Auto Service World
Feature   June 1, 2000   by Auto Service World

Over the Counter (June 01, 2000)

Ontario Business Gets a Tax Break on Warranty

The phase out of provincial sales tax on warranty repairs in the Ontario Provincial Budget was a big surprise for businesses in the automotive aftermarket.

The budget promised that legislation would reduce the tax payable on warranty repairs and replacements to 6% from 8% May 3, and gradually reduce the rate further over time: to 4% on April 1, 2001, 2% the following year, 1% the year after that, and to 0% on April 1, 2004.

The government claims the tax benefit for 2000-2001 will amount to $28 million and that the full impact will reach $130 million.

“Last summer we had a meeting at the request of some of our members with senior people in the retail sales tax branch,” says AIA president Ray Datt. He says that it all started with the ministry asking if the tax situation affected the aftermarket. “I told them that it was worse than anything they could imagine.

“The reason being very simply that the retail sales tax is intended to be collected by a retailer, but you need a retail license. But there was never a provision for them to collect tax from the installer and there was never a requirement or a system in place for the distribution network to collect the retail sales tax.”

To further the discussions, a coalition of associations was formed which included the Canadian Federation of Independent Business. “Our intention was to see if we could define some rules.” Datt says that it became clear that the government would be open to lobbying for a change in the tax because it was causing them difficulties, with many audits being appealed. “We were willing to compromise on rewriting the rules. This is better than we had hoped for.”

While the tax changes indicate a phase out, the rules do contain some stipulations regarding the handling of labor and parts taxes.

Ontario jobbers should adjust their labor and parts tax charge back to suppliers to reflect this change. For example, where a deductible charge is made to the customer for any portion of the value of the warranty repair, this charge is still subject to the full 8% provincial sales tax. Also, where a part under warranty may be covered for six months, but the labor component is only covered for 90 days for example, the labor charges are still subject to the full sales tax after that 90-day period. In the same vein, extended warranty contracts sold at the time of the initial sale or later are subject to the full tax. Work done under the contract will, however, fall under the reduced tax rate and the phase out schedule.

The work on this tax front is not yet completed, says Datt.

“We need to go back to the ministry to determine what their position is going to be on the audits until this thing disappears. There may still be a need to get some guidelines for audits and we’ll certainly be doing that.

“There’s no question that for the next two to three years, the retailer is going to have to pay particular attention. The biggest area is that there is a 90-day window under which the tax is not chargeable.” He advises all businesses to keep good records of transactions and adjust their practices to reflect the new changes.

He says too that there is a positive message for the aftermarket.

“Whether it’s us or trade associations in general, the message here is that we won one,” says Datt.

Jobber Named “Business of the Year”

Ontario Bestbuy shareholder Halton Auto-motive & Industrial Supply Ltd. has been named “Business of the Year, 1999” by its local chamber of commerce.

Halton, which is owned by Dale Devlin, was presented with the award by the Milton Chamber of Commerce for “tireless dedication to quality customer service.” In a letter from Ontario premier Mike Harris, the Devlin family was also commended for “proving that community spirit and hard work are a winning combination.”

Bestbuy executive vice-president and general manager Dov Lidor said, “This prestigious award . . . brings pride to our whole organization.”

Uni-Select Building New Ontario DC

Uni-Select is moving its Ontario Distribution Center to a location in the northwestern part of Toronto later this year.

The 130,000-square-foot facility is currently under construction in the Hiqhway 407 and Pearson International Airport area. Though the new facility is going to be approximately the same size as the current Wilson Ave. facility in Toronto, it will offer its own advantages.

“Due to the layout, it will actually give us more warehouse space,” says Paul Durkin, general manager. He says too that the shape of the building, roughly square, will also allow them to move product in and out more quickly. The reason for the move is largely logistically based. The present location has limited options for access, while the new facility will have several transportation routes nearby, as well as generally less traffic congestion.

Durkin expects to open the facility by December 1 if not earlier.

Permatex Acquires No Touch North America

Permatex, Inc. has acquired No Touch North America from parent company Taiho Industries, Co., Ltd. (Japan).

The acquisition of the $10 million (U.S.) company adds a number of new product categories to Permatex, best known for its gasketing, threadlocking and hand cleaning products. No Touch is a market leader in tire and wheel care, an estimated $100 million market in North America. Its products are sold in leading retail, traditional and mass merchant distribution channels. In Canada, no changes are expected in the agreements that Permatex and No Touch currently have with sales agencies.

Castrol Launches Into Summer

Castrol has launched two consumer campaigns designed to build excitement around the brand and car care.

In a promotion with TSN and the BMW-Williams Formula 1 team, Castrol is offering one lucky race fan a chance to be a VIP at the U.S. Grand Prix in Indianapolis this September. The contest asks viewers to answer racing-related questions during five F1 races, starting with the Monaco GP. The winner will be drawn from eligible entries.

Castrol Canada has also launched a summer promotion that it hopes will give consumers the “car care bug.” The Castrol Pit Crew will hit major population centers across the country in New Beetles, providing consumers helpful tips and information, and supplying them with samples and giveaways. They will visit a variety of retail locations and all Castrol Super Series race events.

Federal-Mogul Launches Consumer Promotion

Federal-Mogul has launched its “On Track!” promotion designed to drive consumers to participating repair outlets.

The program offers consumers rebates and provides shops with bonuses and prizes when selected Anco, Champion, or Wagner Brake products are used.

The spring/summer phase of the promotion runs to July 15 and is to be promoted strongly through television and print media, according to the company.

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