When Rogers Communications Inc. bought a $24-million (U.S.) private jet eight years ago, the company must have seen the plane as a convenient way to get executives from point to point. But the purchase has also become a legal headache for the telecom giant, which has been locked in a four-year battle with Ontario tax officials over a $2-million tax bill.
Toronto-based Rogers bought the Challenger 604 from Bombardier Inc. in 2006 for $23.82-million. The aircraft – which can carry nine to 19 passengers depending on the seating configuration and features ample standing room and a limousine-like interior – is part of the line of Challenger jets also used by the federal government to shuttle the prime minister, governor-general and other high-ranking politicians across the country.
Four years later, the Ontario Ministry of Finance told the company it owed $2.17-million (Canadian) in retail sales tax on the purchase, plus $665,198 in interest.
The company has paid the bill but launched an appeal at the Ontario Superior Court of Justice last year, challenging the ministry's tax assessment, which came after an audit of Rogers's books in 2010.
The dispute, detailed in court documents, is over whether Rogers acquired the jet for resale purposes, in which case the company says retail sales taxes should not be imposed.
When the company took possession of the aircraft in December, 2006, it immediately signed a lease agreement with Skyservice Aviation Inc., which brought the plane from Dorval, Que., to its new home base at the Toronto Pearson International Airport. (The ministry notes in its court filing that retail sales tax applies to tangible personal property purchased outside Ontario at the time the property is brought into Ontario.)
Rogers committed to pay Skyservice for a minimum of 300 flight hours a year, or 25 hours a month, at a cost of $5,700 an hour. The aircraft typically flew 400 hours a year and Rogers also had a right of first refusal on the 100 hours that exceeded the 300-hour minimum.
Rogers states in its appeal that while it was the "primary charterer" of the aircraft, it was not the sole user of the plane for private charters and, "it was always intended that that the aircraft would also be chartered and available for charter by Skyservice to the general public."
The company further notes that Skyservice was required to pay for all costs related to the maintenance, repair and use of the airplane and was also responsible for carrying insurance on the jet.
"Rogers acquired the aircraft for resale purposes (i.e., to lease it to Skyservice), therefore, there is no basis to impose [retail sales tax] on Rogers and the [tax] assessment should be vacated," the company states.
However, the ministry argues that the lease agreement shows Rogers intended to be the primary user of the plane since it committed to pay for a minimum of 75 per cent of the annual flight hours and its right of first refusal on the remaining 25 per cent gave it final control over whether the plane was used by a third party.
"The Minister submits that the aircraft was not acquired for resale, but rather acquired by Rogers for its own use," the ministry states, adding that Rogers was a "consumer and purchaser" of the aircraft, making retail sales tax applicable.
The ministry filed its reply to Rogers's appeal on June 26, 2014 and the case is listed as "active" in the court filing system.
Patricia Trott, spokeswoman for Rogers, said Thursday the company cannot comment in detail on the case as it is before the courts, but noted that while Rogers is challenging the assessment, it has paid the bill.
It isn't clear if Rogers still owns the jet.