The King v. Colgate-Palmolive-Peet Co. Ltd. / Palmolive Manufacturing Co. (Ontario) Ltd. v. The King

The King v. Colgate-Palmolive-Peet Co. Ltd. / Palmolive Manufacturing Co. (Ontario) Ltd. v. The King

The companies, though separate legal entities, functioned in substance as a single enterprise for production and sale of Palmolive goods; the Ontario manufacturing company was the agent/department of the selling company and therefore Colgate-Palmolive-Peet Co. Ltd. is liable for the sales tax based on the prices it obtained from the public (less amounts already paid by the manufacturing company), with specified interest and penalties; the tax is to be imposed on the real price to the consumer rather than on intercompany transfer prices.

Citation
[1933] SCR 131
Parties
Defendant/appellant: The Palmolive Manufacturing Company (Ontario) Limited; Plaintiff/respondent: His Majesty The King on the Information of The Attorney General of Canada; Defendant/respondent: Colgate-Palmolive-Peet Company, Limited
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
7 February 1933
Procedural Posture
Appeal and Cross Appeal to the Supreme Court of Canada From the Exchequer Court of Canada (recovery of Sales Tax) / Final Disposition on Appeal and Cross Appeal; Case Remitted to Exchequer Court for Entry of Judgment Against Colgate Palmolive Peet Co. Ltd.
Outcome
Appeal of The Palmolive Manufacturing Company (Ontario) Limited allowed and action dismissed against it without costs; cross-appeal of His Majesty against Colgate-Palmolive-Peet Co. Ltd. allowed; case remitted to Exchequer Court to enter judgment against Colgate-Palmolive-Peet Co. Ltd. for sales tax based on prices...
Legal Topics
Sales Tax, Consumption Tax, Corporate Veil Piercing, Agency, Related Party Transactions, Tax Avoidance
Source Language
English
Taxation Corporate Law Administrative Law Sales Tax Consumption Tax Corporate Veil Piercing Agency Related Party Transactions +1 more

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Parties

The Palmolive Manufacturing Company (Ontario) Limited

Defendant/appellant

His Majesty The King on the Information of The Attorney General of Canada

Plaintiff/respondent

Colgate-Palmolive-Peet Company, Limited

Defendant/respondent

Procedural Posture

Appeal and Cross Appeal to the Supreme Court of Canada From the Exchequer Court of Canada (recovery of Sales Tax) / Final Disposition on Appeal and Cross Appeal; Case Remitted to Exchequer Court for Entry of Judgment Against Colgate Palmolive Peet Co. Ltd.

Legal Issues

  1. 1 Whether sales tax under s.19BBB(1) is to be calculated on the price charged by the manufacturing subsidiary or on the price received by the selling company from the public
  2. 2 Whether two separate corporations under common control should be treated as one producer or agent of the other for taxation purposes (piercing corporate form)
  3. 3 Whether the intercompany transactions were fictitious and intended to avoid tax

Ratio Decidendi

The companies, though separate legal entities, functioned in substance as a single enterprise for production and sale of Palmolive goods; the Ontario manufacturing company was the agent/department of the selling company and therefore Colgate-Palmolive-Peet Co. Ltd. is liable for the sales tax based on the prices it obtained from the public (less amounts already paid by the manufacturing company), with specified interest and penalties; the tax is to be imposed on the real price to the consumer rather than on intercompany transfer prices.

Court Disposition

Appeal of The Palmolive Manufacturing Company (Ontario) Limited allowed and action dismissed against it without costs; cross-appeal of His Majesty against Colgate-Palmolive-Peet Co. Ltd. allowed; case remitted to Exchequer Court to enter judgment against Colgate-Palmolive-Peet Co. Ltd. for sales tax based on prices...

Orders

  • Allow appeal of The Palmolive Manufacturing Company (Ontario) Limited; dismiss action against it without costs.
  • Allow cross-appeal of His Majesty the King against Colgate-Palmolive-Peet Co. Ltd.; remit to Exchequer Court to enter judgment for sales tax at the rates from time to time applicable based on prices obtained by Colgate-Palmolive-Peet Co. Ltd., less amounts already paid by The Palmolive Manufacturing Company...