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Canada passed a new tax on luxury goods that will make six-figure vehicles a bit more expensive. The tax went into effect on September 1 for new vehicles built after 2018 that cost more than $100,000. The luxury tax also applies to boats, and aircraft with fewer than 40 seats, though the value threshold for those items rises to $250,000.

It's not an all-encompassing tax. Commercial vehicles aren't subject to the fee, nor are vehicles such as motorhomes or anything with a weight greater than 8,501 pounds (3,856 kilograms). Motorcycles are also exempt, as are recreational machines like ATVs and snowmobiles. The tax will be levied at manufacturers and companies who sell or import the vehicles, though it will only be assessed once. Presumably, that tax will then be passed on to the consumer.

How much are we talking about? That depends on the price of the vehicle. The system uses two methods to calculate the fee: either 10 percent of the total price, or 20 percent of the difference between the price and the $100,000 threshold. The lowest of the two will be applied, with the 20 percent threshold favoring vehicles closer to the $100,000 mark.

Consider a $110,000 vehicle as an example. Taxing 10 percent of the total value would be $11,000. However, the difference between the price and the $100,000 threshold is just $10,000. Taxing that at 20 percent is $2,000 – considerably less than taxing the whole enchilada. A bit more basic math tells us that $200,000 is where it all evens out. Beyond that, the 10-percent tax for the entire vehicle is cheaper. Or, you could just buy a GMC Hummer EV, which at 9,000 pounds would theoretically be exempt from the tax.

Gallery: 2022 GMC Hummer EV: First Drive

According to CTV News, industry groups in Canada claim the tax could ultimately lead to $2.8 million in lost sales over the next five years. Mind you, that figure applies to all industries affected, not just automotive.

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