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A location of The Brick in Mississauga, Ont. on March 12, 2012. The chain has been ordered by a B.C. judge to pay uncollected taxes plus penalties relating to its ‘buy now, pay later’ program.Tim Fraser/The Globe and Mail

The company that owns and operates Canadian furniture retail giant The Brick has been ordered by B.C. Supreme Court to pay more than $200,000 in penalties in connection to its so-called buy now, pay later program.

The program allows customers to defer the payment of purchases for up to 18 months by signing up for a "Brick Card," and while customers don't have to pay interest, they must pay a service fee.

A government audit in 2000 found that Quinco Financial, the owner of The Brick, had failed to collect nearly $170,000 in taxes on the service fees, prompting the auditor to propose a penalty on the company.

The Brick had appealed the assessment, arguing that the service fee is separate from the purchase price, and so it is exempt from taxes.

But B.C. Supreme Court Justice Keith Bracken has ruled against Quinco Financial, saying the service fee is a charge directly related to the sale of store items.

Quinco Financial must now pay back $209,000 in penalties, which include the amount of taxes owed plus interest.

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