Salehi – Tax Court of Canada finds that a builder’s certification of the home’s HST exemption engaged s. 194 liability, and that he otherwise was liable under an HST-inclusive clause

Ezri J found that the taxpayer sold a new home, a few months after completing its construction, as a “builder,” so that the sale was a taxable supply. The sale agreement provided:

If the sale of the property … is subject to … HST … then such tax shall be included in the Purchase Price. If the sale of the property is not subject to HST, Seller agrees to certify, on or before closing, that the sale of the property is not subject to HST.

At closing, the taxpayer certified that the sale was an exempt supply pursuant to Part I of Schedule V of the ETA and did not involve a taxable supply. Ezri J found that this was a certification within the meaning of s. 194, and rejected a submission that s. 194 did not apply because the certification failed to specify particular ETA provisions that provided an exemption. As the certification was incorrect, the taxpayer was liable for the HST on the sale.

Ezri J went on to note that, in the absence of s. 194, the purchaser would have been required, by the HST-inclusive clause referred to above, to reduce its payment to the taxpayer by the (13/113) amount of HST included in the purchase price and remit such HST to CRA. However, the purchaser did not do so because of the certification. Thus, the purchase price paid to the taxpayer included HST, which the taxpayer was required, pursuant to ss. 225(1) and 228(1), to remit to CRA, which he had not done. Accordingly, Ezri J rejected the taxpayer’s argument that s. 221(2) relieved him of tax because it was the purchaser who, as a registrant, was responsible to pay the tax on the purchase.

Neal Armstrong. Summaries of Salehi v. The King, 2026 TCC 139 under ETA s. 123(1) – builder – (f), s. 194 and s. 221(2).