Originally published on October 17, 2002


Canada's Income Tax Act requires that individuals and partnerships, as opposed to corporations, must categorize any purchased pick-up truck as either a passenger or motor vehicle.

If your pick-up truck is categorized as a passenger vehicle, you will be able to depreciate it for tax purposes as a business cost up to a maximum in 2001 of $30,000 before the Goods and Services Tax and Provincial Sales Tax.

On your GST return, you can claim a GST input tax credit based on 7⁄107 times the capital cost allowance or tax depreciation that is claimed each year. In most cases it will take three to four years to receive a refund of your GST input tax credit.

If your pick-up truck is categorized as a motor vehicle, then you can depreciate it for tax purposes using its pro-rata business cost, but you are not subject to the $30,000 passenger vehicle cap.

On your GST return you can claim all of the GST input tax credits that were paid on the pro-rata business cost. If you used this pick-up truck 90 percent or more in the transportation of goods, equipment or passengers, then you are entitled to a refund of all of the GST paid on its purchase. This ability to claim most or all of the GST, coupled with a larger taxable purchase price from which to claim tax depreciation, makes the motor vehicle designation the most desirable.

A motor vehicle is defined in the Income Tax Act and has been reproduced in the table.

From this definition we see that both the seating capacity of the pick-up and its use in the transportation of goods, equipment or passengers are the key factors in determining whether your truck meets the definition of a motor vehicle.

On June 26, 1997, judge Ronald Sobier ruled in Myshak vs. Her Majesty the Queen that the taxpayer's extended cab truck had in fact a seating capacity for more than the driver and two passengers.

For this reason the taxpayer was not held to the 50 percent transportation use test but instead expected to meet the second, more onerous test of 90 percent transportation use. Sobier also ruled that even though the truck was equipped with a permanent tool box containing the usual tools, jacks, flares and booster cables, the taxpayer was not transporting goods for a purpose, but rather merely transporting items incidental to the use of the vehicle itself.

The judge concluded that the taxpayer's other business such as banking, purchasing and crop and pasture checking was done at least as often as the transporting of goods and equipment.

In the end, the tax assessment was affirmed and the pick-up was categorized as a passenger vehicle.



It is increasingly difficult for grain and livestock operators to meet the 90 percent transportation use test.


The fact that your new pick-up comes equipped with a trailer package that includes not only a hitch and lights, but also the larger engine and a slip differential required for pulling trailers over rough terrain in muddy situations was not enough for the judge. He indicated that since the seating capacity was more than that of the driver and two passengers, then Test 2 applied.

If you are driving an extended cab and you want it to be considered a motor vehicle, then you will want to meet Test 1 instead of Test 2.

To do this, you must ensure that your extended cab does not have a seating capacity for more than the driver and two passengers. What arguments can we make to the tax department's auditor should he question the seating capacity of your extended cab pickup? Here are a few:

 While the two bucket seats have safety belts, the fold-down rear seat is never down and has had its safety belts removed. For this reason, no passengers ride in the back.

Due to a large toolbox that is behind the front seat, the rear seat cannot be folded down for use.

The fold-down rear seat has been removed.

Get your 250-pound friend and take the tax auditor for a ride around town. Put the tax auditor in the back of your extended cab with your largest toolbox and drive for two hours. Just before the trip ends, ask him if there is any room to pick up one more bloke.

In my mind, the legislation that created the tests will change eventually. But until then, consult with your accountant before you categorize your extended cabpick-up as either a motor or passenger vehicle.


Allyn Tastad, chartered professional accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at or website All data and information provided is for informational purposes only. Readers are cautioned that laws and regulations are subject to change. Consult your accountant for current professional advice tailored to your situation.