First Nations gas tax ruling strengthens N.B. position to renegotiate deals

The New Brunswick government may now be in a stronger legal position to renegotiate controversial gas-tax agreements with First Nations bands, agreements that other retailers say are unfair.

In December, the Supreme Court of Canada refused to hear an appeal of a Quebec ruling that said that province can force First Nations gas stations to collect sales tax and remit it to the government.

"The government's position on this issue as a tax collector is stronger than it was because there is yet another decision to say that," said Timothé Huot, the Montreal tax lawyer who represented gas station owners on the Kahnawake Mohawk Territory.

The New Brunswick government started signing tax agreements with First Nations bands in 1995, in which the bands collect the equivalent of provincial taxes at on-reserve retail operations but are allowed to keep 95 per cent of the money.

Off-reserve retailers say some of the First Nations operations are using the extra profit margin to charge lower gas prices or offer full service at their pumps, both of which lure customers away from their own operations.

Deals avoided court battles

Last fall Madawaska Maliseet First Nation Chief Patricia Bernard told CBC News the province struck the deals to avoid potential court battles. If that happened, a court might rule that Aboriginal communities didn't have to collect tax at all.

"The key component here is: without those agreements, do the First Nations have the legal authority to not charge the tax, and will that be even worse for [off-reserve] gas stations?" she said.

But Huot said the May 2016 Quebec Court of Appeal ruling eliminates that possibility.

Huot said previous appeal court rulings in other provinces were "pretty clear" in saying the same thing, but he decided to try a new tactic by using the 1763 Royal Proclamation, in which the Crown promised to let Indigenous people continue to trade freely.

"Obviously I was unsuccessful," he said.

Retailers say views confirmed

Jerry Scholten, one of the gas station owners who has been pressuring the province to end the tax deals, said the Quebec outcome just confirms what he and other owners already believed.

"Our understanding has been and continues to be that all retailers are required to collect tax and remit tax," he said. "It's our understanding that the First Nations retailers across the province are required to do that as well."

Finance Minister Cathy Rogers said last November that the province's attempt to renegotiate the deals were "going very well" but also said the government had to "balance out meeting different peoples' expectations."

Scholten said his group last met with Rogers in September.

"We were told that they were working on this issue and they would keep us informed of their progress," he said. After that, "all communications stopped. We haven't heard anything back."

Rogers did not respond to a request for a comment Friday on whether the outcome of the Quebec case would affect the province's negotiating position. A spokesperson said negotiations are "progressing."

Rogers would not say last fall whether the government was seeking to adjust the 95 per `cent share.