Several Tax Court of Canada justices have commented on the inadvisability of using an arbitrary percentage of 90% to define "all or substantially all" since such a statement does not always lend itself to a simple mathematical formula but depends on the circumstances of the case.
In Reluxicorp Inc. v. The Queen, Justice Lucie Lamarre ruled that 75% was sufficient to meet the "all or substantially all" test in a complicated GST case dealing with the assessment of franchise fees paid to a United States entity. Reluxicorp Inc. was the owner of the Montreal “Residence Inn by Marriott” where management made 74.83% of the reservations for long‑term stays for 2007 based on total revenues earned by the company. Lamarre’s conclusion is consistent with previous judgments, which she refererenced in her decision.
In McDonald v. The Queen, the Appellant was being taxed on the personal use of a company vehicle because he did not meet the 90% guideline of travel related to his employment.
Justice Gerald Rip noted that the words "substantially all" in the context of paragraph need not be interpreted as 90% or more but may be a lesser proportion of the whole depending on the facts and ruled that 85% of job-related travel was sufficient as far as meeting the statutory requirement. In his ruling, he stated:
“The word ‘substantially’ is not defined in dictionaries as a fixed portion of a whole. The so-called ‘90% rule’ is a rule of thumb that is no doubt convenient to assessors and tax advisors in determining a reasonable standby charge.
“The Oxford English Dictionary defines "substantially" to mean, among other things… b. essentially, intrinsically, c. actually, really…
“The same dictionary defines the word "substantial" to include "of ample or considerable amount, quantity or dimensions".
“These dictionary definitions confirm that the word ‘substantially’… is elastic and an unsatisfactory medium for conveying the concept of an ascertainable proportion of the whole.”
In Keefe v. The Queen, the Appellant relied on McDonald v. The Queen, in support of his position that his employment purpose use of 81% comes within the meaning of "all or substantially all." Justice Gerald Sheridan was satisfied that even though the departmental assessing policy may follow the "90 per cent rule," the Appellant’s specific case makes it clear that something less than that might be sufficient since it does not lend itself to a simple mathematical formula.
In Keith v. The Queen, the Appellant and his wife owned Seafood Express, a successful export company supplying lobster and other products from Prince Edward Island to the United States. Even though Mr. Keith’s percentages of the use of his car for business purposes fell just short of the 90% mark, Justice Campbell J. Miller concluded that the taxpayer still met the test for all or substantially all of his business use of the car. He cited other cases noting that “90% business use constitutes substantially all must be an elastic not formulaic application.”
In Watts v. The Queen, Justice Donald G. H. Bowman decided that an amount varying from 76% to 81% of the Appellant’s income that was taxable in Canada over a three-year period could qualify as “all or substantially all”. In his ruling, he noted that:
“There has been a fair amount written about the somewhat imprecise term ‘all or substantially all’. The unofficial departmental position is 90% but the meaning of the expression should not be decided on the basis of an arbitrary percentage.
“In Pronovost v. The Queen… it was observed that
In Ruhl (W.) v. Canada.. it was observed that they are terms of some elasticity and that ‘an unsatisfactory medium for carrying the idea of some ascertainable proportion of the whole. They do not require a strictly proportional or quantitative determination’.
The 90% rule used by the CCRA has no statutory basis although it may be necessary that some sort of rigid criterion be applied administratively. That does not mean that the court must follow it. The 90% rule, even if it had some basis in law, is itself defective because it leaves unanswered the question ‘90% of what? time? mileage? number or weight of passengers or goods carried?’
“In Lim v. The Queen, I commented further on the meaning of ‘substantial’ or ‘substantial completion’
I shall, however, deal briefly with the concept of ‘substantial completion’. The words ‘substantial’ or ‘substantially’ appear in a number of statutes, including the Income Tax Act and mechanics' lien statutes of the provinces. They have been the subject of a certain amount of judicial commentary. Their meaning in a particular statute has often occasioned some difficulty. The terms are somewhat flexible and relative, and their meaning is derived from the context in which they are used and the facts of the particular case…
“I think it would be absurd to conclude that the appellant's rights under the Income Tax Act should depend on the assignment of an arbitrary percentage to the words ‘all or substantially all’. This mechanical exercise runs counter to common sense.”