BACKGROUND

The One Stop was a convenience store and full service gas bar located along Highway 105 in the community of Waycobah First Nation. Owned by a community member, it was a popular location for the purchase of gasoline and cigarettes, but also sold basic grocery needs, such as milk, bread, and cereal. When the One Stop was put up for sale, the Waycobah First Nation Band bought it in 2000 for $2.5 million plus commissions on gross sales. The chief and council at that time saw the gas bar as an opportunity for the band to generate their own revenue and secure employment opportunities for community members.

CONTEXT

Waycobah's population at the time the gas bar was purchased was approximately 630. The community's reserve land encompasses approximately 828.5 hectares. In addition, the community of Waycobah also holds 20% of Malagawatch reserve; the 661.3 hectare reserve is shared with Potlotek (Chapel Island), Membertou, Eskasoni, and Wagmatcook. Waycobah is located in Inverness County, which in 2000 had a total population of about 19,900. The One Stop was located on the reserve and situated adjacent to the highway, which made it convenient for passing traffic heading towards Inverness, Mabou, Cheticamp, Baddeck, the Cabot trail, Sydney, and Glace Bay. This highway was the main thoroughfare for traffic to and from the ferry that travelled between Nova Scotia and Newfoundland several times each day. Given their location, the majority of the One Stop's customers were non-natives travelling through the area. There was a time when the One Stop was known as the cheapest gas bar within Inverness County. Under new management, however, discounts on gasoline were only available on Tuesdays ($0.05/litre). Consequently, many local customers only purchased fuel on Tuesdays, often filling up their vehicles and gas cans. There was another service station in the area, less than 5km away.

SITUATION

Under its previous ownership, harmonized sales tax (HST) had not been collected from non-Aboriginal customers purchasing gas or tobacco, or other taxable goods, at the One Stop. When the Waycobah First Nation Band took over the One Stop in 2000, they continued this practice, as there was ongoing debate as to whether First Nation Purdy Crawford Chair in Aboriginal Business Studies 1 businesses were required to collect such taxes on reserve from non-Aboriginal customers. The issue was challenged in the courts. In 2000, Waycobah lost its appeal in the Tax Court of Canada and in 2003 the Supreme Court of Canada upheld the 2000 decision. Waycobah First Nation complied with the ruling and began collecting HST from non-Aboriginal customers in June of 2003. However, the uncollected and unremitted taxes from previous years were accumulating along with interest and penalties for non-payment. As time passed, the band hoped that they could make an arrangement to avoid remitting taxes that were never collected. They even applied to the courts for remission, which would wipe the debt clean; however, their request was dismissed in 2010. By 2011, the tax bill was $3.2 million. Waycobah First Nation needed to determine how to proceed.

Question-1

What are the rules surrounding the collection of taxes by a First Nation business located on reserve?