If you have clients that operate power take offs, devices that transfer power from motor vehicles burning diesel fuel, gasoline, or propane and use that power to operate other pieces of equipment, those clients might be eligible for a tax refund from the Ontario Ministry of Finance. The refund applies to businesses that have purchased fuel for use in certain PTO operations. You can help your clients apply for and receive this benefit by understanding the eligibility requirements and application process.
Eligibility for Refunds
Your client might be eligible for a tax refund if:
- The business paid tax for fuel purchased to power PTO equipment
- The motor vehicle that powered the PTO equipment is licenced under the Highway Traffic Act
- The business uses the equipment in Ontario
- The fuel tank powering the motor vehicle also powers the auxiliary equipment
- The auxiliary equipment does not power the motor vehicle
- The principal use of the motor vehicle does not involve transporting passengers
- Neither the business owner nor its employees use the motor vehicle for personal or recreational use
How to Apply
Your client must file a refund claim within four years of paying the tax. To do so, the business owner can download the application form from the ServiceOntario website, as well as a detailed guide on how to fill it out. Your client should note whether it is claiming a refund for taxes paid before or after July 1, 2017, as there are separate forms for each.
The business must also submit extensive supporting documentation, including proof of fuel purchases, fuel disbursement records, the business’ ministry reference number, and its bank deposit information. Ideally, you have been keeping up with these records on your client’s behalf and can easily gather and assemble them for submission with the application.
Rules for Records and Receipts
On your client’s behalf, you must make sure its PTO fuel invoices show the following for the Ministry to consider them for refunds:
- Seller’s name and address
- Price per litre
- Total tax charged
- Total quantity purchased
- Date of sale
Additional record requirements apply to purchases made on or after July 1, 2017, including a monthly summary of fuel purchases broken down by each vehicle for which the fuel was purchased.
Calculating a Refund
As of July 2017, the Ministry calculates PTO refunds based on the type of auxiliary equipment for which the fuel was purchased. The refund ranges from 5 percent for equipment such as line painters, log loaders, and street sweepers, to 40 percent for vacuum/hydro vac trucks over 600 horsepower. Based on the client’s fuel receipts and purchase log, you can calculate the expected refund and let it know what to expect.
Refunds for Interjurisdictional Carriers
For interjurisdictional carriers, the PTO refund applies only to the proportion of fuel used in Ontario during the claim period. If your client purchased 2,000 litres of fuel at a tax rate of 14.3 cents per litre but only used 25 percent of that fuel in Ontario, its PTO refund is based on only 500 litres (25 percent of 2,000). Multiply 500 litres by the tax rate of 14.3 cents per litre, and you end up with the amount on which your client’s refund is based: $71.50.
Additional variables might further reduce your client’s refund, such as if not all its fuel use in Ontario was for PTO purposes. With detailed recordkeeping, you can ensure your client receives the maximum refund for which it qualifies.
The Ontario PTO fuel tax refund offers a great way for your clients to save money at tax time. You can help them make the most of this incentive by staying on top of their recordkeeping and guiding them through the application process.