EXCLUSIVE: Highland O/Os win fuel tax rebate battle with TransForce

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MARKHAM, Ont. — A long-running dispute between owner/operators at Highland Transport and its parent company TransForce, over who should receive approximately $2 million awarded by Revenue Canada in diesel excise tax rebates, has come to an end.

The owner/operators will get their money.

Truck News has learned the United Steelworkers Local 1976, representing former and current Highland Transport owner/operators, has reached a settlement with TransForce, that will see about $1 million returned to O/Os who drove cross-border for Highland between the years of 1991 and 2002. The initial claim was for about $2 million, but the lawyer and accountant who filed the original challenge against Revenue Canada received about 40% and then legal and administrative fees ate into the remainder.

Still, it’s being hailed as a victory by the union.

“It’s a positive news story,” Herb Daniher, USW staff representative, told Trucknews.com this morning. “Now it’s a matter of finding the people affected, or the people finding us. The money’s definitely going to get distributed, hopefully in May.”

As many as 1,600 owner/operators are affected by the settlement, with payments ranging from as little as $100 to as much as $10,000, depending on how much fuel was bought in Canada and consumed in the US during the applicable period.

Highland Transport was one of about 35 Canadian trucking companies that, on the advice of their accountant, filed a claim with the federal government, contending that diesel fuel purchased in Canada but consumed in the US was an export, making it exempt from federal excise taxes. Larry Babins, who at the time was an accountant with Permicom Permit Services, discovered the loophole and partnered with Winnipeg-based lawyer Israel Ludwig to challenge Revenue Canada. Babins masterminded the scheme after reading about a ruling in 1880, in which a ship left Britain with coal on-board to be used as fuel on its voyage. The shipping line argued successfully that the coal should be considered an export item, making it exempt from federal excise tax. Could the same logic apply to trucking in Canada? Babins wondered.

“Under the Excise Tax Act, if you are paying excise tax on an item that is subsequently exported, you can get that money back,” Ludwig explained to Truck News in an earlier interview. “These trucks, after filling up with diesel, were driving into the US. So the question becomes: Is the fuel in the tank of your truck an exported item, such that you can claim a rebate on the tax?”

It was a David vs. Goliath court challenge that made it all the way to the Supreme Court of Canada before the tenacity of Babins and Ludwig was rewarded.

The claim was filed in 1998 and it was about 10 years before the Supreme Court made its ruling, ordering Revenue Canada to issue refunds totaling about $15 million to the 117 carriers who’d joined the claim.

While Revenue Canada paid out the carriers, the money was intended to go to the owner/operators who paid for the diesel. Some carriers, such as Nolan Transport and Bison Transport, actively sought out previous and current O/Os who drove for them between 1991 and 2002 (the rules were changed in 2002 to prevent future claims).

Complicating matters for Highland Transport owner/operators, however, was the fact TransForce acquired the company after the ruling, creating confusion over whether or not it was required to pass on the funds it received from Revenue Canada.

The United Steelworkers spent about a year arguing with TransForce over who was entitled to the money before launching litigation, which lasted another two years. Mediation was also attempted but Daniher said legal action was required to reach a settlement.

“Certainly, the union bringing it to the litigation process assisted the parties in arriving at a final settlement in this matter,” he said, acknowledging the proceedings also dragged out the process. “Once you get lawyers involved and start filing grievances and these types of things, then you are in a formal process and part of the delay was the process. The other part (of the delay) was likely because of some of the complexities pertaining to the whole aspect of TransForce taking over Highland. TransForce didn’t own the company during any of the time in which the applicable redress period was paid – they purchased the company after the fact.”

While an agreement in principle between the USW and TransForce has been reached, the terms and conditions are still being finalized. Within weeks, Daniher expects the process of paying back the affected owner/operators will begin. In short, if you were an O/O for Highland between 1991 and 2002, purchased fuel in Canada during this time and consumed it in the US, you could be entitled to a rebate. Look for a further announcement on Trucknews.com when the cheques are ready for distribution.

Background Reading

Truck News has reported extensively and exclusively on the interesting case of the $15-million federal excise tax rebates issued by Revenue Canada to owner/operators. Here are our previous reports:

The most incredible story no one wants to talk about (January 2012)

Canadian carriers take on the tax man (March 2011)

EXCLUSIVE: Canadian trucking companies win landmark settlement with CRA on behalf of O/Os (January 2011)

Taking on Goliath (March 2008)

BLOG: Owner/Ops: Are you entitled to share of $15M settlement?

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Truck News is Canada's leading trucking newspaper - news and information for trucking companies, owner/operators, truck drivers and logistics professionals working in the Canadian trucking industry.

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  • I can’t find any where that you can apply for this excise tax refund. I was at Highland Transport with three trucks unit #1087…#1111….#1138 from 1985 until mid nineties. Can anyone give me the information that I need to apply for this excise tax.

  • I received a letter for Unit #8243 dated July 30, 2014. Why have I not received a letter for Unit # 8359 and 3582?