Originally published on November 4, 2004


More farmers are buying extended cab trucks because they serve two purposes.  They haul like a pick-up and they have seating capacity for the whole family, like a car.

Tax auditors have made a deliberate point of auditing the purchases of extended cab trucks and the farmer usually gets a reduced claim for the GST input tax credit. 

But recently, a farmer, Helmuth Muller, decided to challenge this reassessment and appealed to the Tax Court of Canada.

His case is now a precedent and can be used to argue claims for the GST input tax credit.

There are two ways to calculate the GST input tax credits, depending on the type of vehicle you purchase.

For an "an “automobile”, the GST is restricted to 7/107 times the capital cost allowance or tax depreciation that is claimed each year (only the farm-related portion is claimed). 

For a “truck”, the GST is a simple calculation of the GST paid multiplied by the percentage used for the farm. 

The question becomes whether the extended cab is an “automobile” or a “truck”.

An “automobile” is defined in the Income Tax Act as  a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets.  It goes further to say that an automobile is different than a pick-up truck, which normally has a seating capacity for not more than the driver and two passengers or is used primarily or entirely for the transportation of goods or equipment in the course of gaining or producing income.

Before the Muller case, the GST auditor used the argument that the extended



cab truck by design has a seating capacity of more than the driver and two passengers.

For this reason it can be exempted from automobile status only if it is used 90% or more of the time in the transportation of goods or equipment.  It is increasingly difficult for farmers to meet this 90% transportation-use test.

In the Muller case, it was argued that the primary use for this vehicle was to haul and to tow; the fact that it carried passengers being secondary.  So the argument challenged the initial definition of “automobile”, rather than trying to fit it into the exception from an “automobile”. 

If you’re interested in reading the details of this case, it is available at www.canlii.org.  The case is Muller v. The Queen, 2004 TCC 562 and was heard on August 13, 2004. 

You may want to compare the details of this case with your own situation if you’re considering using it as a precedent to argue your own case. 

For example, this farmer’s truck had three doors, not the four doors that are now being sold. 

His truck did not have shoulder belts.  It had a bench seat that folded to allow more floor space, it was a 4x4 with a manual five-speed transmission, the tires were eight-ply rated and the 6,000 pound gross vehicle weight package also had two hooks. 

He had attached a hitch which he used to pull a combine header, trailer, hopper box, and grain augers.

Tax Court appeals can be costly and time consuming, so most people tend to avoid it.  We have to appreciate the determination of Muller who persevered, took the time, and risked the money to take this all the way to court. 


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 allyn@hth-accountants.ca or website www.hth-accountants.ca. 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.