Union of New Brunswick Indians v. New Brunswick (Minister of Finance)

Supreme Court of Canada – [1998] 1 S.C.R. 1161

New Brunswick Indian ActTaxation

This case specifies which goods bought and consumed by Indians are subject to sales tax. The main criterion in order to establish whether the good is “on reserve” and therefore can be exempt is that of the selling point, and not that of use.


Is New Brunswick’s Social Services and Education Tax Act rendered inoperative by section 87 of the Indian Act since it imposes a sales tax on goods bought off-reserve by status Indians living on a reserve?


The New Brunswick’s Social Services and Education Tax Act is not incompatible with section 87 of the Indian Act, since this disposition does not forbid taxation of goods bought outside the reserve, even tough they are destined to be used on the reserve (5 judges against 2).


Between: the Minister of Finance for the Province of New Brunswick and the Provincial Sales Tax Commissioner for the Province of New Brunswick

And: Union of New Brunswick Indians and Paul David Leonard Tomah, suing on his own behalf and on behalf of all New Brunswick Indian Bands and their members

Interveners: Canada, Manitoba, British Columbia, Alberta, the Grand Council of the Crees (Eeyou Estchee), the Cree Regional Authority, Matthew Coon Come, Violet Pachanos and Bill Namagoose


Section 87 of the Indian Act provides that the personal property of an Indian situated on a reserve is exempt from taxation.

Prior to April 1, 1993, status Indians in New Brunswick did not have to pay the provincial sales tax on items of consumption if the value of their purchases was under $1,000 (McEnvoy and Bird, 1999: 241-242).

 On April 1, 1993, this exemption was repealed and status Indians were subjected to the provincial sales tax on items of consumption. Only goods and services purchased on reserve lands or delivered there by the vendor continued to be exempt. The Union of New Brunswick Indians brought a test case before the Provincial Court to challenge the government’s imposition of a sales tax on goods bought off-reserve by status Indians living on a reserve.


The Union: Items for personal use and consumption which have been purchased by Indians off their reserve to be used on the reserve should be exempt from tax because such taxation is inconsistent with section 87 of the Indian Act. The New Brunswick tax is a consumption tax instead of a sales tax, and since status Indians living on the reserve use the taxed goods within its boundaries, they should be exempt from paying the tax under section 87 of the Indian Act. Also, when a status Indian purchased goods off-reserve to be used on the reserve, their paramount location is considered as being on a reserve.

New Brunswick: Parliament’s intention when adopting section 87 of the Indian Act was to give status Indians a tax exemption only on goods purchased on the reserve in order to promote their own retail market.

Decision of the lower courts

New Brunswick Provincial Court (1994): Section 87 of the Indian Act, which exempts goods on reserves from taxation, pertains only to property actually situated on a reserve.

New Brunswick Court of Appeal (1996): The trial judge’s decision is overturned. The Indian Act allows Indians to use or consume property on reserve without being subject to taxation, but this right would lose its purpose if it did not apply to goods bought off-reserve since most of the property consumed or used on reserve were bought outside.

Reasons for Judgement


Lamer, Cory, McLachlin, Iacobucci, Major


The government’s intention in section 87 was to exempt some of the Indians’ property from taxation, such as personal property located within a reserve’s boundaries in order to preserve the unique nature of reserve lands intact with no possibilities of infringement by the government through taxation or by non-Indian creditors through seizure.

It was never the federal government’s intention to grant Indians a general economic advantage over other Canadian citizens. Williams extended the protection to intangible personal property and Lewis to property of which the paramount location is on a reserve. Since the tax in question is a sales tax, the criterion to determine if an item is exempt or not is the location of the point of sale.

The Union’s argument that qualified the tax as a consumption tax, where the taxation of goods would have been contingent on the place of their anticipated use and not on the point of sale, is rejected. The Social Services and Education Tax Act follows the same pattern as the other Canadian sales taxes. All provincial sales taxes collected on retail sales are sales taxes even if the wording of the statutes refers to notions of “consumer” and “consumption.” The concept of paramount location cannot be applied to sales taxes since no one can know for sure where the taxed good will really be used at the time of sale. Due to this uncertainty, making taxation contingent on the location of its anticipated use is unmanageable. Exempting all status Indians living on a reserve from payment of the provincial sales tax because they usually used their purchased goods on-reserve would unfairly benefit them since those living off-reserve would never benefit from the exemption.

By exempting purchases made on-reserve, there are more reasons for Indian entrepreneurs to start businesses within the boundaries of the reserve and at the same time increase economic development and employment in their community. This also gives Band councils the opportunity to create their own sales taxes for purchases made on-reserve.


The issue in this case was an important one for Aboriginal people living in New Brunswick. Of the 10,000 Aboriginal people established in the province, 65 to 75% were living on reserves (McEnvoy and Bird, 1999: 241). The New Brunswick sales tax is considered to be direct taxation under section 92 (2) of the Constitution Act, 1867 since it is levied at the point of sale and the fiscal burden falls on the buyer. Conversely, customs and excise duties are considered indirect taxation and fall within the exclusive jurisdiction of the federal government, under section 91 (3) of the Constitution Act, 1867, because it is the importer who pays the duties and who transfers these costs to the buyer.

In 1997, the New Brunswick sales tax was replaced by the Harmonized Sales Tax (HST), a federal tax that combined the federal GST with the provincial sales tax and created a revenue-sharing scheme between the federal government and the participating provinces: New Brunswick, Nova Scotia and Newfoundland. One of the consequences is that this new tax falls under federal jurisdiction and cannot be challenged in the courts on the basis that it is a consumer tax and, therefore, outside the jurisdiction the province concerned (McEnvoy and Bird, 1999: 249-250).

Related Cases

Williams v. Canada, [1992] 1 S.C.R. 877

R. v. Lewis, [1996] 1 S.C.R. 921

McDiarmid Lumber Ltd. v. God’s Lake First Nation, [2006] 2 S.C.R. 846


McENVOY J.P. and R.W. BIRD. 1999. Case Comment: Union of New Brunswick Indians v. New Brunswick, National Journal of Constitutional Law 10: 241-250.

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