Who Qualifies As A User Under the Federal Carbon Tax?

This pertains to users of fuel who are manufacturers that use fuel as raw material in a process that produces another fuel or substance (e.g., plastic) where the fuel (as a raw material) is not burned or flared to produce heat or energy.

The other category of a user is a person who burns combustible waste to produce heat or energy.

Registration Required

Mandatory registration of a user of combustible waste is required where the person burns tires or asphalt shingles to provide heat or energy.

Registration is not mandatory for any person who is a user of fuel in a non-covered activity (described below). Registration was first available April 1, 2019.

Voluntary Registration

Voluntary registration is not available for any user of combustible waste. Where the business burns tires or asphalt shingles and other materials to produce heat or energy, registration is mandatory.

Voluntary registration is optional for users of fuel in a non-covered activity, except where the person is, or is required to be, registered as a distributor for that type of fuel.

Non-covered activity is regarding a type of fuel that is used:

• as a raw material in an industrial process to produce another fuel or another substance, material or thing
• as a solvent or diluent in the production or transport of crude bitumen or another substance, material or thing
• in a prescribed circumstance (nothing is yet prescribed)
• is not put into a fuel system that produces heat or energy and is not burned or flared

For example, ABC Co. uses oil as a raw material in their manufacturing process to produce plastics. DEF Co. uses natural gas condensate as a diluent in the transportation of crude bitumen. These are examples of fuel that is not used to generate heat or energy. Registration for both of these users is considered optional.

Other Types of Registration

A person applying for registration as a user of fuel may also qualify as:

• A registered emitter
• A registered air carrier (or specified air carrier)
• A registered marine carrier (or specified marine carrier)
• A rail carrier (or specified rail carrier)
• A road carrier
• A registered user of combustible waste

A person applying for registration as a user of combustible waste may also qualify as:

• A registered distributor
• A registered emitter
• A registered importer
• A registered air carrier (or specified air carrier)
• A registered marine carrier (or specified marine carrier)
• A rail carrier (or specified rail carrier)
• A road carrier
• A registered user of fuel

Review these registration types to see if they apply to you.

Exemption Certificate

A registered user of fuel can accept delivery of the fuel without a fuel charge being payable at the time where they provide an exemption certificate to the registered distributor that delivers the fuel. The fuel charge could apply at a point later in the hands of the registered user if the fuel is later combusted or flared or used differently than the purpose of the exemption certificate. Where the fuel is to be used in a non-covered activity, it is not intended to be subject to the fuel charge at this stage. The carbon charge would be triggered later, if at all.

If the exemption certificate is not provided, or the user is not registered, the registered distributor will account for the fuel charge payable at the time of delivery. 

A registered user of combustible waste is not eligible for an exemption certificate, neither are they generally eligible for a rebate in the regular course of business.

Fuel Charge

A registered user of fuel will pay the fuel charge on any fuel that was originally purchased exempt from fuel tax but was later used in anything other than in a non-covered activity.

A registered user of combustible waste will self-assess a fuel charge based on the amount of combustible waste burned in the reporting period.

Fuel Charge Calculation – User of fuel

The fuel charge is A x B, where:

A = quantity of fuel in respect of which the charge becomes payable

B = rate for the type of fuel for the federally regulated province applicable at the time the charge becomes payable

Example:

A = 10,000 litres of naphtha acquired on an exempt basis but was sold to a non-registered user

B = rate for naphtha in a federally regulated province $0.0451 per litre

Result: $451 to be remitted as a fuel charge.

Note: A separate calculation is needed for each federally regulated province.

Fuel Charge Amount – Combustible Waste

The registered user of combustible waste must pay a charge on the combustible waste it burns in a federally regulated province for the purpose of producing heat or energy. The charge payable is calculated as A x B, where:

A = the quantity, measured in tonnes

B = the rate in respect of the combustible waste for the federally regulated province applicable at the time the charge becomes payable.

For example, a registered user burns 10,000 tonnes of asphalt shingles in the reporting period in a federally regulated province. The prescribed rate for combustible waste is $39.95 per tonne for 2019. 

A x B = 10,000 x $39.95 = $399,500 fuel charge

Other Considerations

• If another person transports fuel into a federally regulated province on behalf of a registered user, the registered user and not the person transporting the fuel, is considered to have brought the fuel into the federally regulated province. The same concept applies when fuel is removed from a federally regulated province. This means the person transporting someone else’s fuel is not considered to be responsible for the user’s fuel charge. The person transporting the fuel may only have to be worried about being a registered carrier themselves (road, rail, air or marine).
• Fuel in transit through a federally-regulated province is not considered to have been brought into the federally-regulated province provided it is not being stored in a federally-regulated province (other than incidental to the transportation), and the person bringing in the fuel into the federally-regulated provinces is a registered emitter or is registered otherwise than only as a road carrier in respect of that type of fuel (e.g.; the road carrier has to account for a fuel charge on the fuel they are using their fuel tanks for what is consumed in the federally-regulated province in which they are travelling through).
• The fuel charge is adjusted when we are dealing with biogasoline, biodiesel, and biomethane.
• Fuels in a mixture of two or more fuels is deemed to be the fuel of the type that has the higher proportion in the mixture.
• Rebates are eligible for fuel being removed from a federally regulated province by a person that is a registered importer and they remove a quantity of fuel from a federally regulated province. The fuel charge on that fuel would have to be accounted for initially, then the rebate can be obtained for what is removed from the federally regulated province. The fuel charge is not to be reduced by the amount of the rebate. An amended return is to be filed in certain cases to affect this reduction (two-year time limit).

*Federally regulated provinces refer to Manitoba, New Brunswick, Ontario, Saskatchewan, Yukon and Nunavut as they are provinces that fall under the federal carbon tax because they do not have a provincial carbon tax. Alberta will fall under this program beginning January 1, 2020.