A Whitehorse-based fuel company is taking the Yukon government to court, alleging that the territory is overtaxing it for arbitrary reasons and retaliating with audits and re-assessments when questioned.
North 60 Petro Ltd. filed a petition in Yukon Supreme Court Sept. 18, seeking a judicial review of the conduct of the tax administration branch with the Yukon government’s Department of Finance.
Among the company’s allegations are that the Yukon government has overstepped its authority by requiring North 60 to collect more information on customers than required under the Fuel Oil Tax Act and acted in a “malicious, vindictive, punitive and bullying fashion.”
The company also alleges that the government owes it more than $1 million in overpaid taxes.
The Yukon government, as of Sept. 24, had not yet filed a reply.
According to the petition, the Fuel Oil Tax Act requires fuel seller to collect a tax when fuel is sold, and then give that tax to the Yukon government. The seller is also required to keep records showing the date of a sale, the amount of fuel sold, the price per litre of fuel, and what purpose to fuel is being purchased for.
Some fuel sales, such as fuel sold for heating buildings, are tax-exempt.
However, the petition says, North 60 has been subject to “an ongoing audit” since at least 2017, with documents obtained by the company indicating the audit covering the period between Jan. 1, 2011, to Dec. 31, 2016. During the audit, the Yukon government “conducted several and repeated re-assessments of the fuel oil taxes remitted” by North 60.
As part of the re-assessments, the petition says, the Yukon government has ordered North 60 to pay additional taxes on transactions the company listed as heating fuel sales.
In order for heating fuel sales to be tax-exempt, the petition says, the government wants North 60 to provide the location of where the fuel was delivered or the address of the person buying the fuel if it’s picked up, the name of the purchaser and “proof of heating fuel consumption.”
The act, the petition says, does not require fuel seller to collect or provide any of those details.
The Yukon government has also, following re-assessments, ordered North 60 to pay additional tax for “unsubstantiated volume adjustments,” the petition says.
Fuel, the petition says, is known to change in volume due to evaporation, spillage, theft and temperature variances, and there can be “variances” in measurements of large volumes of fuel due to equipment or human errors.
However, the Yukon government refuses to accept those factors, the petition claims, and has taxed North 60 for a larger volume of fuel than what the company actually had in its possession.
North 60, the petition continues, typically buys its fuel from Washington state or British Columbia, with the fuel transported by barge to Skagway and then trucked up the highway.
In Skagway, the fuel is temporarily stored in tanks owned by American company Petro 49.
The Yukon government has taxed North 60 for fuel held in Alaska, the petition says, despite it never having been imported into the Yukon.
When North 60 has questioned or challenged how the Yukon government is calculating and re-assessing fuel oil tax, the petition alleges, the government has responded by “conducting audits of (North 60) in a punitive fashion,” “expanding audits that were already being conducted in a punitive fashion,” “performing compliance reviews and threatening to charge (North 60) if (it) did not comply,” and “threatening to shut down or close” North 60, among other thing.
North 60 has never been provided with a final report from the audit despite repeated requests, the petition says, but obtained what it believed was a draft report via an access-to-information request in 2018. That draft, according to the petition, indicated that North 60 had overpaid $1,304,758.75 in fuel oil tax between January 2011 and December 2016 and was owed a refund.
However, when North 60 brought that to the attention of the Yukon government, the petition says, the government “produced a further re-assessment of the fuel oil tax” North 60 remitted between Jan. 1, 2015 and Dec. 31, 2017 and claimed that North 60, in fact, owed it $1,022,004.92 in taxes, penalties and interest for 2015, 2016 and 2017.
The Yukon government has “erred in law and acted in excess of the jurisdiction conferred on it” by the Fuel Oil Tax Act, and “unreasonably exercised its discretion and acted in excess or abuse of its discretionary power,” the petition says.
North 60 is seeking an order containing six declarations, including that the Yukon government has “acted in excess of the jurisdiction conferred upon it by the Fuel Oil Tax Act;” that the government re-calculate the tax North 60 owes in accordance with the act; that the Yukon government “has used the powers of assessment an audit … in an improper, vindictive and malicious manner to punish” North 60; and that the government pay North 60 $1,304,758.75 for the excess tax it collected between January 2011 and December 2015.
The case has not yet been tested in court.
Contact Jackie Hong at email@example.com