Toronto home builder ordered to pay $33,613 in costs after HST appeals fail

The Tax Court has ordered a Toronto home builder to pay $33,613 in litigation costs after rejecting his challenge to HST assessments involving two residential properties. The costs ruling adds a litigation consequence to a case about when a claimed family home remains inventory for resale, and why a purchaser’s HST registration did not relieve this seller of liability.

In Salehi v. The King, 2026 TCC 186, Justice Michael U. Ezri fixed the Crown’s costs in an order signed October 28, 2026. The judge had dismissed Amir Salehi’s tax appeals on July 28. The further amended merits reasons, 2026 TCC 139, were issued September 15. Approximately $580,000 in HST was at issue, according to the costs reasons.

Brief occupation did not establish primary residential use

Salehi argued that the homes were intended for personal or family use and were sold after unexpected circumstances arose. Ezri instead found that both projects were commercial ventures for resale, making Salehi a builder under the Excise Tax Act. That conclusion depended on the evidence about each property, rather than simply on the fact that a newly built house had eventually been sold.

For the Walder Avenue property, Salehi and a relative acquired a lot, demolished the existing house and built two detached homes following a severance. Salehi’s home was listed for sale about four days after its occupancy permit was issued. The neighbouring home was listed at the same time. The judge considered the joint financing, the organized construction work and the short period before sale to be evidence of a redevelopment venture.

Salehi’s asserted occupation of the home did not change that conclusion. The court found that the family’s use was minimal and intended to create the impression of a residential purpose. Under the statutory exception considered by Ezri, the question was whether the property was used primarily as a residence. He found that its primary use remained inventory for resale, so the self-supply assessment stood.

The Dunblaine Avenue property involved a different route to liability. No one moved into the newly constructed house before it was sold. Ezri rejected the account that it had been acquired and rebuilt for Salehi’s mother, finding that Salehi controlled the project and that resale was the objective from the start. He also rejected a claimed trust relationship; alternatively, he held that the trustee obligations relied on in his reasons would not have displaced Salehi’s liability.

The exemption declaration and the purchase price mattered

Salehi raised an additional argument for Dunblaine: its purchaser was a corporation registered for HST. The court accepted that, all else being equal, subsection 221(2) relieved him of the obligation to collect tax from that purchaser. That did not make the sale tax-exempt, however, and it did not resolve the consequences of the closing documents.

Salehi had signed a statutory declaration stating that the sale was exempt under Part I of Schedule V to the Excise Tax Act. Having found the sale taxable, Ezri applied section 194, which in the circumstances deemed Salehi to have collected the tax. The judge rejected the argument that the declaration escaped that provision because it did not identify a particular exempting section within that part of the schedule.

There was a separate basis for the result. The sale agreement provided that any applicable HST was included in the purchase price. The purchaser paid the full price without withholding an HST amount because it understood the transaction to be exempt. Ezri held that Salehi had therefore collected an amount on account of tax, even though he had not been required to collect it. On the court’s analysis, he had to report and remit that amount rather than retain it.

Reopening the case carried a costs consequence

The corporate-purchaser argument had emerged at the end of the evidence in December 2025. In a February 12 reopening order, 2026 TCC 30, Ezri permitted amended pleadings and further evidence despite the late timing. He considered the issue sufficiently contained to be addressed fairly through additional discovery and costs. That order separately fixed $1,200 in motion costs and required Salehi to pay the Crown’s additional discovery costs under the tariff, regardless of the eventual result.

After hearing the remaining evidence and arguments in July, the judge dismissed both tax appeals. In the October costs reasons, he described the late defence as marginal or doomed to fail because the purchaser’s registration did not answer Salehi’s own incorrect exemption declaration. He took the extra work caused by reopening the trial into account, while otherwise finding the parties’ conduct satisfactory.

The calculation began with Salehi’s proposed tariff figure of $15,700. Ezri added $700 for the further pleading, $2,000 to account for seven hearing days or part-days rather than six, and $5,000 for second counsel at the December hearing. With $2,213 in disbursements, the corrected figure was $25,613. He then added $8,000 for the work and preparation associated with the interrupted and resumed trial, producing the $33,613 award. The earlier motion and discovery costs had already been addressed separately.

Salehi had asked the judge to postpone fixing costs until his Federal Court of Appeal appeal was adjudicated, the October reasons record. Ezri declined, saying costs should be decided while the trial remained fresh in the hearing judge’s mind. That account establishes what was before the Tax Court when it made the costs order; it does not establish the appeal’s current disposition or that any tax or costs have been paid.

Sources: Costs order and reasons; further amended merits reasons and judgment; reopening order and reasons.