Consumption | Do you know about TPA?

Did you know that if a retailer from whom you buy a computer or television set sells you a protection plan at the same time, the tax added to the purchase of this insurance is called the Insurance Premium Tax (TPA) and is equivalent to 9% of the premium? On this type of plan, if you are charged the GST and QST (15%), you are paying too much tax. Consumers have learned this the hard way.

What is TPA?

This is the tax that must be paid on an insurance product. Protection plans offered by electronics retailers, for example, are considered insurance. Therefore, the GST must be applied to them. In the case of an extended warranty, however, the consumer will have the GST and QST added. The difference between the two? “A warranty plan does not cover the risk, the accidental aspect,” summarizes M.^e Benoît Gamache of CBG Avocat. According to him, retailers sometimes misrepresent protection plans as extended warranties. This results in them collecting more taxes than they should.

Why talk about it now?

A class action lawsuit was filed Thursday against a dozen retailers: Best Buy, Costco, Walmart, Bureau en Gros, Home Depot, Groupe BMTC (Tanguay), RONA, Corbeil, Surplus RD, Brick, Meubles Léon and Apple Canada. By purchasing a $629.99 protection plan when purchasing a computer, Charles-Olivier Rivard, a Best Buy customer who initiated the class action, had to pay the GST and QST (15%), when he should have been charged the GST (9%). Mr. Rivard later realized that he had paid too much tax.

What is the criticism made against the retailers concerned?

These merchants allegedly collected “the GST and QST when selling protection plans, whereas it is the GST (9%) that applies when these qualify as insurance products,” indicates the press release published Friday by M^e Benoît Gamache and M^e Benoît Marion, the two lawyers leading the class action. In the case of Mr. Rivard, who purchased a protection plan worth $629.99 with the purchase of his computer, he “should have paid a tax equivalent to 9% on the sale price, or $56.70, while he paid $94.34 in GST/QST,” we can read in the application for authorization to institute a class action. “I tell you that I am selling you an extended warranty, but that is not true and I am charging you more,” explains Mr.^e Gagnon: There is a “misrepresentation.” Whether it is intentional or not, it is still there.

If the request is allowed, what could the aggrieved customers get?

It is unclear at this point whether the application will be allowed. A ruling is expected within 12 to 18 months. If they proceed, “lawyers estimate that $60 million could be paid to customers for every $1 billion in protection plan sales volume.” Retailers are being asked to refund the 6% overpayment of taxes. It is unclear how many customers could get a refund or when purchases must have been made to qualify.

What does the Office of Consumer Protection (OPC) say?

“We are not able to sort through the complaints to extract those that could relate to this subject, but we believe that they are very few in number, if any, given that the majority of consumers are not aware that the protection they were sold is insurance and that the taxes are calculated differently,” OPC spokesperson Charles Tanguay responded by email. “Consumers concerned should monitor the outcome of this class action to possibly be compensated, if applicable.”

And the targeted retailers?

The Press attempted to obtain reactions from many of the retailers concerned. Most of them did not respond to us. By email, RONA’s communications department simply wrote that the company would not comment.