of statutory interpretation s. 87 of the Indian Act prohibits taxation of tangible personal property purchased off-reserve, New Brunswick’s Social Services and Education Tax Act was rendered inoperative to the extent of the inconsistency with s. 87.

Held (Gonthier and Binnie JJ. dissenting): The appeal should be allowed. New Brunswick’s Social Services and Education Tax Act is not inconsistent with s. 87 of the Indian Act because that section does not prohibit taxation in respect of tangible personal property purchased off-reserve even if destined for use on-reserve.

Per Lamer C.J. and Cory, McLachlin, Iacobucci and Major JJ.: Section 87 of the Indian Act applies only to property physically located on a reserve at the time of taxation or property whose paramount location is on a reserve at the time of taxation. This comports with the purpose of s. 87, which is to protect the property of Indians on reserves and prevent that property from being eroded. In determining the applicability of s. 87, one must consider whether the property is located or has its paramount location on a reserve at the time and place that the tax would otherwise attach. In the context of retail sales taxes, this can be called the “point of sale” test.

Provincial sales taxes when imposed on retail sales are sales taxes and not taxes on consumption, notwithstanding references to “consumer” and “consumption”. This sort of language is used to define the taxpayer and so avoid the charge of indirect taxation. It has been repeatedly held to impose a sales tax, not a consumption tax. Sections 1, 4 and 5 of the Social Services and Education Tax Act, when read together, impose a direct retail sales tax that fixes on the transaction of sale and is calculated on the fair value of the goods. In the case of a retail sale, the act of purchase, not the act of consumption, triggers liability for the sales tax. For the purposes of these sections, it is largely irrelevant how, why, where, when, and by whom they are consumed once they have been purchased at a retail sale within the province. If there is a sale but no consumption, the sales tax is still payable. If the sales tax were a true consumption tax, each use of taxable goods by the ultimate consumer would attract tax liability.

The “paramount location” test, which has been used to protect Indian property normally situated on the reserve from being taxed or seized while off‑reserve, should not be applied to sales taxes on tangible goods. Sales taxes attach at the moment of sale and the property at this point cannot have its paramount location elsewhere than the point of sale because no pattern of use and safekeeping has been established. The location of property after the sale and the imposition of sales tax is irrelevant. Goods purchased off‑reserve therefore attract tax, while goods purchased on‑reserve are exempt, regardless of where the purchaser may intend to use them. To make taxation dependent on the place of anticipated use would render the administration of the tax uncertain and unworkable. Where the location of the property at the time of taxation is readily apparent, the “paramount location” test need not be applied.

To apply s. 87 to sales tax levied off‑reserve on goods purchased by Indians for use on the reserve would take the purpose of s. 87 far beyond preventing the erosion of on-reserve Indian property which this Court articulated to be the purpose of s. 87. Such an extension flies in the face of the wording of s. 87(1)(b), which confines the protection from taxation to property situated on a reserve. The history of s. 87 also belies the conclusion that Parliament intended it to provide general tax protection for property intended for on-reserve use. Finally, providing a tax exemption to Indians for property purchased off‑reserve will not necessarily benefit Indians uniformly. Adopting the “paramount location” test would have adverse consequences for Indians who live off the reserve because they would presumably have to pay tax on goods purchased on-reserve for use off the reserve.

The “point of sale” test is beneficial to on‑reserve Indians in many parts of Canada. First, it provides an incentive for Indians to establish their own retail outlets on reserves and gives a competitive edge to reserve businesses, thereby increasing economic activity and employment. Second, the “point of sale” approach to the tax exemption permits reserves to impose their own taxes on reserve sales, thus creating a tax base for aboriginal governments. These considerations belie the conclusion that s. 87, by its object and purpose, must be read as intending to exempt Indians from all sales taxes, whether on or off a reserve, on property used on reserves.

Per Gonthier and Binnie JJ. (dissenting): The expression “situated on a reserve” bears the same interpretation in s. 87(1) of the Indian Act as it does elsewhere in that statute and should not be extended in an artificial or conceptual way to cover personal property that is not physically situated on a reserve at the critical time. Indian people cannot be expected to live reasonably on the reserve without making purchases. If the goods are not available locally, then purchases will have to be made off-reserve to enable the Indians to enjoy a reasonable standard of life on the reserve. Exemption of such goods from taxation in these circumstances is consistent with the purpose of s. 87(1).

New Brunswick, having levied a tax explicitly “in respect of consumption” to finesse any constitutional challenge to its constitutional validity based on the tax being construed as an indirect tax beyond provincial competence, should not be relieved of the consequences of that design feature when the statute is subjected to scrutiny under s. 87 of the Indian Act. If in fact the New Brunswick tax had been charged in respect of the transaction of purchase and sale, then the tax (subject to any constitutional infirmities) would be an exigible as neither the purchaser nor the goods were situated on a reserve at the time of the transaction. However, s. 4 of the Social Services and Education Tax Act imposes the tax in “respect of consumption”, and the critical time is therefore the time of consumption, not the time when the goods were purchased. At the time of consumption, the goods are “primarily located” on the reserve. While the legislation identifies a retail sale as a condition precedent to taxation where goods are purchased in the province, such a condition precedent cannot reasonably be characterized as the subject matter of the tax.

In any event, given that some of the key provisions of the Act are ambiguous in their meaning and effect and since any ambiguities should be resolved in favour of the Indian taxpayers, s. 87 applies. The assurance, expressed in earlier cases, that s. 87 is designed to give status Indian people a meaningful tax choice in the location of their personal property should not be defeated.

The “pattern of use and safekeeping” which controls the tax treatment under s. 87(1) is not necessarily the situs of the personal property at the moment of acquisition. Even if some importance is to be attached to situs at that moment, the issue here is not unidimensional, and the circumstances of acquisition should be placed in the larger “pattern” or context of the realities of life on a New Brunswick reserve. The “paramount location” approach reflects a purposive approach to s. 87(1)(b), and confirms the appropriateness of a tax exemption in this case.

The purpose of s. 87 was not to allow merchants on reserves to compete on a tax-free basis with off-reserve merchants for business in the broader community. In terms of financing Indian self-government, the present wording of s. 87 is not immutable. The s. 87 exemption is the creature of an ordinary federal statute and can be expanded or redefined as Parliament sees fit. Thus neither of these objectives offers a valid policy justification for interpreting the tax as exigible here.

Cases Cited

By McLachlin J.

Considered: Williams v. Canada, 1992 98 (SCC), [1992] 1 S.C.R. 877; Simpsons‑Sears Ltd. v. Provincial Secretary (N.B.), 1978 211 (SCC), [1978] 2 S.C.R. 869; distinguished: Leighton v. British Columbia (1989), 1989 251 (BC CA), 57 D.L.R. (4th) 657; Attorney‑General for British Columbia v. Kingcome Navigation Co., 1933 320 (UK JCPC), [1934] A.C. 45; referred to: Nowegijick v. The Queen, 1983 18 (SCC), [1983] 1 S.C.R. 29; Francis v. The Queen, 1956 79 (SCC), [1956] S.C.R. 618; Mitchell v. Peguis Indian Band, 1990 117 (SCC), [1990] 2 S.C.R. 85; Leonard v. R. in Right of British Columbia (1984), 1984 535 (BC CA), 52 B.C.L.R. 389; R. v. Lewis, 1996 243 (SCC), [1996] 1 S.C.R. 921; Brown v. The Queen in right of British Columbia (1979), 1979 559 (BC CA), 107 D.L.R. (3d) 705; Danes v. The Queen in right of British Columbia (1985), 1985 400 (BC CA), 18 D.L.R. (4th) 253; Attorney‑General for British Columbia v. Canadian Pacific Railway Co., 1927 482 (UK JCPC), [1927] A.C. 934; Atlantic Smoke Shops, Ltd. v. Conlon, 1943 372 (UK JCPC), [1943] A.C. 550; Air Canada v. British Columbia, 1989 95 (SCC), [1989] 1 S.C.R. 1161; Miawpukek Indian Band v. Newfoundland (Minister of Finance) (1995), 1995 6253 (NL SC), 130 Nfld. & P.E.I.R. 164; Brooks (J.E.) and Associates Ltd. v. Kingsclear Indian Band (1991), 1991 4002 (NB CA), 118 N.B.R. (2d) 290.

By Binnie J. (dissenting)

Williams v. Canada, 1992 98 (SCC), [1992] 1 S.C.R. 877; Nowegijick v. The Queen, 1983 18 (SCC), [1983] 1 S.C.R. 29; Mitchell v. Peguis Indian Band, 1990 117 (SCC), [1990] 2 S.C.R. 85; Francis v. The Queen, 1956 79 (SCC), [1956] S.C.R. 618; Simpsons‑Sears Ltd. v. Provincial Secretary (N.B.), 1978 211 (SCC), [1978] 2 S.C.R. 869; Attorney‑General for British Columbia v. Canadian Pacific Railway Co., 1927 482 (UK JCPC), [1927] A.C. 934; Attorney‑General for British Columbia v. Kingcome Navigation Co., 1933 320 (UK JCPC), [1934] A.C. 45; Air Canada v. British Columbia, 1989 95 (SCC), [1989] 1 S.C.R. 1161; Miawpukek Indian Band v. Newfoundland (Minister of Finance) (1995), 1995 6253 (NL SC), 130 Nfld. & P.E.I.R. 164.

Statutes and Regulations Cited

Budget Implementation Act, 1997, S.C. 1997, c. 26.

Constitution Act, 1867, s. 92(2).

Indian Act, R.S.C., 1985, c. I‑5, ss. 87, 88, 89(1) [rep. & sub. c. 17 (4th Supp.), s. 12], (2).

Social Services and Education Tax Act, R.S.N.B. 1973, c. S‑10, ss. 1 “consumer”, “purchaser” [rep. & sub. S.N.B. 1983, c. 86, s. 1(b)], “retail sale” [idem, s. 1(c)], 4 [idem, s. 2; am. 1985, c. 68, s. 2(a)], 5(1) [rep. & sub. 1979, c. 67, s. 2; am. 1983, c. 86, s. 3; am. 1993, c. 66, s. 1(a)], (2) [ad. 1993, c. 66, s. 1(b)], 8(1) [rep. & sub. 1979, c. 67, s. 3(a); am. 1983, c. 85, s. 1], 16 [rep. & sub. 1979, c. 67, s. 6].

Authors Cited

Bartlett, Richard H. Indians and Taxation in Canada, 3rd ed. Saskatoon: Native Law Centre, University of Saskatchewan, 1992.

Hogg, Peter W. and Mary Ellen Turpel. “Implementing Aboriginal Self‑Government: Constitutional and Jurisdictional Issues” (1995), 74 Can. Bar Rev. 187.

Maritimes Tax Reporter (loose‑leaf). Don Mills, Ont.: CCH Canadian Ltd., 1993.

Reiter, Robert Alan. Tax Manual for Canadian Indians. Edmonton: First Nations Resource Council, 1990.

APPEAL from a judgment of the New Brunswick Court of Appeal (1996), 1996 4806 (NB CA), 178 N.B.R. (2d) 1, 454 A.P.R. 1, 135 D.L.R. (4th) 193, [1997] 1 C.N.L.R. 213, [1996] N.B.J. No. 258 (QL), allowing an appeal from a judgment of Savoie J. (1994), 1994 10042 (NB QB), 148 N.B.R. (2d) 351, 378 A.P.R. 351, 115 D.L.R. (4th) 292, 2 G.T.C. 7178, [1995] 1 C.N.L.R. 210, [1994] N.B.J. No. 212 (QL). Appeal allowed, Gonthier and Binnie JJ. dissenting.

Bruce Judah, Q.C., for the appellants.

P. John Landry and Lewis F. Harvey, for the respondents.

John R. Power, Q.C., and Sandra Phillips, for the intervener the Attorney General of Canada.

Kenneth J. Tyler and Stewart J. Pierce, for the intervener the Attorney General of Manitoba.

Patrick G. Foy, Q.C., and Hunter W. Gordon, for the intervener the Attorney General of British Columbia.

Robert J. Normey, for the intervener the Attorney General for Alberta.

John Hurley, for the interveners the Grand Council of the Crees (Eeyou Estchee), the Cree Regional Authority, Matthew Coon Come, Violet Pachanos and Bill Namagoose.

The judgment of Lamer C.J. and Cory, McLachlin, Iacobucci and Major JJ. was delivered by

McLachlin J. --

I. Introduction

1This case requires the Court to rule whether Indians living in New Brunswick were required to pay provincial sales tax on goods purchased off the reserve for consumption on the reserve.

2Prior to April 1, 1993, Indians in New Brunswick were generally exempt from paying provincial sales tax under the Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10. The exemption was repealed in 1993 and the New Brunswick Sales Tax Commissioner issued sales tax notices that status Indians were only exempt from sales tax on goods and services purchased on or delivered by the vendor to reserve lands. The respondent Indians bring a test case challenging this. They argue that s. 87 of the Indian Act, R.S.C., 1985, c. I-5, which exempts Indians from taxation on “property . . . situated on a reserve”, prohibits taxation on off-reserve sales where the property is intended to be used on a reserve.

II. Judgments Below

3At trial ((1994), 1994 10042 (NB QB), 148 N.B.R. (2d) 351), Savoie J. concluded that s. 87 applies only to property actually situated on a reserve. The sales tax is charged and collected at the point of sale. At this point, the property is not on a reserve. It follows that the tax is not prohibited by s. 87 of the Indian Act.

4The majority of the New Brunswick Court of Appeal ((1996), 1996 4806 (NB CA), 178 N.B.R. (2d) 1), per Bastarache J.A. (as he then was) rejected Savoie J.’s conclusion that s. 87 applies only to property located on a reserve. It held that s. 87 confers on Indians the right to use or consume personal property on the reserve without taxation. Since most property consumed or used on-reserve in New Brunswick is purchased off-reserve, the right would be meaningless without the right to purchase goods off-reserve tax-free. Therefore, s. 87 must extend to purchases off the reserve. Hoyt C.J. (Turnbull J.A. concurring) dissented, holding that the only purpose of s. 87 was to protect Indians from being dispossessed of their on-reserve personal property by taxation.

III. Statutory Provisions

5 Indian Act, R.S.C., 1985, c. I-5

87. (1) Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to s. 83, the following property is exempt from taxation, namely,

(a) the interest of an Indian or a band in reserve lands or surrendered lands; and

(b) the personal property of an Indian or a band situated on a reserve.

(2) No Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (1)(a) or (b) or is otherwise subject to taxation in respect of any such property.

88. Subject to the terms of any treaty and any other Act of Parliament, all laws of general application from time to time in force in any province are applicable to and in respect of Indians in the province, except to the extent that those laws are inconsistent with this Act or any order, rule, regulation or by-law made thereunder, and except to the extent that those laws make provision for any matter for which provision is made by or under this Act.

89. (1) Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian or a band.

(2) A person who sells to a band or a member of a band a chattel under an agreement whereby the right of property or right of possession thereto remains wholly or in part in the seller may exercise his rights under the agreement notwithstanding that the chattel is situated on a reserve.

Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10

1 . . .

“consumer” means a person who

(a) utilizes or intends to utilize within the Province goods for his own consumption, or for the consumption of any other person at his expense, or

(b) utilizes or intends to utilize within the Province goods on behalf of or as the agent for a principal, who desired or desires to so utilize such goods for consumption by the principal or by any other person at the expense of the principal;

“purchaser” means a consumer who acquires goods at a retail sale within the Province and includes also

(b) a person who purchases services;

“retail sale” means a sale to a consumer for the purpose of consumption and not for resale and includes a sale of services to a purchaser;

4 Every consumer of goods consumed within the Province and every purchaser of services purchased within the Province shall pay to the Minister for the raising of revenue for Provincial purposes a tax in respect of the consumption of such goods or purchase of such services, computed at the rate of eleven per cent of the fair value of such goods or services. . . .

5(1) In the case of a retail sale within the Province, the tax shall be payable by the purchaser at the time of purchase on the fair value of the goods or services.

5(2) Notwithstanding subsection (1), in the case of a retail sale within the Province of goods that are used or consumed within the Province and are used or consumed frequently or substantially outside the Province, the purchaser shall report the matter to the Commissioner in accordance with the regulations and shall pay the tax on such goods at such time and in such manner as the Commissioner requires.

8(1) Every person who consumes within the Province goods acquired by him for resale, or who consumes within the Province goods manufactured, processed, produced or purchased by him within or without the Province, shall for the purposes of this Act, be deemed to have purchased the goods at a retail sale in the Province on the day that he begins to consume the goods within the Province.

IV. Analysis

6 This appeal requires us to decide whether s. 87 of the Indian Act applies to tax levied under the former New Brunswick Social Services and Education Tax Act. The provisions of both statutes must be interpreted and analyzed to determine whether the s. 87(1)(b) exemption applies to the sales tax on the property in question: see Williams v. Canada, 1992 98 (SCC), [1992] 1 S.C.R. 877. In the event of ambiguity, the interpretation that most favours the Indians is to be preferred: see Nowegijick v. The Queen, 1983 18 (SCC), [1983] 1 S.C.R. 29.

A. The Application of Section 87 of the Indian Act

7 Section 87(1) of the Indian Act exempts certain property of Indians from taxation. This includes “the personal property of an Indian or a band situated on a reserve”: see s. 87(1)(b). Section 87(2) describes the types, or modalities, of taxation on the exempted property that are prohibited: taxation “in respect of the ownership, occupation, possession or use of” the property mentioned in s. 87(1).

8 The purpose of the s. 87 exemption was to “preserve the entitlements of Indians to their reserve lands and to ensure that the use of their property on their reserve lands was not eroded by the ability of governments to tax, or creditors to seize”. It “was not to confer a general economic benefit upon the Indians”: see Williams, supra, at p. 885.

9 In the past, s. 87(1)(b) has been confined to property physically situated on a reserve or property whose “paramount location” is on a reserve.

10 In Francis v. The Queen, 1956 79 (SCC), [1956] S.C.R. 618, the Court, per Kellock J., stated at p. 631:

It is quite plain from this section that the actual situation of the personal property on a reserve is contemplated by s. 86 [now s. 87] and that any argument suggesting a notional situation is not within the intendment of that section.

11 In Mitchell v. Peguis Indian Band, 1990 117 (SCC), [1990] 2 S.C.R. 85, at p. 132, La Forest J. approved and quoted the comments of Macfarlane J.A. in Leonard v. R. in Right of British Columbia (1984), 1984 535 (BC CA), 52 B.C.L.R. 389 (C.A.), at p. 395:

It is a reasonable interpretation of the section to say that a tax exemption on the personal property of an Indian will be confined to the place where the holder of such property is expected to have it, namely on the lands which an Indian occupies as an Indian, the reserve. [Emphasis in original.]

In response to the argument that Parliament intended the privileges of ss. 87 and 89 to protect all property, regardless of where that property is situated, La Forest J. continued at p. 144:

. . . such an interpretation takes one beyond the liberal and the generous and subverts the very character of the commitments that the Crown has historically undertaken vis-à-vis the protection of native property.

12 Again, in Williams, supra, the Court, per Gonthier J. confirmed the approach in Mitchell in determining whether the situs of unemployment insurance benefits was on or off the reserve for the purposes of taxation. As the benefits, intangible personal property, were effectively on the reserve at the time of taxation, they were exempt from taxation pursuant to s. 87.

13 In R. v. Lewis, 1996 243 (SCC), [1996] 1 S.C.R. 921, at p. 959, this Court, per Iacobucci J., held that the phrase “on the reserve” in s. 81(1)(o) of the Indian Act should be given its ordinary and common sense meaning, namely “within the reserve”, “inside the reserve”, or “located upon or within the boundaries of the reserve”. The Court had earlier stated at p. 955 that the phrase should be given the same construction wherever it is used throughout the Indian Act. The phrase “situated on a reserve” should be interpreted in the same way. The addition of the word “situated” does not significantly alter the meaning of the phrase in the circumstances of this case: see also Brown v. The Queen in right of British Columbia (1979), 1979 559 (BC CA), 107 D.L.R. (3d) 705 (B.C.C.A.), at p. 713, and Danes v. The Queen in right of British Columbia (1985), 1985 400 (BC CA), 18 D.L.R. (4th) 253 (B.C.C.A.), at p. 257.

14 The only qualification the case law admits to the rule that s. 87 catches only property physically located on a reserve is the rule that where property which was on a reserve moves off the reserve temporarily, the court will ask whether its “paramount location” is on the reserve. If it is, s. 87 will apply to prevent taxes being levied on property while it is off the reserve: see Leighton v. British Columbia (1989), 1989 251 (BC CA), 57 D.L.R. (4th) 657 (B.C.C.A.).

15 These authorities suggest that s. 87 applies only to property physically located on a reserve at the time of taxation or property whose paramount location is on a reserve at the time of taxation. This comports with the purpose of s. 87 to protect the property of Indians on reserves and prevent that property from being eroded: see Williams, supra. In determining the applicability of s. 87, one must consider whether the property is located or has its paramount location on a reserve at the time and place that the tax would otherwise attach. In the context of retail sales taxes, this can be called the “point of sale” test.

16 The remaining question, therefore, is whether the sales tax here at issue is levied on property while it is situated, or has its paramount location on a reserve. The property described in the stated case consists of items for personal use and consumption like clothing and toiletries, purchased by Indians off the reserve for use on the reserve. The Social Services and Education Tax Act levies the tax on these items at the time of the off-reserve sale. At the point of sale, the property is not, and has never been located on a reserve. This, without more, suggests that the tax is not levied on goods situated on a reserve or whose paramount location is on a reserve. This would accord with the general view expressed by Richard H. Bartlett, Indians and Taxation in Canada (3rd ed. 1992), at p. 92:

The reasoning employed by the Supreme Court of Canada [in Francis] appears applicable to the imposition of sales tax at the point of sale off a reserve. In the vast majority of sales transactions involving Indian purchases in Canada the sales take place off the reserve, and according to Francis are not subject to the exemption conferred by section 87.

17 This, however, does not conclude the matter. The respondents raise a number of arguments in support of their position that s. 87 applies to the tax at issue in this case: (1) that the tax is not a sales tax but a consumption tax collected at the time of purchase but levied in respect of the on-reserve consumption of personal property by Indians; (2) that property purchased for use on-reserve has its paramount location on a reserve; and (3) that s. 87 must be applied to off-reserve purchases by Indians in New Brunswick in order to fulfill its purpose. I will address each of these arguments in turn.

B. The Consumption Tax Argument

18 The respondents argue that the sales tax is a consumption tax collected out of convenience at the time of purchase but levied in respect of the consumption or use of property which occurs on the reserve.

19 To this, we must look at the language used by the Legislature, the history and purpose of the Social Services and Education Tax Act and the case law. As stated earlier, if ambiguity exists, it must be resolved in favour of the Indians. In this case, this process leads to but one conclusion: when imposed on a retail sale, the tax is a sales tax, not a tax on consumption.

20 The tax at issue is one in a long series of taxing statutes adopted to tax sales in New Brunswick. It conforms generally to a pattern of sales taxes found all across Canada. The pattern combines provisions imposing tax on “sale[s]” with wording suggesting that the tax is paid by “consumer[s]” of the goods taxed. Despite their references to “consumer[s]” and “consumption”, these taxes have long and uniformly been held by the courts to be, in essence, sales taxes, not consumption taxes. Indeed, this Court has ruled that the predecessor of the very statute here at issue, using a similar combination of provisions regarding sale and consumption, was a sales tax and not a tax on consumption: see Simpsons-Sears Ltd. v. Provincial Secretary (N.B.), 1978 211 (SCC), [1978] 2 S.C.R. 869, per Ritchie J.

21 The peculiar wording of modern Canadian sales tax statutes stems from the constitutional prohibition on indirect taxation by the provinces. The provinces are limited to direct taxes -- taxes whose incidence falls primarily on the person who pays them. They cannot impose taxes which may be passed on to another person: see Constitution Act, 1867, s. 92(2).

22 A tax imposed on sales simpliciter runs afoul of this rule, since the purchaser may resell the goods to another and pass the tax along in the resale price. Early sales taxes were struck down on this basis: see Attorney-General for British Columbia v. Canadian Pacific Railway Co., 1927 482 (UK JCPC), [1927] A.C. 934 (P.C.). In response to Canadian Pacific, British Columbia passed a true consumption tax, which was upheld in Attorney-General for British Columbia v. Kingcome Navigation Co., 1933 320 (UK JCPC), [1934] A.C. 45 (P.C.). However, as consumption taxes proved difficult to compute and collect, the provinces eventually came up with a new scheme -- a sales tax which avoided the problem of indirect taxation by identifying the person liable to pay the tax as the consumer, or ultimate user of the property: see Laskin C.J. in Simpsons-Sears, supra, at p. 872. This sort of tax was upheld as direct in Atlantic Smoke Shops, Ltd. v. Conlon, 1943 372 (UK JCPC), [1943] A.C. 550 (P.C.).

23 The new tax raised a fundamental question -- the very question before us on this appeal. What was the new tax? Was it a tax on consumption? Or was it a sales tax? The Privy Council in Atlantic Smoke Shops, per Viscount Simon, upheld the tax on the basis that sales taxes could be direct (at p. 564). Implicit in this reasoning is acceptance that the tax was a sales tax.

24 The next case to consider the problem was Simpsons-Sears, supra, involving the New Brunswick statute at issue on this appeal. At that time, the statute also combined the language of sales tax with the language of consumer and consumption. Section 4, the charging section, imposed a tax on the consumer: “Every consumer of goods consumed in the Province shall pay to the Minister for the raising of a revenue for Provincial purposes, a tax in respect of the consumption of such goods. . . .” Section 5 went on to provide that the tax was payable at the time of purchase. Like the present statute, the act also defined “consumption” and “consumer” and made provisions for variation of the tax where, for example, goods were purchased for consumption outside the province. In describing the nature of the tax imposed by the act, Ritchie J., for the majority, stated, at p. 888: “I have referred to the last cited sections . . . to show that the original concept of a sales tax payable by the consumer purchaser is maintained in the present statute. . . .” To the argument that the tax was a tax on consumption, Ritchie J. pointed out, at p. 887, that “the ‘consumption’ . . . referred to is to be construed as meaning a consumption after sale. . . .” (emphasis in original) and found that “[f]or these purposes ‘a sale’ is an essential component of the taxable consumption. . . .” In short, the tax was held to retain its character as a sales tax, despite its references to consumption. It followed that the use or “consumption” of catalogues without a sale was not taxable.

25 This Court’s most recent pronouncement on the character of a tax on sales for consumers came in Air Canada v. British Columbia, 1989 95 (SCC), [1989] 1 S.C.R. 1161. At issue was the validity of a provincial tax imposed under the Gasoline Tax Act, s. 25 (quoted at p. 1175), on “any person who, within the Province, . . . purchased or received delivery of gasoline for his own use or consumption. . . .” In response to the argument that the tax was a consumption tax, La Forest J. stated, at p. 1187, that “[t]he Act clearly does not impose a consumption tax. The references in the definition to consumption or use merely define the taxpayer, i.e., a purchaser who buys gasoline for his own use.”

26 These cases have settled the law: provincial sales taxes, when they are levied on retail sales, are just that — sales taxes — notwithstanding their references to “consumer[s]” and “consumption” to avoid the charge of indirect taxation. In Miawpukek Indian Band v. Newfoundland (Minister of Finance) (1995), 1995 6253 (NL SC), 130 Nfld. & P.E.I.R. 164 (Nfld. S.C.T.D.), at p. 170, Roberts J. stated, in dealing with a similar provision in Newfoundland’s Retail Sales Tax Act, R.S.N. 1990, c. R-15:

That the tax provided for by the said s. 3 is “in respect of the consumption or use of that property”, in my opinion, changes nothing. These words are intended to identify the tax as a direct tax on the consumer, not one to be passed on, and thus within the jurisdiction of the province to impose. The important point for the purpose of the present analysis is that the tax is levied “at the time of sale”.

See also the Maritimes Tax Reporter (1993 (loose-leaf)), at ¶ 60-004:

In New Brunswick sales tax is imposed on the purchase of goods and services at fair value within the province.

Sales tax is designed to be one of single incidence upon the ultimate consumer or user of taxable property in New Brunswick.

27 The language of the statutory provisions at issue does not negate this view. It is the same sort of language that has been repeatedly held to impose a sales tax, not a consumption tax. Section 4 imposes a tax on “[e]very consumer of goods consumed within the Province” a tax “in respect of” consumption. “Consumer” is defined by the Social Services and Education Tax Act as a person who “utilizes or intends to utilize within the Province goods for his own consumption, or for the consumption of any other person at his expense. . . .” Section 5, on the other hand, imposes a tax on sale, providing that “[i]n the case of a retail sale within the Province, the tax shall be payable by the purchaser at the time of purchase on the fair value of the goods or services.” Section 1 defines “retail sale”, in part, as “a sale to a consumer for the purposes of consumption. . . .” “Sale”, in turn, is defined as including “exchange, barter . . . and any other contract whereby for a consideration a person delivers goods or services to another”. Finally, “purchaser” is defined as “a consumer who acquires goods at a retail sale within the Province. . . .”

28 These sections, apart from minor changes in wording, mirror the sections found in the statute’s predecessor, which this Court ruled in Simpsons-Sears did not impose a tax on consumption. To borrow the language of La Forest J. in Air Canada, the references to “consumption” merely define the taxpayer for the purpose of ensuring that the person taxed cannot pass the tax on to another, thereby making the tax indirect and unconstitutional.

29 Section 4 does not operate in isolation. Rather, it operates in tandem with s. 5 and is given meaning by the definitions in s. 1. When read together in light of the definitions, it is evident that these sections impose a direct retail sales tax that fixes on the transaction of sale and is calculated on the fair value of the goods. In the case of a retail sale, the act of purchase, not the act of consumption, triggers liability for the sales tax. For the purposes of these sections of the Social Services and Education Tax Act, it is largely irrelevant how, why, where, when, and by whom they are consumed once they have been purchased at a retail sale within the province. If there is a sale but no consumption, the sales tax is still payable. If the sales tax were a true consumption tax, each use of taxable goods by the ultimate consumer would attract tax liability.

30 Certain provisions in the Social Services and Education Tax Act impose a tax on consumption. For example, s. 8(1) stipulates that “[e]very person who consumes within the Province goods acquired . . . for resale, or . . . goods manufactured, processed, produced or purchased by him . . . [is] deemed to have purchased the goods at a retail sale” and, as such, is liable to pay the tax. Under s. 8(1), the use or consumption of the goods triggers tax liability. However, the fact that the Act taxes consumption in certain specific circumstances does not determine the overall scheme of the Act or influence the nature of the tax imposed by ss. 4 and 5. Indeed, it is implicit in s. 8(1) that the consumption of goods in such circumstances would, absent express statutory provision to the contrary, not attract the sales tax. In the present case, the Court is concerned with the tax levied on goods purchased at a retail sale. In these circumstances, ss. 4 and 5 impose tax liability on the transaction of sale. Section 8(1) and any others that impose a tax on consumption are not at issue.

31 The sales tax here may be contrasted with the pure consumption tax at issue in Kingcome Navigation, supra. It may also be contrasted with the consumption or “use” tax provisions at issue in Leighton, supra, where the provincial government sought to tax the off-reserve use of goods that had been purchased tax-free on the reserve. The Social Service Tax Act, R.S.B.C. 1979, c. 388, was amended to impose a tax on “tangible personal property . . . purchased by an Indian or a band” that is otherwise exempt under s. 87 of the Indian Act, when “that tangible personal property is, while owned by that Indian or band, used at a place where the exemption would not have applied. . . .” (pp. 659-60). The use of the property attracted the tax rather than the purchase of the property for use or consumption. The British Columbia Court of Appeal, per Lambert J.A., struck down the tax on the ground that it taxed property that had its paramount location on the reserve.

32 I conclude that the law is clear: statutory provisions like the ones here at issue impose a sales tax, not a consumption tax. The law has long been settled and there is no ambiguity. In the present case, the tax is imposed at the time of sale on property off the reserve.

C. The “Paramount Location” Argument

33 The respondents submit that tangible personal property which is intended to be consumed primarily on the reserve is “situated on a reserve” for the purposes of s. 87. In doing so, they seek to extend the “paramount location” doctrine to property which has never been on a reserve.

34 As discussed earlier, the “paramount location” test has been used to protect Indian property normally situated on the reserve from being taxed or seized while off-reserve. In Leighton, supra, the B.C. Court of Appeal, per Lambert J.A., held that neither a motor vehicle nor its Indian owner could be taxed with respect to the use of a vehicle off the reserve if the paramount location of the property remained on the reserve. Similarly, the New Brunswick Court of Appeal, per Stratton C.J., in Brooks (J.E.) and Associates Ltd. v. Kingsclear Indian Band (1991), 1991 4002 (NB CA), 118 N.B.R. (2d) 290, held that a school bus which had been used for years to transport children from the reserve to an off-reserve school could not be seized by creditors while off-reserve pursuant to s. 89(1) of the Indian Act because its paramount location was on the reserve.

35 The concept of “paramount location” finds no application to sales taxes on tangible goods. Sales taxes attach at the moment of sale. At this point, the property has but one location — the place of sale. It cannot have its paramount location elsewhere because no pattern of use and safekeeping elsewhere is established. The location of property after the sale and the imposition of tax is irrelevant. This means that goods purchased off-reserve attract tax, while goods purchased on-reserve are exempt, regardless of where the purchaser may intend to use them. To make taxation dependent on place of anticipated use of the article purchased would render the administration of the tax uncertain and unworkable. As Macfarlane J.A. put it in Danes, supra, at p. 259:

An exemption must apply at the moment of purchase. To do so it must be certain. It must not depend upon the consideration of factors such as the extent to which the property may be used on or off the reserve.

36 In these circumstances, where the location of the property at the time of taxation is readily apparent, there is simply no need to apply the “paramount location” test and I conclude that it does not assist the respondents.

D. The “Purpose of Section 87” Argument

37 The respondents argue that s. 87 is intended to protect Indians from taxation in respect of their use of property on-reserve. Where Indians are obliged to purchase most of their goods off-reserve, as most are in New Brunswick, this protection is eroded. Therefore, they submit that s. 87 should be read as applying to sales tax levied off-reserve on goods purchased by Indians for use on the reserve. This was the view of the majority of the New Brunswick Court of Appeal.

38 The first difficulty with this argument is that it takes the purpose of s. 87 far beyond that articulated by this Court in Williams — to prevent Indian property on Indian reserves from being eroded by taxation or claimed by creditors. No support has been offered for the proposed extension, except that this would economically benefit Indians. But that, this Court has stated, is not the purpose of s. 87: see Mitchell and Williams. La Forest J. in Mitchell (at p. 133) specifically cautioned against attributing an expansive scope to the s. 87 exemption:

. . . one must guard against ascribing an overly broad purpose to ss. 87 and 89. These provisions are not intended to confer privileges on Indians in respect of any property they may acquire and possess, wherever situated. Rather, their purpose is simply to insulate the property interests of Indians in their reserve lands from the intrusion and interference of the larger society so as to ensure that Indians are not dispossessed of their entitlements. [Emphasis added.]

39 The second difficulty with this argument is that it flies in the face of the wording of s. 87(1)(b), which confines the protection from taxation to property situated on a reserve. The respondents attempt to overcome this difficulty by relying on s. 87(2) which provides that “[n]o Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (1)(a) or (b) or is otherwise subject to taxation in respect of any such property.” But this section does not extend the ambit of s. 87(1)(a) and (b). Section 87(1) states what property is protected from taxation. Section 87(2) states that tax cannot be levied in respect of the ownership, occupation, possession or use of this property. It does not enlarge the class of property subject to the exemption, but merely states the types of tax that are prohibited on a particular type of property. It does not change the rule that for property to be exempt from taxation under s. 87, it must be situated on a reserve. Courts have consistently held that s. 87(1)(b) is confined to property physically situated on a reserve or whose paramount location is on a reserve: see Francis, Mitchell, Williams, Lewis and Leighton, supra.

40

A third difficulty with this argument is that the history of s. 87 belies the conclusion that Parliament intended it to provide general tax protection for off-reserve property. The tax exemption began in 1850 as a prohibition against taxes on Indians residing on Indian lands. It was amended in 1876 to prevent taxes on Indian property unless it was held outside the reserve. It now prohibits taxation in respect of Indian property that is situated on the reserve: see Bartlett, supra. Over the years Parliament has explicitly limited and narrowed the scope of what is now s. 87 to protect from taxation only property that is situated on the reserve.

41 A fourth difficulty with this argument is that it rests on the assumption that providing a tax exemption to Indians for property purchased off-reserve will benefit Indians uniformly. The argument is that Parliament must have intended the tax to apply to off-reserve purchases because this is required to protect and enhance the position of Indians. Yet it is far from clear that Indians across Canada would benefit from such an interpretation.

42 Confining s. 87 to property situated on a reserve and excluding off-reserve sales taxes will have varying effects. It is said that in New Brunswick the effects are negative. There are very few retail establishments on New Brunswick reserves where 65-75 percent of status Indians live. Delivery of goods to reserves may partially offset the problem; the trial judge, Savoie J., found that delivery of goods and services to Indians resident on reserves in New Brunswick was available from many of the retail establishments close to reserves. However, delivery may involve additional charges equivalent to a sales tax and, in any event, will not be available in many situations. The reality is that, at present, New Brunswick Indians are unable to live on their reserves without paying a certain amount of provincial sales tax.

43 At the same time, adopting the “paramount location” test would have adverse consequences for Indians who live off the reserve. They would presumably have to pay tax on purchases made on and off the reserve because the “paramount location” of the goods would be off-reserve. Indians who lived, and thus consumed their property, off the reserve would always be subject to taxation, while those living on the reserve would be effectively immune. In contrast, the “point of sale” test allows Indians living off-reserve to purchase goods tax-free on reserves regardless of where the goods are ultimately used.

44 In addition, the “point of sale” test is beneficial to on-reserve Indians in many parts of Canada. First, it provides an incentive for Indians to establish their own retail outlets on reserves and gives a competitive edge to reserve businesses, thereby increasing economic activity and employment. Although the exemption may not yet have been a catalyst in New Brunswick, where until recently off-reserve sales were exempt from tax, it has fostered aboriginal economic development elsewhere. For example, the intervener, the Attorney General of Manitoba, asserted that almost all Manitoba reserves contain some retail businesses. The fact that the exemption is closely tied to the reserve enhances reserve-linked benefits, promotes privatization of reservation economies and encourages an entrepreneurial spirit: see Robert A. Reiter, in Tax Manual for Canadian Indians (1990), at p. 1.1.

45 Second, the “point of sale” approach to the tax exemption permits reserves to impose their own taxes on reserve sales, thus creating a tax base for aboriginal governments: see Peter W. Hogg and Mary Ellen Turpel, “Implementing Aboriginal Self-Government: Constitutional and Jurisdictional Issues” (1995), 74 Can. Bar Rev. 187, at pp. 207 et seq. For example, in the Budget Implementation Act, 1997, S.C. 1997, c. 26, Parliament granted the Cowichan tribes the authority to impose a direct tax on the on-reserve purchase of tobacco by status Indians. This legislation enabled the Cowichan Tribes to fill the tax void created by s. 87 and raise revenue for the community. If s. 87 is interpreted to provide an exemption for all off-reserve purchases of tobacco destined for use on the reserve, the purpose of this amendment would be frustrated.

46 These considerations belie the conclusion that s. 87, by its object and purpose, must be read as intending to exempt Indians from all sales taxes, whether on or off a reserve, on property used on reserves. I conclude that the argument that s. 87 must, in keeping with its objects, be read expansively to apply to off-reserve sales cannot succeed.

V. Conclusion

47 I would allow the appeal and set aside the order of the New Brunswick Court of Appeal. I make no comment regarding the validity of the new Harmonized Sales Tax that replaced the tax here at issue.

48 The following constitutional question was stated:

Question: If as a matter of statutory interpretation, the Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10, imposes a tax in respect of tangible personal property purchased at a location off reserve which is destined for use entirely or primarily by an Indian or an Indian band on a reserve, and further, if as a matter of statutory interpretation, s. 87 of the Indian Act prohibits such taxation, is the Social Services and Education Tax Act rendered inoperative to the extent of its inconsistency with s. 87 of the Indian Act?

Answer: Section 87 of the Indian Act does not prohibit taxation in respect of tangible personal property purchased at a location off reserve which is destined for use entirely or primarily by an Indian or an Indian band on a reserve. As such, the Social Services and Education Tax Act is not inconsistent with s. 87 of the Indian Act and is not rendered inoperative.

The reasons of Gonthier and Binnie JJ. were delivered by

49 Binnie J. (dissenting) -- This appeal is about the right of Indian people on New Brunswick reserves to purchase clothing and other goods for their personal consumption without paying tax to the provincial government. Given the realities of reserve life in that province, and in particular the lack of on-reserve shopping facilities, restricting the tax exemption to shopping on reserves in New Brunswick means for all practical purposes that no exemption is available.

50 The legal issue, in more technical terms, is the proper construction of the New Brunswick Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10, and whether its reach is defeated in these circumstances by the tax exemption provided by s. 87(1)(b) of the Indian Act, R.S.C., 1985, c. I-5. A majority of this Court has concluded that the exemption is not available where the point of acquisition of the personal property is off the reserve irrespective of where the personal property is used or consumed. The result is that New Brunswick can collect its 11 percent tax. I disagree.

51 The facts are outlined in the reasons for judgment of my colleague Justice McLachlin and I will add to them only insofar as may be necessary to explain these reasons.

Relevant Statutory Provisions

52 Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10

1 . . .

“consumer” means a person who

(a) utilizes or intends to utilize within the Province goods for his own consumption, or for the consumption of any other person at his expense, or

(b) utilizes or intends to utilize within the Province goods on behalf of or as the agent for a principal, who desired or desires to so utilize such goods for consumption by the principal or by any other person at the expense of the principal;

“purchaser” means a consumer who acquires goods at a retail sale within the Province and includes also

(a) a promotional distributor to the extent that the full fair value of any goods provided by way of promotional distribution exceeds any payment specifically made therefor by the person to whom such goods are provided, and

(b) a person who purchases services;

4 Every consumer of goods consumed within the Province and every purchaser of services purchased within the Province shall pay to the Minister for the raising of revenue for Provincial purposes a tax in respect of the consumption of such goods or purchase of such services. . . . [Emphasis added.]

5(1) In the case of a retail sale within the Province, the tax shall be payable by the purchaser at the time of purchase on the fair value of the goods or services.

8(1) Every person who consumes within the Province goods acquired by him for resale, or who consumes within the Province goods manufactured, processed, produced or purchased by him within or without the Province, shall for the purposes of this Act, be deemed to have purchased the goods at a retail sale in the Province on the day that he begins to consume the goods within the Province.

16 Every vendor shall be an agent of the Minister for the purpose of collecting the tax imposed by section 4 and payable under section 5, and as such shall collect the tax.

Indian Act, R.S.C., 1985, c. I-5

87. (1) Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83, the following property is exempt from taxation, namely,

(b) the personal property of an Indian or a band situated on a reserve.

(2) No Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (1)(a) or (b) or is otherwise subject to taxation in respect of any such property.

Analysis

53 In Williams v. Canada, 1992 98 (SCC), [1992] 1 S.C.R. 877, the Court discussed the appropriate approach to consideration of a claim for a tax exemption under s. 87 of the Indian Act, per Gonthier J. at p. 885. First, any analysis must keep in mind the limited and specific purpose of s. 87. Second, the nature of the property or benefits sought to be exempted from taxation is to be looked at. Third, the manner in which the incidence of the particular provincial tax (here the New Brunswick Social Services and Education Tax Act) falls upon the personal property sought to be taxed is to be considered. That having been done, the Court compares the text of the taxing statute with s. 87(1)(b) of the Indian Act to determine if the exemption applies. In the vital exercise of construing both the Indian Act and the New Brunswick Social Services and Education Tax Act, the interpretive principles expressed by Dickson J. (as he then was) in Nowegijick v. The Queen, 1983 18 (SCC), [1983] 1 S.C.R. 29, at p. 36, must be observed, namely:

It is legal lore that, to be valid, exemptions to tax laws should be clearly expressed. It seems to me, however, that treaties and statutes relating to Indians should be liberally construed and doubtful expressions resolved in favour of the Indians. If the statute contains language which can reasonably be construed to confer tax exemption that construction, in my view, is to be favoured over a more technical construction which might be available to deny exemption.

This “liberal interpretative method” was affirmed in Mitchell v. Peguis Indian Band, 1990 117 (SCC), [1990] 2 S.C.R. 85, per La Forest J., at p. 143, although he pointed out that these principles did not imply

. . . automatic acceptance of a given construction simply because it may be expected that the Indians would favour it over any other competing interpretation.

It is convenient in this case, as in Williams, to examine separately each step of the analysis of the tax exemption claimed by the Indian people.

Purpose of Section 87 of the Indian Act

54 In Williams, Gonthier J., for the Court, outlined the “Nature and Purpose of the [s. 87] Exemption from Taxation” as follows, at p. 885:

The question of the purpose of ss. 87, 89 and 90 has been thoroughly addressed by La Forest J. in the case of Mitchell v. Peguis Indian Band, 1990 117 (SCC), [1990] 2 S.C.R. 85. La Forest J. expressed the view that the purpose of these sections was to preserve the entitlements of Indians to their reserve lands and to ensure that the use of their property on their reserve lands was not eroded by the ability of governments to tax, or creditors to seize. The corollary of this conclusion was that the purpose of the sections was not to confer a general economic benefit upon the Indians. . . . [Emphasis added.]

55 Gonthier J.’s focus on the “use” of personal property stems from the language of s. 87 which exempts from taxation “the personal property of an Indian or a band situated on a reserve” and, importantly, taxation “in respect of the . . . use of any [such] property. . .”, which personal property is not to be “otherwise subject to taxation” (emphasis added).

56 I agree with McLachlin J. that the expression “situated on a reserve” bears the same interpretation in s. 87(1) of the Indian Act as it does elsewhere in that statute and should not be extended in an artificial or conceptual way to cover personal property that is not physically situated on a reserve at the critical time. (The task, of course, is to determine the “critical time” in the context of a particular case.) In this I differ from the majority of the New Brunswick Court of Appeal. This Court held in Francis v. The Queen, 1956 79 (SCC), [1956] S.C.R. 618, per Kellock J. at p. 631, that the words “situated on a reserve” were to be taken literally and did not include “notional situation” on a reserve. Parliament has not seen fit to enlarge the exemption in the 42 years since that decision. In Francis, the critical time was the moment of importation of the Indian’s personal property into Canada. The question in this case is whether the critical time is the time of acquisition, as the province contends, or the time of use or consumption, as the Indian respondents contend. If the New Brunswick Social Services and Education Tax Act charges the tax on the use or consumption of the personal property of Indian people, and if at the time of use or consumption the personal property is primarily situated on a reserve, then in my opinion the respondents are entitled to the benefit of the exemption.

Nature of the Property in Question

57 The goods at issue in this case are tangible goods which we are told by the parties include ordinary household and related goods such as taxable groceries, personal toiletries, cleaning supplies, building materials, sports and recreational equipment, furniture, household appliances, motor vehicles, clothing and footwear. Indian people cannot be expected to live reasonably on the reserve without purchasing some or all of these goods, and if the goods are not available locally, then purchases will have to be made off-reserve to enable the Indians to enjoy a reasonable standard of life on the reserve. New Brunswick recognized the justice of this position during the decades when the province itself exempted the Indians from payment of the tax.

58 New Brunswick will still exempt from the tax goods delivered by the vendor at the vendor’s expense to the reserve. To the vagaries of on-reserve shopping facilities are therefore added the idiosyncrasies of off-reserve delivery services. The parties agreed that the tax would be levied (if the provincial Attorney General prevails in this appeal) in the following instances of everyday purchases by a status Indian resident on a reserve:

(a) purchase of an article of children’s clothing in July, 1993 for a price of approximately $150 from Metropolitan Store in Woodstock, New Brunswick where the purchaser, a resident of the Woodstock reserve, was advised that vendor delivery to the reserve was not available;

(b) purchase of an article of clothing in December, 1993 for a purchase price of approximately $150 from Eaton’s department store in Moncton where the purchaser, a resident of the Woodstock reserve, was advised that vendor delivery to a reserve was not available but that delivery through a common carrier could be made with the charge for such delivery to be borne by the purchaser;

(c) purchase of light bulbs, toothpaste and sundry toiletry items in January, 1994 for less than $50 from Shoppers Drug Mart in Fredericton in which the purchaser, a resident of the Kingsclear reserve, was advised that delivery to the reserve was not available;

(d) purchase of cleaning supplies, laundry detergent, paper towels, dish washing liquid and similar household cleaning items in February, 1994 for less than $25 from the Byway Store in Fredericton where the purchaser, a resident of the Kingsclear reserve, was advised that no delivery to the reserve was available; and

(e) purchase of sundry toiletry items, magazines and taxable groceries, in November, 1993, for less than $20, from a convenience store in Newcastle where the purchaser, a resident of the Eel Ground Reserve, was advised that vendor delivery to the reserve was not available.

59 These illustrations underscore the extent to which the province seeks to benefit from its 11 percent impost on on-reserve living expenses under the Social Services and Education Tax which, ironically, does not benefit Indian people on the reserve, who receive such education and services (if at all) from the federal government.

60 There are at least 9,500 status Indians resident in the Province of New Brunswick, approximately 65 to 75 percent of whom are resident on reserves. The parties agreed that there are very few retail establishments located on reserves in the province. For this reason, most personal property purchased by on-reserve status Indians and New Brunswick bands must be purchased from retail establishments located off reserve. If the Social Services and Education Tax applies to off-reserve acquisitions, as argued by the provincial Attorney General, the result would be that New Brunswick Indians would suffer a greater tax vulnerability than Indians settled elsewhere in the country on larger reserves with better on-reserve shopping facilities. I say all of this by way of background to the narrow legal issue, which is whether the wording of s. 87(1)(b) is apt to prevent the application of the New Brunswick tax statute in the factual circumstances already mentioned.

Design of the New Brunswick Social Services and Education Tax Act

61 The key to this case is the precise wording of the charging section of the New Brunswick Social Services and Education Tax Act, which imposes the tax on the consumer “in respect of the consumption” (emphasis added) of the goods in question:

imposition of tax

4 Every consumer of goods consumed within the Province and every purchaser of services purchased within the Province shall pay to the Minister for the raising of revenue for Provincial purposes a tax in respect of the consumption of such goods. . . . [Emphasis added.]

The Act specifically defines “consumer” as a person who “utilizes or intends to utilize within the Province goods” (emphasis added). This echoes the reference to the “use” of personal property in s. 87 of the Indian Act which, it will be recalled, provides that “[n]o Indian or band is subject to taxation in respect of the . . . use of any property [situated on a reserve] or is otherwise subject to taxation in respect of any such property” (emphasis added).

62 The appellant argues that despite such clear and specific language the New Brunswick tax is a transaction tax targeting the transaction of purchase and sale rather than a tax in respect of consumption. An appraisal of that position requires consideration of s. 8 which provides that goods acquired outside New Brunswick are taxed if consumed within the province despite the absence of any retail sale within the territorial jurisdiction of New Brunswick:

8(1) Every person who consumes within the Province goods acquired by him for resale, or who consumes within the Province goods manufactured, processed, produced or purchased by him within or without the Province, shall for the purposes of this Act, be deemed to have purchased the goods at a retail sale in the Province on the day that he begins to consume the goods within the Province. [Emphasis added.]

63 Accordingly, the New Brunswick Social Services and Education Tax Act is a tax imposed “in respect of” consumption subject to the condition precedent of either a sale within the province (s. 5) or a deemed sale within the province (s. 8(1)). I take this characterization from the decision of this Court in Simpsons-Sears Ltd. v. Provincial Secretary (N.B.), 1978 211 (SCC), [1978] 2 S.C.R. 869. The particular issue in that case had nothing to do with Indians and nothing to do with s. 87 of the Indian Act, but it did require an interpretation of a predecessor of the New Brunswick Social Services and Education Tax Act. In that case, the particular issue was whether Simpsons-Sears had to pay the tax in its capacity as distributor of free catalogues in the province. Laskin C.J. observed, at p. 872:

. . . I agree with my brother Ritchie’s primary conclusion that the language of the New Brunswick Social Services and Education Tax Act cannot be construed to convert a distributor into a taxable consumer of the catalogues which that distributor mails or delivers free to persons in New Brunswick. This is enough to dispose of the appeal which I would allow as proposed by my brother Ritchie. [Emphasis added.]

The primary conclusion of Ritchie J. was that while the tax was imposed “in respect of” consumption, imposition of the tax under s. 4 required there to be a sale prior to consumption, and that Simpsons-Sears was not party to any such sale. In other words, a retail sale had been imposed by the legislature as a condition precedent to taxable consumption with respect to goods acquired within the province, per Ritchie J., at p. 888:

. . . in amending s. 4 so as to place the burden of the tax on the consumer, the Legislature of New Brunswick nevertheless retained “a sale” or “purchase” as a precondition of taxable consumption at least with respect to goods purchased at retail in New Brunswick.

In the present case there is no sale of catalogues within or without the Province either at retail or otherwise. The appellant is the producer, not the purchaser of the catalogues and potential customers receive them free of charge. [Emphasis added.]

64 In the circumstances, I cannot agree with McLachlin J. that the Simpsons-Sears case characterized the Social Services and Education Tax as a transaction tax rather than a consumption tax. Ritchie J., for the majority, seems to me plainly to state in the paragraph reproduced above that the s. 4 tax is in respect of consumption albeit he notes that a precondition to its imposition is a transaction of purchase and sale. The precondition to the imposition of a tax cannot plausibly be characterized as its subject matter. This view is reinforced by the fact, already mentioned, that New Brunswick imposes the tax under s. 8 where goods are consumed in the province where no retail sale has taken place in the province. My colleague McLachlin J. is obliged to argue in para. 30 of her reasons that the Social Services and Education Tax Act creates two different taxes, a s. 8 tax in respect of consumption and a s. 4 tax in respect of a transaction of purchase and sale. In my view, there is nothing to suggest that the Legislature intended the Social Services and Education Tax Act to create two different taxes. The difference between s. 4 and s. 8 is not that one creates a transaction tax and the other creates a consumption tax. There is a single tax in respect of consumption. The difference is that where goods are retailed in the province s. 5 qualifies s. 4 by imposing the “precondition” of a retail sale (as Ritchie J. termed it) but s. 5 cannot qualify s. 8 because by definition s. 8 only applies where no retail sale occurs within the territorial jurisdiction of the province. The interpretation accepted by McLachlin J. derives no support from Simpsons-Sears, where Ritchie J. said, at p. 887:

The “tax” referred to in both these sections is obviously “the tax” imposed by s. 4 which is the charging section and when that section is read in light of s. 5(1) the “consumption” therein referred to is to be construed as meaning a consumption after sale if the goods are to be purchased at retail within the Province. [Italics in original; underlining added.]

65 My colleague, McLachlin J., states in para. 27 that s. 5 “imposes a tax on sale” but if this is intended to suggest that s. 5 is a charging section, I respectfully disagree. As stated in Simpsons-Sears, the tax is imposed by s. 4. There is no reference in s. 4 to a sale of any description. While provincial taxes of this type are popularly known as retail sales taxes, the generic name is an oversimplification. Each taxation statute has to be considered in light of its particular terms. In the case of the New Brunswick statute, the sale referred to in s. 5 does no more than trigger payment and collection of a tax explicitly charged by s. 4 “in respect of” consumption.

66 As to the argument of McLachlin J. in para. 29 that “[i]f the sales tax were a true consumption tax, each use of taxable goods by the ultimate consumer would attract tax liability”, nothing in the Act suggests repetitive impositions of the tax in respect of use or consumption of the same goods, i.e., a consumer who buys a pair of pants is not expected to pay tax every time he or she puts the pants on. One-time imposition is entirely consistent with characterizing this tax as a consumption tax. Moreover, as Ritchie J. pointed out in Simpsons-Sears, at p. 889:

Incidental use such as that which the appellant [Simpsons-Sears] makes of its catalogue is not, in my opinion, “consumption” within the meaning of this section or of s. 4 of the statute.

67 The interpretation of the New Brunswick Act by this Court in Simpsons-Sears is therefore fully consistent with the granting of the s. 87 exemption to the respondents. The manner in which “the incidence of taxation falls upon the benefits to be taxed”, to quote again from this Court’s unanimous judgment in Williams, supra, at p. 885, is fixed by s. 4, the charging section, and is not altered by later sections in the taxing statute that deal with the legislative infrastructure for the payment and collection of the tax thus imposed.

68 I add parenthetically that the concerns raised by the province about the uncertainties of application and collection of a tax in respect of consumption seem already to be present in the case of out-of-province acquisitions which are consumed within the province which, as stated, the province has historically taxed under s. 8.

The Constitutional History

69 The respondents’ interpretation is also consistent with the constitutional history related by McLachlin J. at para. 21 et seq. The “consumer” orientation of modern provincial sales taxes stems from the constitutional prohibition on indirect taxation by the provinces. In the early years of this century the provinces faced the dilemma that a tax imposed on a transaction of purchase and sale would not pass constitutional muster because goods purchased can usually be resold for consumption by others. The tax in that event is passed along as part of the purchase price, and thus constitutes a constitutionally impermissible indirect tax. In Attorney-General for British Columbia v. Canadian Pacific Railway Co., 1927 482 (UK JCPC), [1927] A.C. 934 (P.C.), the Judicial Committee struck down a provincial tax imposed on purchasers of fuel oil because, as stated, purchasers were not necessarily consumers and could always resell to other purchasers. One solution hit upon by the provinces (and it is evident here in the design of the New Brunswick Social Services and Education Tax Act) is to aim the tax explicitly at the consumer who, by definition, is at the end of the line and cannot pass along the goods (and the tax) to anyone else. As pointed out by McLachlin J., however, consumption taxes proved difficult to compute and collect. The provincial strategy was to devise methods of computation and collection without sacrificing the constitutional validity assured to them by imposing a tax “in respect of consumption”. The provinces found that they could have their constitutional cake and eat it too by imposing the tax in respect of consumption but making the tax payable at the time of sale, and designating the vendor as a provincial government agent for collection of the tax. This legislative device was upheld as valid in Attorney-General for British Columbia v. Kingcome Navigation Co., 1933 320 (UK JCPC), [1934] A.C. 45 (P.C.), where the distinction between a transaction tax and a consumption tax was relied upon to uphold the constitutional validity of the provincial tax as a consumption tax. In that case and as quoted from p. 49, the charging section of the taxing statute read:

2. For the raising of a revenue for Provincial purposes every person who consumes any fuel-oil in the Province shall pay to the Minister of Finance a tax in respect of that fuel-oil at the rate of one-half cent a gallon. [Emphasis added.]

With respect to this wording, Lord Thankerton stated, at p. 59:

. . . it is clear that the Act purports to exact the tax from a person who has consumed fuel-oil, the amount of the tax being computed broadly according to the amount consumed. The Act does not relate to any commercial transaction in the commodity between the taxpayer and some one else. Their Lordships are unable to find, on examination of the Act, any justification for the suggestion that the tax is truly imposed in respect of the transaction by which the taxpayer acquires the property in the fuel-oil nor in respect of any contract or arrangement under which the oil is consumed, though it is, of course, possible that individual taxpayers may recoup themselves by such a contract or arrangement; but this cannot effect [sic] the nature of the tax. [Emphasis added.]

70 In my opinion, New Brunswick, having levied a tax “in respect of consumption” to finesse any constitutional challenge to its validity, should not be relieved of the consequences of that characterization when the statute is subjected to scrutiny under s. 87 of the Indian Act. This reading of Kingcome Navigation, supra, seems to be confirmed by La Forest J. in Air Canada v. British Columbia, 1989 95 (SCC), [1989] 1 S.C.R. 1161, where he notes at p. 1174:

A virtually identical provision in the British Columbia Fuel-oil Tax Act, R.S.B.C. 1924, c. 251, had been struck down by the Privy Council in Attorney-General for British Columbia v. Canadian Pacific Railway Co., 1927 482 (UK JCPC), [1927] A.C. 934, on the ground that since the initial purchaser could always resell the commodity and thereby pass on the tax, it was not a direct tax within the meaning of s. 92(2) of the Constitution Act, 1867. Oddly enough, though the Fuel-oil Tax Act was shortly afterwards amended so as to impose the tax directly on the consumer, an approach later held by the Privy Council to conform to the constitutional requirements of s. 92(2) (see Attorney-General for British Columbia v. Kingcome Navigation Co., 1933 320 (UK JCPC), [1934] A.C. 45), no such step was taken in respect of the Act impugned in the present case until 1976. [Emphasis added.]

71 At paragraph 25 of her reasons, McLachlin J. draws comfort from Air Canada for her characterization of the New Brunswick tax as a transaction tax. In that case, it will be remembered, the charging section of the statute (Gasoline Tax Act), quoted in Air Canada at p. 1175, provided:

25. . . .

(2) Every purchaser shall pay to Her Majesty for the purpose of raising revenue for Provincial purposes a tax of 15¢ a gallon on all gasoline purchased by him. . . . [Emphasis added.]

The taxpayer is thus functionally identified as a purchaser rather than as a consumer, and it was held by La Forest J. that references in the statute to “use” and “consumption” of gasoline were words of description rather than words of imposition. See La Forest J., at p. 1187:

The airlines argued that the tax was a tax on the consumption of gasoline. Since most of that consumption, so far as the airlines were concerned, was in the airspace, which falls outside the province (see R. in right of Manitoba v. Air Canada, 1980 16 (SCC), [1980] 2 S.C.R. 303), the tax was imposed outside the province. I cannot agree with this contention. The Act clearly does not impose a consumption tax. The references in the definition to consumption or use merely define the taxpayer, i.e., a purchaser who buys gasoline for his own use. Since the tax is imposed in the province in respect of the purchase of gasoline, it does not matter where the gasoline is consumed, whether it is in the airspace or in another province. [Emphasis added.]

72 As has been noted, the charging section at issue in Air Canada was very different from the charging section in this case, and the fact in Air Canada a tax on “the purchaser” was held not to be a consumption tax is, with respect, not determinative here. For our purposes, the question is whether the references in the New Brunswick Social Services and Education Tax Act to “consumer” and “consumption” are merely descriptive of the purchaser (as in Air Canada) or identify the subject matter of the tax (as in Kingcome Navigation). If indeed the New Brunswick tax is charged in respect of the transaction of purchase and sale, then (subject to any constitutional infirmities) it would have to be concluded that as neither the purchaser nor the goods were situated on a reserve at the time of the transaction, the tax is exigible. On the other hand, if the particular design of the New Brunswick statute does indeed impose the tax in respect of consumption (as s. 4 says) and consumption occurs primarily on an Indian reserve, as it does according to the agreed facts, there should be no tax payable.

73 The other case cited in support of the characterization of the tax by McLachlin J. is the Newfoundland trial level judgment in Miawpukek Indian Band v. Newfoundland (Minister of Finance) (1995), 1995 6253 (NL SC), 130 Nfld. & P.E.I.R. 164. The short passage reproduced by my colleague constitutes the entirety of the learned trial judge’s discussion of the point, which is simply stated as a conclusion unsupported by any analysis, and is therefore, in my respectful view, of little assistance to this Court.

Application of the Nowegijick Principle

74 As stated, the charging section (s. 4) of the Act says that it is a tax “in respect of the consumption” and I see nothing else in the Act to contradict that characterization. However, if I am wrong in that analysis, the very least that can be said is that the differences of opinion here and in the courts below about the interplay of the concepts of purchase and consumption in this statute show that reasonable people differ in their interpretation of the New Brunswick Act. In a word, some of the key provisions are ambiguous in their meaning and effect. In these circumstances, the applicable rule is that any ambiguities in the New Brunswick statute should be resolved in favour of the Indian taxpayers (Nowegijick). Unless the Court is now prepared to resile from the fundamental Nowegijick rule resolving statutory ambiguities in favour of the Indian taxpayer, then it seems to me s. 87 of the Indian Act applies and the appeal must be dismissed.

Giving Indian People a Meaningful Choice

75 In Williams, supra, Gonthier J. (for the Court at p. 887) outlined “the choice” confronting Indian people in respect of their personal property:

Therefore, under the Indian Act, an Indian has a choice with regard to his personal property. The Indian may situate this property on the reserve, in which case it is within the protected area and free from seizure and taxation, or the Indian may situate this property off the reserve, in which case it is outside the protected area, and more fully available for ordinary commercial purposes in society. Whether the Indian wishes to remain within the protected reserve system or integrate more fully into the larger commercial world is a choice left to the Indian.

76 In the present case, we are dealing with personal property which, it is agreed, the Indians have chosen to locate and consume on the reserve. New Brunswick seeks to deny Indian people the tax benefit of that choice, not because the Indians have decided to “integrate more fully into the larger commercial world”, but because the absence of appropriate retail stores on the reserve compels the Indians to shop off the reserve. The result of the majority decision to allow the appeal in this case is to defeat the assurance in Williams, supra, and in Mitchell, supra, that s. 87 is designed to give status Indian people a meaningful tax choice in the location of their personal property.

Subsequent Removal of Property from the Reserve

77 In the foregoing discussion, reference has been made to personal property “primarily located” on a reserve. The concept of “primary location” is intended to avoid the administrative inconvenience of shifting tax treatment every time the personal property in question crosses the boundary of the reserve. In Mitchell, supra, La Forest J. referred at pp. 132-33, with approval, to the concept of primary or paramount location:

In another recent decision, Leighton v. B.C. (Gov’t), 1989 251 (BC CA), [1989] 3 C.N.L.R. 136, the British Columbia Court of Appeal again had occasion to consider the significance of the phrase “situated on a reserve” in s. 87(b) of the Indian Act. In what I take to be a sound approach, Lambert J.A. held that when considering whether tangible personal property owned by Indians can benefit from the exemption from taxation provided for in s. 87, it will be appropriate to examine the pattern of use and safekeeping of the property in order to determine if the paramount location of the property is indeed situated on the reserve. I have no doubt that it will normally be appropriate to take a fair and liberal approach to the problem whether the paramount location of tangible property or a chose-in-action is situated on the reserve: see Metlakatla Ferry Service Ltd. v. B.C. (Gov’t) (1987), 1987 2748 (BC CA), 12 B.C.L.R. (2d) 308 (C.A.).

78 It seems to me inconsistent with this “sound approach” for the Court in the present case to conclude that the one and only thread in the “pattern of use and safekeeping” which controls the tax treatment is the situs of the personal property at the moment of acquisition, irrespective of the fact that the “paramount location” of the use and consumption of the personal property is “situated on a reserve” in the literal and physical sense of the words in s. 87(1)(b) of the Indian Act. Even if some importance is to be attached to situs at the moment of acquisition, the issue here is not unidimensional, and acquisition should be placed in the larger context of the realities of life on a New Brunswick reserve. The “paramount location” approach endorsed by this Court in Mitchell, reflects a purposive approach to s. 87(1)(b). For this reason, as well, the provincial Attorney General’s argument should be rejected.

Additional Policy Considerations

79 My colleague, McLachlin J., at the conclusion of her discussion of the purpose of s. 87 (paras. 41 to 45), reviews a number of policy arguments designed to show the mixed benefits and burdens for status Indian people across the country if the respondents’ contentions are accepted. She points out, correctly, that taxes imposed by Indian bands themselves on retail sales on reserves may become an important source of income, and that there are real advantages for off-reserve Indians in being able to make on-reserve purchases free of tax if a “point of sale” exemption is allowed. On this theory, the goods would then be consumed tax free off the reserve. In my view, however, it is not the purpose of s. 87 to allow merchants on reserves to compete on a tax-free basis with off-reserve merchants for business in the broader community. Moreover, in terms of financing Indian self-government, the present wording of s. 87 is not immutable. The s. 87 exemption is the creature of an ordinary federal statute and can be expanded or redefined as Parliament sees fit. The successful financing of Indian government does not turn on the present wording of s. 87, or on the outcome of this appeal.

Disposition

80 I would dismiss the appeal with costs.