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Luxury Tax Update – How SLITA Works in Practice

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On September 1, 2022, the Select Luxury Items Tax Act (“SLITA”) officially came into effect. Vendors and importers of subject goods should be registered with the Canada Revenue Agency (“CRA”), paying tax, and keeping track of the information they will need to file their first returns.

While we have written about the luxury tax previously, this blog provides further practical details on the implementation of the luxury tax in light of the CRA’s recently-released administrative guidance.


The SLITA imposes a luxury tax on the sale or importation of certain vehicles and aircraft priced above $100,000 and certain vessels priced above $250,000 (collectively, “items”). The tax rate is the lesser of 10% of the taxable value of the item, or 20% of the item’s value above the threshold.

Subject Vehicles, Aircraft and Vessels

The luxury tax only applies to vehicles, aircraft and vessels with a date of manufacture after 2018. There is also a notable exclusion for items which are sold but were previously registered for use with a government authority before September 1, 2022 (e.g., the purchase and sale of a motor vehicle previously registered with a provincial authority).

The definitions used to characterize subject items are clearly meant to exclude most commercial vehicles, aircraft and vessels – although the particulars of how this is achieved varies between the three categories of “items”.

Required Registration

There are three types of registration under the SLITA (one for vehicles, one for aircraft, and one for vessels) – with registrants referred to as “registered vendors”. Registered vendors can use “exemption certificates” to avoid having to pay the tax when purchasing from one another (otherwise, the luxury tax needs to be paid), and can likewise avoid having to pay the luxury tax at the time of import (i.e., only having to pay at time of sale).

Initial registration is done using a Form L500, and penalties will apply to those who are required to register but fail to do so. Registration has to be done by the earlier of the date of sale, or the date of the accounting for the importation under the Customs Act (as applicable).

Filing Returns

The default length of a reporting period under the SLITA is a calendar quarter, with filings generally due by April 30, July 31, October 31, and January 31. That said, the initial return for the reporting period from September 1, 2022 to December 31, 2022 is due on January 31, 2023.

In a crucial difference from the GST/HST and most sales taxes (e.g. provincial tobacco tax), registered vendors are not merely “collecting and remitting” the tax from the consumer. Instead, the registered vendor is the one with the core obligation to pay a luxury tax in respect of their sales – which needs to be paid at the time of filing a return.

Registered vendors need to take extra care in ensuring that they understand their tax obligations and appropriate increase their selling prices so they do not have to “eat the tax”. If a registered vendor is assessed for failure to pay the luxury tax, there is also no legislative mechanism which would allow the registered vendor to recoup the tax from the purchasers.

“Vendor” Does Not Mean “Retailer”!

Lastly, businesses should understand that the term “vendor” in the SLITA includes anyone who sells or imports a subject item – including sales from manufacturers to dealers. This makes it especially important to understand and make proper use of the exemption certificate system – perhaps even making it a condition of sale – because even though the vendor is the one liable to pay the tax, it is the purchaser who needs to provide the exemption certificate!

If you need assistance understanding your obligations or help with implementing SLITA, please reach out to discuss your specific situation.

Do you require assistance in this area?  If so, please click here.

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