Executive Summary: Key Legal and Evidentiary Issues

• Construction S3M contested a $7,650.08 assessment that denied input tax refunds on parking fees it reimbursed to its employees.
   
• Under section 212 of the Act respecting the Québec sales tax, an employer is deemed to have acquired goods or services that employees buy and are reimbursed for in the course of its activities.
   
• Both parties agreed that if the reimbursements were a taxable benefit to employees, input tax credits and refunds could not be claimed.
   
• The court asked who primarily benefited from the parking and relied on a Revenu Québec interpretation letter, academic commentary and Anthony v. R.
   
• Testimony from the company's representatives rebutted the assessment's presumption of validity, which shifted the burden to the ARQ.
   
• Whether construction sites can be a regular place of work was left undecided because it was no longer necessary.
   

Facts of the case

Construction S3M ltée supplies skilled workers to construction clients and bills those clients by the hours its employees work. The employees must bring many of the company's tools to each site, several of them heavy, and travel either in a company truck or in their own vehicle. When a site has no free parking, employees pay for nearby parking. Construction S3M reimburses the employees and bills the fees to its clients. According to the company, it reimburses the full amount under its service offer to clients, not under the construction collective agreement, even when the fees exceed the agreement's maximum.

After an audit, the Agence du revenu du Québec (ARQ) issued a notice of assessment on August 17, 2022, for $7,650.08. The assessment disallowed input tax refunds tied to the parking fees for the period from August 1, 2017 to November 30, 2019. Construction S3M asked the Court of Québec, Administrative and Appeal Division, to annul it. Judge Mélanie Sauriol heard the matter on March 19, 2026, and issued judgment on September 18, 2026.

Policy and legislative provisions at issue

Section 212 of the Act respecting the Québec sales tax governs cases where an employee acquires property or a service for use in the employer's activities, pays the tax, and is reimbursed. In that situation, the employer is deemed to have received the supply, and the employee's use is deemed to be the employer's use. The court also cross-referenced section 175 of the Excise Tax Act. The parties agreed that a taxable benefit to employees would bar the input tax credits and refunds. Neither the Taxation Act nor the Income Tax Act defines "benefit."

The ARQ relied on a Revenu Québec interpretation letter dated October 30, 2020. It states that a parking reimbursement is generally a benefit under paragraph 6(1)(a) of the Income Tax Act where it covers personal expenses and the employee is shown to be the primary beneficiary. The letter treats the question of who primarily benefits as one of fact. It adds that where an employer does not require employees to drive to work, or even to own a car, it is difficult to find that the employer is the primary beneficiary.

Reasoning and analysis

From the interpretation letter, the court drew the test of who primarily benefits from the parking. It noted that Professor Vern Krishna frames the question similarly: does reimbursing the expense increase the employee's patrimony, or merely restore the employee to their initial position? The court also cited Anthony v. R., 2010 TCC 533, where the Tax Court found nothing to suggest that a school derived any benefit from providing parking to employees who were not required to use their cars for work.

Construction S3M gave two reasons for having employees park close to sites. Nearby parking lets workers leave company tools in their vehicles rather than making repeated trips that expose the tools to theft, and the company said paying for parking costs less than replacing stolen equipment. The walking time would also be billed to clients as unproductive hours, while the employees are paid the same wherever they park.

A notice of assessment is presumed valid, but a taxpayer can rebut the presumption with prima facie evidence that it is incorrect. The court found that Construction S3M did so, in particular through clear testimony from its representatives. The burden then shifted to the ARQ to prove the assessment's validity on a balance of probabilities, and the court found it had not met that burden. The court held that Construction S3M was the primary beneficiary of the parking expenses because they allowed it to offer better service to clients billed by the hour. The service offer's provision for billing parking fees, together with evidence that clients were actually billed, showed that the fees were incurred in the course of the company's activities within the meaning of section 212. The ARQ had also argued that construction sites could be a regular place of work, but that question became unnecessary once the court found no taxable benefit.

Ruling and overall outcome

The court allowed Construction S3M's contestation and annulled notice of assessment No. 1625021, relieving the company of the $7,650.08 assessed. The judgment was rendered with legal costs, which were not quantified. No monetary award was ordered in the company's favour, and no exact amount for costs can be determined from the decision.